Pharmaceutical Industry Reform

The prospect of healthcare reform in the United States was a hot topic of debate during the 2008 presidential election, and as of 2010, American citizens were still grappling with this complex and polarizing issue. Inherent in all discussions of how best to provide quality healthcare is the subject of pharmaceutical industry reform. Americans spend $200 billion on prescription drugs annually, and that rate is growing at more than 10 percent per year. Those most interested in reforming the pharmaceutical industry argue that drug companies have too much influence over regulatory laws, and these hopeful reformers take issue with the rising cost of prescription medicines, the unfair practices embraced by drug companies eager to rake in massive profits, and the aggressive marketing campaigns spearheaded by mammoth, profit-rich companies commonly referred to as Big Pharma.

After two years of fiery debate, healthcare reform legislation passed on March 21, 2010, and, for the most part, the pharmaceutical industry stands to benefit more than it will lose. Big Pharma has agreed to contribute $85 billion toward the bill's cost, which mostly will be distributed as industry fees and lower prices paid to pharmaceutical companies under the new program. In addition, Big Pharma will see tens of billions of dollars in [Page 376]increased revenue as more prescriptions are written for the huge influx of newly insured citizens. Further, because healthcare reform does not include drug price control measures or increased regulation, Big Pharma has largely embraced the legislation, spending about $100 million in marketing geared toward promoting reform.

Generic drug makers were not quite as lucky as name-brand drug makers, since healthcare reform gives name-brand manufacturers marketing exclusivity for 12 years. This, of course, is bad news for consumers, many of whom can only afford generic versions of name-brand drugs. Another win for name-brand manufacturers—and loss for consumers and generic drug makers: Congress omitted a provision from the legislation that would have placed new restrictions on patent settlement agreements between generic and namebrand drug manufacturers. Big Pharma defends these settlement agreements as helping to foster innovation.

The pharmaceutical industry claims that its efforts to create innovative drugs require massive spending on research and development, and they defend their business practices by citing free-market values and invoking notions of American free enterprise. In contrast, Marcia Angell's 2004 book, The Truth About the Drug Companies, describes a pharmaceutical industry rife with corruption and greed, bolstered by a complicit U.S. government that grants drug companies patents and exclusive marketing rights while creating a system that allows those firms to rely on taxpayer-funded research carried out at universities and the National Institutes of Health. In answer to Big Pharma's argument that research and development requires massive spending, Angell noted that research and development expenditures typically consume 10 to 15 percent of Big Pharma budgets, while marketing and administration costs devour close to 40 percent of the budgets. Many note that the aggressive marketing carried out by Big Pharma is necessary precisely because the market is flooded with so many similar drugs, with very little actual innovation.

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