Plunder drugs: why Americans believe they have to put up with pharmaceutical profiteering

$800 Million Pill: The Truth Behind the Cost of New Drugs

By Merrill Goozner

University of California Press, $24.95

I have only two regrets over the life I led in my twenties. I should have gone on that sailing trip to the South Pacific with a group of entomologists seeking to study the insects on the exotic Marquesas Islands, instead of rushing back to "college after my year off. My other regret is once back at school, I failed to heed the advice of the fellow graduate student who told all of us in the biology department at the University of California that we should serape together every penny we had and invest in a startup biotechnology company called Amgen. Had I listened to him, I might be cruising the South Pacific in my own yacht instead of writing book reviews, because anybody who plunked down $100 in the mid-1980s on Amgen would have shares worth more than $1.5 million today.

Today, Amgen is the world's most successful biotechnology company, hailed regularly by Wall Street and the media as a shining example of the marriage between scientific ingenuity and the American entrepreneurial spirit. It is still headquartered in Thousand Oaks, Calif., the bedroom community of ranch houses and shopping malls an hour west of Los Angeles, where it was founded by a small group of scientists from UCLA in 1980. Back then, the company had no products, no warehouses, no laboratories--merely a handful of investors willing to bet that the fledgling firm could turn ideas into real drugs using recombinant DNA technology. Nine years later, Amgen launched its first product, Epogen, a genetically-engineered form of erythropoietin, one of the proteins made by the body that stimulates the production of red blood cells. Today, the company makes more than $5 billion a yeas, a third of which is profit, selling just three products. Epogen alone brings in over $1 billion, most of it from about 300,000 Americans on kidney dialysis, who would suffer debilitating anemia without it.

Epogen is truly a wonder drug. It eases many of the miserable symptoms that dialysis brings. But you don't have to be an economist to figure out that it is also incredibly expensive--among the most costly drugs on the market. The federal government picks up the tab for Epogen through the Medicare program that pays for dialysis. The company doesn't try to justify its high price on the basis of manufacturing costs; the recombinant DNA technology used to make Epogen is commonplace. And it long ago earned back its development expenses. Rather, as Merrill Goozner writes, the high price tag placed on Amgen products can only be justified as paying "for the scientists and technicians squirreled away in Thousand Oaks, who are busily searching for the next generation of wonder drugs."

Indeed, that is the mantra that the entire biotechnology and pharmaceutical industry begins chanting whenever the high price Americans pay for their medicine comes up. According to a 2001 Tufts University study--funded by the industry--it costs an average of $800 million to get a single new drug to market. But what biotech and Big Pharma companies don't tell you is that the vast majority of the new drugs they bring to market are "me-too drugs," new formulations of existing pharmaceuticals. They also don't tell you that they did not invest a dime in the basic research that produces the majority of breakthrough drugs.

Americans pay twice for the medications they take. First, their taxes go toward the federally-funded basic research that lies behind most such discoveries. The majority of new drugs are based on findings made by dedicated, hard-working, federally funded scientists in universities and government laboratories, not the research arms of drug companies. A recent congressional report found that of the 21 most important drugs introduced between 1965 and 1992, 15 were developed using knowledge and techniques from federally-funded research. Then the public pays astronomically for the drugs once they hit the market.

Why do we put up with the highest drug prices in the world? Because everybody from doctors to legislators, policy-makers, and patients has been bamboozled into believing that the breakthrough drugs of tomorrow will never materialize unless the drug industry makes an ungodly profit.

The $800 Million Pill is required reading for anybody who wants to understand the role Big Pharma and biotech companies play in driving up healthcare costs in America. This book does for drugs what Fast Food Nation did for fast food, peeling back the layers of science, clever accounting, and hype to expose the dark side of the nation's most profitable industry. Goozner, former chief economics correspondent for The Chicago Tribune, tells a series of deft and engaging stories about the discovery and development of a half dozen drugs. Amgen's blockbuster blood booster Epogen, for instance, was the product of 20 years of slogging work by Eugene Goldwasser, a soft-spoken, unassuming biochemist at the University of Chicago who in 1977 isolated the protein that formed the basis for the drug.