Amgen Buying State Legislatures to Prolong Profit Stream

The whole idea of a patent system is that (1) the public gives the "inventor" a monopoly for a period of time (currently 20 years from the application date, with the potential for extensions based on processing delays), and (2) AFTER that time is up, the patented product may be produced by anyone.  The idea is that after the patent expires, there will be unrestricted competition and prices will fall.  And in principle it works -- that's why you can buy Prozac at WalMart for $4 a bottle, when it used to cost hundreds.

But the problem is that the makers of drugs make SO much money while the patent is still in force that  they do everything in their power to keep that cash stream alive, even after the product should by all rights have fallen into the public domain.  There is a long list of shenanigans employed by branded drugmakers to illegitimately prolong those cash flows.  And now I've learned of one more.

As reported in yesterday's NYT, Amgen and other biotech companies are now lobbying states to prevent generic competition AFTER the patent has expired.  The argument is that the generics are not producing IDENTICAL products, but are merely producing "biosimilars," and who can be sure that those biosimilars are safe?

If safety of biosimilars is truly an issue, that is yet one more argument for federal control of the pharmaceutical and biotech industries.  To effectuate the patent bargain, after the patent expires, the federal government should just step in and TAKE OVER the biotech company's manufacturing process, and sell the results at generic prices, possibly through generic companies.  If this is considered a "taking" then perhaps the biotech company should get some "just compensation," pursuant to the Constitution's takings clause.  But that "compensation" does NOT amount to a prolonged billion-dollar-a-year monopoly for technology that should be in the public domain. 

Interesting facts from the article:  

1.  Biotech drugs are drugs that are produced by cells, as opposed to synthesized in chemical reactions.

2.  Biotech drugs now amount to one quarter of the $320 billion annual spending on drugs in the U.S. And that percentage is growing.

3.  Biotech drugs are generally dispensed in the doctor's office, not through pharmacies.  Nevertheless, it's obviously worth the biotech companies' while to stop pharmacies from selling generics whenever they can.

4.  Amgen and Genentech are the two biotech companies that are writing the legislation.  As documented here and here, if Amgen were a human being, it would probably be in jail for fraud.  But since it isn't, its money is still good in state legislatures (and, of course, Congress).

5.  Two of Amgen's biggest sellers are the anti-anemia drugs Epogen and Aranesp. As documented elsewhere (see links in 4, above), Amgen has successfully and dishonestly caused both of these drugs to be over-prescribed.

6.  Other Amgen drugs are Enbrel, Neupogen, and Neulasta.  Enbrel is for psoriasis and rheumatoid arthritis; Neupogen and Neulasta protect chemotherapy patients from infections.  

7.  Genentech (owned by Roche) makes Rituxan, Herceptin and Avastin, all of which are top-selling anti-cancer drugs.

8.  The patents on all the drugs listed in 6 and 7, except for Enbrel, will expire very soon.

9.  The state legislators introducing the bills at issue admit that they were written by Genetech and/or Amgen.

10.  The Virginia house of delegates voted 91-6 in favor of such a bill. 

Another $500M Pharma Giveaway -- Senate to Amgen

From today's NYT, in an article by Kevin Sack and Eric Lipton.

About a  month ago, Amgen pled guiltyto having fraudulently, illegally marketed one of its anti-anemia drugs, Aranesp.  It agreed to pay criminal and civil penalties totaling $762 million.

But what the government taketh away, the government giveth right back, if you know what you're doing.  The government -- led by Orrin Hatch, Max Baucus, and Mitch McConnell -- has now given back $500 million.  It's only a matter of time before Amgen gets the other $262 million back, with interest.

In case Amgen sounds familiar to readers of this blog, it was only in July 2012 that I posted about the billions of dollars of profits it had made by endangering patient health by encouraging physicians to overprescribe Epogen, another anti-anemia drug.  http://pricefixer.blogspot.com/2012/07/anemia-drug-scam.html

How did this latest grift happen? Amgen is still the world's largest biotech firm.  That gives them enough money to hire 74 lobbyists, and contribute tons of money to Senators like Orrin ("never met a drug company I didn't like") Hatch ($59,000 plus large donations to "OrrinPAC" and Utah Families Foundation), Max Baucus ($67,750 plus large donations to "Glacier PAC"), and Mitch McConnell ($73,000).  Dan Todd, one of Hatch's top aides, was a lobbyist for Amgen before he switched to Hatch and started working to prevent Medicare price controls from applying to Amgen.  Amgen lobbyists Jeff Forbes and Hunter Bates are former chiefs of staff of Baucus and McConnell, respectively.

And that in turn enables them to ensure that legislation that threatens their income stream for the sake of patient health and Medicare savings doesn't actually apply to them.

The legislation at issue was actually the "fiscal cliff" bill, which most ordinary people probably thought had something to do with trying to save money for taxpayers.  But instead, it delays by two years imposition of Medicare price restraints on Sensipar, Amgen's flagship, overprescribed dialysis drug.  Sensipar is not mentioned by name -- that would be too obvious -- but instead is the most important member of a small class of drugs that benefit from the provision.

The provision is projected to cost Medicare up to $500 million over those two years.

Who pays for Medicare?  YOU and me.  And the excuse of the the bought-and-paid for political hacks who gave Amgen our $500 million?  Per the New York Times, they said: "it was necessary to allow regulators to prepare properly for the pricing change"; "it would give the Medicare system and medical providers the time they needed to accommodate other complicated changes in how federal reimbursements for kidney care were determined."

So let's just keep on paying Amgen too much -- we're just not ready to pay them less!

According to the NY Times, there has been an ongoing "five-year effort in Washington to control the enormous expense of dialysis for the Medicare program by reversing incentives to overprescribe medication."  So really, they've already had five years to prepare to start paying less.

More specifically, the effort started in 2008, when Congress figured out that providers had a big incentive to overprescribe dialysis drugs (see link re Epogen above), since they were being reimbursed separately from the dialysis treatment.  Congress realized that by bundling reimbursement for dialysis with reimbursement for dialysis-related drugs, it could cut down on such overprescription and save money and ensure that providers made more responsible decisions regarding patient health.  But Congress will never snatch away drugmaker profits too quickly -- it tried to ease them into it, including by making sure that the "bundling requirement" would not apply to Amgen's Sensipar until 2014. The current legislation extends that to 2016.  Let's hope eight years will be enough for regulators to prepare for this change. 

The irony of putting this in the fiscal cliff legislation -- which has to do with balancing the budget after all -- is too rich.  We could have bought TWO bridges to nowhere for this amount of money.  

The NYT explains that it got through as a result of the political clout of Amgen-owned Finance Committee Members Senate Minority Leader Mitch McConnell, Republican of Kentucky, and Senators  Max Baucus, Democrat of Montana, and Orrin G. Hatch, Republican of Utah.  For some reason, these buffoons "hold heavy sway over Medicare payment policy as the leaders of the Finance Committee."

And where was the Obama administration?  Amgen's lobbyists have logged over a dozen White House visits since 2009, and according to the NYT, Amgen lobbyist Tony Podesta's firm has "unusually close ties to the White House."  And Amgen employees donated more than $141,000 to Obama's reelection, although of course they probably donated just about that much to Romney as well. The Company says it didn't contact the administration about this particular piece of legislation, and the administration says it had nothing to do with the provision.

Of course, hardly anyone knew that the provision was in there.

Really, I should let the Senators defend themselves.  Here's Baucus's defense, via spokeswoman Meaghan Smith: “What is the best policy for Montanans and people across the country lies at the heart of every decision Chairman Baucus makes . . . .  It’s as simple as that.”

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So let's take a minute to absorb this.  The entities that we put in charge of our nation's health -- the drug companies -- are guided by a profit motive (that's capitalism, after all), that causes them to engage in criminal conduct.  Their thirst for profits causes them to suppress studies that contradict their health claims, and to encourage doctors to prescribe drugs that patients don't need, or which are affirmatively harmful to patients.  When caught, they pay the fines and then are immediately back to their old tricks, ably assisted by the Congress.

I'm not blaming the drug companies.  That's how capitalism works and it's how capitalism is supposed to work, and somewhere in there, we decided we'd get the best drugs through a capitalist system, aided by patents, which of course, suppress one of the best things about capitalism -- competition.

But this again raises the question:  Is this patent-assisted capitalism -- especially in an era of a Congress all-too-willing to sacrifice patient health for campaign contributions -- really the best way to cause new and useful drugs to be produced, and moreover, to cause the right drugs to be prescribed, in the right doses, to patients?

In capitalism, the market takes care of all that.  Producers produce what customers want, and they do so in competition with other producers.  That ensures that customers get what they want, at the lowest possible prices.  This is working better than ever in today's internet age, where the theoretical notion of "perfect information" is becoming more and more of a reality.  I can go to amazon and read customer reviews and compare products and prices in ways I never could before.  And I can buy great things more cheaply than ever before.

But that doesn't work with drugs.  With drugs, there is nothing approaching "perfect information."  The "information" is often suppressed by the drugmakers, or distorted in their efforts to get doctors to continue to prescribe -- and overprescribe -- their drugs.  And all of the market incentives tell the drug company to keep on pumping out bad information, because that is what will keep prices and sales high. Consumers have no way to tell whether an on-patent drug is better or worse than something that's off-patent.  

If we could simply figure out a way to compensate drugmakers on a one-time basis when they come up with a valuable drug, all of the distortions would disappear.  The drugs would instantly become generic, and true free competition would reign.  And all drugs would cost $4 a bottle.  Yes, we would have paid a huge premium up front for the drugs, but after that, the market would ensure the most effective and proper distribution of the drugs.  All the distortions would be over.  This is what the think tanks should be figuring out.  

UPDATE Jan. 29, 2013:  The NYT reported yesterday on Amgen's efforts to get State legislatures to restrict generic competition for biotech drugs.