Sky’s the limit on monopoly drug prices
Published Jan 23, 2010 7:42 AM
The U.S. Government Accountability Office released a December report
highlighting the extraordinary price increases for many brand-name prescription
drugs. According to the GAO, prices for many widely used drugs more than
doubled between the years 2000 and 2008.
The report identified the growth of drug company monopolies and the drug
repackaging process — buying drugs wholesale and repacking them in
smaller packages — as the main culprits of the hyperinflation of
The GAO report identified more than 400 examples of extreme price hikes for
brand-name drugs. Most price increases ranged from 100 percent to 499 percent,
but increases in excess of 1,000 percent were common. Nine of the drugs
evaluated actually experienced a price increase of more than 2,000 percent
— that’s 21 times the original price. All these increases occurred
from one day to the next.
More than half of the extreme increases were related to just three therapeutic
classes of drugs — central nervous system, anti-infective and
cardiovascular. These classes of drugs are used to treat ailments ranging from
fungal and viral infections to heart disease.
Prescription drug cartels to blame
Pharmaceutical companies can seek 20-year patents on various aspects of new
drugs. Once a patent is granted, other manufacturers are prohibited from
making, using or selling the formula for the life of the patent.
The Food and Drug Administration can also protect the company’s exclusive
access to the market, independent of the patents. Such exclusivity prevents FDA
approval for a competing drug for up to seven years, depending on the type of
drug. In addition to the market exclusivity and patents, drug companies already
receive incentives to develop so-called orphan drugs used to treat rare
diseases. These incentives include FDA research grants, tax credits for up to
50 percent of the cost of clinical research and a waiver of FDA fees.
Experts and drug industry representatives reported to the GAO that transfers of
drug ownership rights and consolidations among drug companies have increased.
According to the GAO the transfers and consolidations limit competition and
contribute to extreme price rises. Fewer drug companies competing in a
therapeutic class leads to fewer prescription drugs being developed within that
class and allows the companies to use their patents and market exclusivity to
further increase prices.
The consolidation of drug companies is typical of capitalism in its current
stage of development. In his book, “Imperialism: The Highest Stage of
Capitalism,” the Russian communist leader V. I. Lenin identified that
“this transformation of competition into monopoly capitalism is one of
the most important — if not the most important — phenomena of
modern capitalist economy.” In this 1915 work that is still relevant
today, Lenin referenced Karl Marx’s theoretical and historical analysis
of capitalism, which showed that “free competition gives rise to the
concentration of production, which, in turn, at a certain stage of development,
leads to monopoly.”
This monopoly stage of capitalism was referred to by Lenin as imperialism.
Internationally, imperialism is associated with wars of conquest and
territorial division for the export of capital and goods. At home the monopoly
stage of capitalism has a number of implications — not the least of which
are price fixing and price gouging. These practices allow monopolies to drive
potential competitors from the market and to fix hyperinflationary prices that
provide superprofits for the monopolies at great cost to the workers.
The corporate media are constantly playing up stories about dangerous drug
cartels that work to promote illicit trafficking of outlawed drugs such as
heroin and cocaine. The officers of the Drug Enforcement Agency are portrayed
as heroes in this epic battle between good cops and bad guys.
The media and the capitalist state rarely aim their fire at some of the biggest
criminals on the scene — the prescription drug cartels that promote their
legal wares to an unsuspecting public on television and in magazines, while
simultaneously extorting sick patients with hyperinflationary prices for many
Pharmaceutical monopolies rake in prime profits
A 2005 report from Families USA titled, “The Choice: Health Care for
People or Drug Industry Profits,” highlights the obscene profits the drug
monopolies have accumulated at the expense of patients.
The report found that combined revenues for the top seven U.S.-based
pharmaceutical companies totaled more than $190 billion in 2004. These
companies reaped over $34 billion in profits that same year. Families USA
reports that all seven companies spent more than twice as much on marketing,
advertising and administration (average 32 percent of revenues) as they did on
research and development (average 14 percent of revenues).
The companies’ stock owners are the biggest winners. In addition, the
average annual income, exclusive of unexercised stock options, of the chief
executives of the seven companies was $13 million in 2004. The combined value
of the unexercised stock options for these seven executives was another $135
If the media and the DEA had really wanted to do the public a service in the
war on drug cartels, they would investigate and expose the executives of the
top U.S. pharmaceutical companies for profiting while those who cannot afford
their extortionate prices die from a lack of access to lifesaving medicines.
Articles copyright 1995-2012 Workers World.
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