“America’s Pharmaceutical Companies: New Medicines. New Hope.” This was the tag line of full-page ads appearing in national magazines last year as part of a campaign by drug-industry trade group Pharmaceutical Research and Manufacturers of America (PhRMA) to gussy up its increasingly negative image. The ads featured handsome, smiling people in lab coats–just some of the “50,000 researchers at America’s pharmaceutical companies [who are] dedicating their lives to making all our lives better.” Perusing its promotional materials, you might get the idea the pharmaceutical industry is a nonprofit research operation out to save the human race by putting every disease that afflicts us “on the path to extinction,” as one industry spokesperson put it.
But this message of hope has a dark side. Faced with a proposal to limit drug prices, industry representatives invariably respond by insisting the measure will put an end to research into terrifying diseases like Alzheimer’s and cancer, hitting us where we live. “I can guarantee,” PhRMA’s Richard Smith warned reporters last year, “if you aren’t already today, at some point in your lives every one in this room will be a patient in need of medical care. The question is: Will a medicine be there for you?”
Here is the industry driving home its point: “‘If you touch our profits, the laboratories will close and you’ll all die,'” says Alan Sager, a professor of health services at Boston University School of Public Health who has studied the drug industry. “It’s a terror tactic.”
Certainly pharmaceutical companies take on risk by spending very large sums in their laboratories. Comparing numbers from PhRMA’s annual member survey with government appropriations, the Federation of American Societies for Experimental Biology estimates that big pharmaceutical companies sponsored 47 percent of all biomedical R&D in 2000. This represented a huge increase in R&D spending by Big Pharma in the latter half of the 1990s, with the government’s share of total R&D declining to 39 percent despite substantial increases in the National Institutes of Health (NIH) budget.
But some frankly doubt PhRMA’s figures, derived from confidential reports by member companies. Though pharma execs hold up R&D spending as a justification for just about everything they do, they hold the details of this spending very close to the chest. Examinations by various advocacy groups of drugmakers’ financial reports have yielded much lower estimates of their R&D budgets. For example, while manufacturers reported spending over $20 billion on R&D in 1999, Sager and colleague Deborah Socolar arrive at “a more skeptical estimate,” based on financial filings, of about $10 billion.
Perhaps more important than the question of how much companies spend on R&D–assume it’s a large and increasing amount–is what those drug-development dollars are yielding. After all, in asserting the need to charge high prices for drugs, industry spokespeople implicitly suggest their R&D has enormous social value–that it proffers “new hope” to the sick and dying. And indeed few would deny that the history of the pharmaceutical industry is, in part, the history of human progress: from vaccines to antibiotics and, more recently, an array of AIDS drugs, some medicines have produced benefits beyond measure. But brush aside the industry platitudes about new cures for a close look at products coming through R&D pipelines, and one finds that too often their value is more commercial than social.
Well over half the drugs approved in the United States between 1989 and 2000 were “product-line extensions” using old active ingredients, according to a study released in May 2002 by the National Institute for Health Care Management. As the pace of new drug approvals accelerated sharply over the past decade, “standard-rated” product-line extensions–those deemed by the US Food and Drug Administration (FDA) to add no significant benefit over already available drugs–accounted for 62 percent of this growth. These standard-rated product-line extensions also contributed most to increased consumer spending on new drugs in the five years leading up to 2000. With true breakthroughs few and far between, drug companies are flooding the market with new dosages, new combinations and otherwise rejiggered forms of their older medicines.