Right now, GlaxoSmithKline claims that it’s hard at work creating an Ebola vaccine. The company is boasting that it has compressed a decade worth of trials into just one year’s time. Yet in the nearly four decades since Ebola was discovered, GlaxoSmithKline did not initiate a vaccine trial. So why are drug companies only now addressing Ebola when they’ve known about the virus since 1976?
Although Ebola has been killing people in Africa for decades, fighting Ebola only became profitable when the virus attacked people in already developed countries. In many cases, big drug companies wait until economic pressures spur them to address certain diseases. They also choose not to develop less profitable medicines, like vaccines and antibiotics, until richer patients start getting sick.
The Problem With Market-Driven Healthcare
Economists play many roles in the drug debate, whether they’re analyzing ways to increase profits for pharmaceutical companies or figuring out how drug costs affect the economy. Many economists have started to argue that a profit-driven healthcare system limits access to medicines in poor areas. In other words, if sick people can’t generate profits, then they don’t get the medicines that they need.
According to a study in The Lancet, of the 336 pharmaceutical drugs developed in the first decade of the 21st century, only four addressed tropical diseases. Three of those drugs were for malaria, which kills over a million people every year and affects 300 million to 600 million people annually. Most of the deaths occur in children under the age of five, and 90 percent of malaria cases occur in sub-Saharan Africa. People living in that part of the world don’t have enough money to purchase expensive medications. Saving their lives isn’t profitable, so drug companies don’t rush to their aid.
Government-Enabled Price Gouging
Pharmaceutical companies set prices for their medications, and they do so without incurring consequences. In fact, in the U.S., Medicare pays whatever price a pharmaceutical company charges for a drug. That’s right: Medicare doesn’t use its extraordinary purchasing power to negotiate better prices. It simply pays the price charged by the drug company.
For example, a cancer drug like Gleevec, which cost $28,000 per year in 2001, cost $92,000 per year in 2012, almost four times its original value. For some inexplicable reason, Medicare hasn’t negotiated to keep the price down. It has simply continued to pay the cost as determined by the manufacturer.
Doctors With Unclean Hands
In addition, some private practice oncologists buy cancer drugs at wholesale prices and sell them to patients at an extraordinary markup. For example, Medicare allows doctors to charge a 6 percent markup for some oncology drugs. As a result, doctors have a financial incentive to purchase more expensive drugs — no matter what their efficacy — just because they can earn more money by selling them to desperate patients. Six percent of $1,000 just isn’t as enticing as 6 percent of $10,000.
Other doctors, including Dr. Leonard Saltz of Memorial Sloan Kettering Cancer Center, have started speaking out against high cancer drug prices. Sloan Kettering started refusing to purchase a cancer drug called Zaltrap because it was too pricey for patients, and Saltz and his colleagues published an op-ed about their decision in The New York Times.
The manufacturer of Zaltrap responded by offering doctors a $6,000 rebate if they purchased the drug for $11,000. Although a rebate sounds good on the surface, there’s a catch. Doctors can still bill their patients’ insurers as though the drug cost them $11,000. A Medicare patient who has a 20-percent copay will pay that copay against $11,000, not $5,000, because the doctor will bill Medicare for $11,000.
The Bottom Line
Patients in the developed world who pay for drugs like Gleevec deliver big money to Big Pharma, but malaria patients in sub-Saharan Africa don’t drive those kinds of profits. Ebola wasn’t a moneymaking machine when people from Africa had the disease. Now that it’s threatening developed countries — and scaring people with fatter wallets — there’s a rush to create a vaccine.
Pharmaceutical companies might not purposely value some lives more than others, but market-driven pharmaceuticals only generate profits when the right people get sick. Do big drug companies want you to be sick? It’s impossible to say, but one thing is clear: They don’t make a profit when you’re well.