A top official at pharmaceutical giant Johnson & Johnson dismissed questions on a recent earnings call about the drug price reform debate in Washington, saying that the company is “responsible” in its pricing.
As part of the question and answer period during the company’s third quarter earnings call in October, one questioner asked Johnson & Johnson Chief Financial Officer Dominic Caruso where he sees the drug pricing reform debate in Washington going and if the company was planning a pledge, similar to one made by many firms in the 1990s, to not raise drug prices beyond the cost of inflation.
“Despite significant media attention on drug pricing, there really isn’t a consensus on policy solutions that would lower prices without negatively lowering innovation,” Caruso said.
After recalling the industry’s collaboration on the Affordable Care Act, Caruso then told the questioner that the “real answer to this dilemma is to monitor and provide outcome-based metrics and not simply focus only on price.”
Finally, Caruso, in response to a question about the industry voluntarily restraining the prices of its own drugs, explained that he would rather focus on justifying the current prices of drugs. “I think we’re very responsible in our drug pricing. And we tend to support the price of our drugs with strong economic data,” he said. “So rather than pledge to a particular number I think it’s important that we continue to develop robust data that provides a solid foundation for the value that our products provide the health care system.”
Listen to Caruso’s full remarks below:
“Johnson & Johnson’s justification for their prescription drug prices are outrageous,” Vijay Das, a health care advocate at Public Citizen, told The Intercept in response to Caruso’s comments to investors. “Sick patients and taxpayers are held hostage in order for the drug maker to extract extreme profits.”
Das pointed to investor documents Johnson & Johnson uploaded that show the company spent 12.6 percent of its total sales in research and development, compared to 26.6 percent it spent on selling, marketing, and administrative expenses. This means the company was spending twice as much on marketing and sales as on actually developing the drugs.
Johnson & Johnson has gained notoriety for the high cost of its drugs. For example, it produces and markets the cancer drug Imbruvica, which retails at around $9,550 for one bottle of 90 capsules. Dosage is four capsules a day, meaning one bottle will be a 22-and-a-half-day supply.
At this average price, a full-year supply would cost $154,922.
Another drug it produces, Olysio, is used to treat Hepatitis C. This drug retails at around $22,000 on the low end for around a month’s supply (see daily dosing here). Altogether, that equals $264,000 for an annual supply.
“Hepatitis C treatment costs are forcing state governments to consider rationing care for their Medicaid and prison rolls,” said Das. “Instead of simply charging less, this industry is outdoing itself every year, extracting huge profits at the expense of our poor and sick.”
We should just freeze big pharmaceutical assets trough all the world simultaneously, then globalize the whole damn medical complex. Adjust the pricing to make reasonable profit for research then set a medical world bank and distribute the goodies based on resources and needs.
Yeah my dreams are radical, can i get arrested for “dreaming” stuff like that these days? :P
The vast majority of medical research is paid for by NIH, Med Schools and research hospitals.
Pharma spends 19 times as much for marketing overpriced drugs (not counting the millions spent on bribing (contributions) and lobbying congressmen, than they do for research.
Another outrageous cancer drug is Neulasta.
$5000 – $8000 a shot. One dose fter every chemo treatment (usually every 2 weeks) for 12 cycles or 24 treatments.
I had a horrible reaction to it requiring sedation for the first 3 times. After that they agreed to squirt $2500 worth of Nuelasta in the toilet and give me the rest. That worked. There is no other dose available. Its insane.
I hope they didn’t literally squirt it in the toilet, but at least were professional enough to dispose of it with the rest of their “toxic waste”?
The premise of intellectual property on drug development is to tax the sick to pay for research and safety certification.
Patents, generic exclusivity, biologic exclusivity, patent extensions, and rewards for taking old drugs through new clinical trials are all forms of this taxation, which is conducted under the ancient medieval model of “tax farming”, in which private monopolists are given power to extract what revenue they can.
To extort the sick in this manner is an act of cruelty at the moral level of a schoolyard bully who steals a child’s medicine on the way to school and demands he do something humiliating to get it back… multiplied by billions.
As discussed, the firms spend more on marketing than research; there is no reason why the NIH couldn’t take the drugs straight to market except that capitalist fundamentalist fanatics think the market is “more efficient”. Does it look more efficient?
What kind of free enterprise bases itself solely on the arbitrary decisions of courts on patents and regulatory agencies on safety?
What kind of safety does it grant to test a drug exhaustively, when it then is unavailable to many who need it? How reliable is safety testing by companies who publish only what supports safety when they want their drug on the market, then publish the studies that show a drug’s hazards when exclusivity expires in order to keep it from competing with their next product?
The patenting is claimed to support “useful arts”, but how useful is it really that herbal drugs like elderberry are ignored while comparably effective substances like Tamiflu are promoted?
In theory the answer is simple: just end all the regulations. We are tired of lying, conniving profiteers telling us that we shouldn’t be allowed to buy this pill or make that pill. We will establish a new, entirely voluntary social system of prescriptions and medical certifications and watch the price of health care plummet. In time we may recover or even increase the quality. And with it so much cheaper, we should readily find the courage to do the other part, make it a universal right; indeed, if this is done at the same time, then the determination of eligibility for funding support allows a more gentle method of regulation to make up for the loss of the other.
But the U.S. is not a country that solves its problems, and so what is obvious is also impossible; in which case it will fall to terrorists to be the agents of social change. We may need our own pantheon of heroes like George Pickering II to be immortalized in folk songs and spray-painted on the sides of buildings before people start to look up and wonder.
http://Www.dunwalke.com
Just substitute “Big Pharma” for Private Prison and you will understand. I am on the front line of health care in that I am a health care councillor. The ACA “obama care” is nothing more that a mass redistribution of wealth from the middle class to the upper class. The middle class pays for services for the poor while owners of pharmaceuticals, doctor and hospital groups and medical equipment manufacturers charger higher and higher prices for the services we are forced to have. That is unless you make between $11,700 and $15,800 where you don’t qualify for Medicaid or a subsidy in 20 states.
The taxing is used to prop up profits and cover 1900% of marketing costs rather than research.
responsible for destroying any vestige of what passes for healthcare in the US
There’s an very, very easy and real, permanent solution to this issue. Bring an end to so called “intellectual property”.
When companies cannot deploy Gov’t enforcement to protect ideas, they remain mercify to a competitive market. Instead of being able to charge exorbitant fees without fear of competition for decades, they are left with being only successful by providing a better product for the least money.
People are kidding themselves if they think turning to Gov’t for yet more regulation, which in fact creates this issue by protecting these corporations to begin with, will in turn somehow “solve” the very issue it creates. No matter what ends up passing, if anything at all, it will be with the blessings of highly paid lobbyists and the crony representatives who will ensure pharma corps keep thier profits far higher than free markets would otherwise dictate. It will be no “solution” at all, but instead will only further protect these institutions and thier sham of “intellectual property.”
It’s extortion. Other countries are protected from these predator who are profiting off the misery they created. It’s out right criminal, the whole system is corrupted.
The reason they can extort is because others are not free to compete.
For the sake of some balance, it is also true that drug patents don’t last forever and if, thanks to government regulations that add unbelievable amounts of useless overhead and years to the development cycle, the evil drug companies have only a very small time window to recover their investment which often adds up to billions – a lot of it being government-imposed overhead.
Yes, marketing expenses may be higher than R&D but anyone remotely familiar with ‘math’ or made up statistics might recognize that, while R&D is focused on a small number of products being developed, ‘marketing’ is applied to the company’s entire portfolio which could be thousands of products so comparing marketing expenses to R&D expenses is just stupid but it probably resonates with all those who don’t take a minute to think about it.
I’m not saying that the pharmas aren’t in for the money because they are but think about what you are getting. If the ‘big pharmas’ didn’t spend billions to develop these super-expensive drugs that, yes, one day will become ‘generics’, who would have? The government is much more interested in taxing everyone so that they can invest their trillions into bombers, armed droned and missiles and those don’t help anyone. And yet many wish the government would ‘tax more’ which would results in more weapons and, if they taxed the pharmas ‘more’, fewer useful drugs that might turn into inexpensive ‘generics’ someday.
This was covered years ago on Frontline (The Other Drug War).
http://www.pbs.org/wgbh/pages/frontline/shows/other/
Check out these comments from an interview with the former editor in chief of The New England Journal of Medicine, Marcia Angell.
“In fact, the pharmaceutical industry is what’s parasitic on publicly funded research. The pharmaceutical industry likes to depict itself as a research-based industry, as the source of innovative drugs. Nothing could be further from the truth. This is their incredible PR and their nerve.
In fact, if you look at where the original research comes from on which new drugs are based, it tends to be from the NIH [National Institutes of Health], from the academic medical centers, and from foreign academic medical centers. Studies of this, looking at the seminal research on which drug patents are based, have found that about 15 percent of the basic research papers, reporting the basic research, came from industry. That’s just 15 percent.
The other 85 percent came from NIH-supported work carried out in American academic medical centers. In one study, 30 percent came from foreign academic medical centers. So what we know about the numbers indicates that the foreign academic medical centers are responsible for more new drug discoveries than the industry itself.”
If that were true, and I bet it isn’t, then the vast majority of new drugs would be ‘generics’ and not patented by one pharma company or another.
The sad true is that pharmas do spend billions researching, testing and doing all sort of absurd government-mandated ‘compliance’ things while developing new drugs.
Do we have a list of the new drugs developed by the NIH?
Patents can exist far longer than is officially claimed by corporations making one tiny change in ingredients or in sizing and getting a new patent extension. That is the way the game is being played with a complicit congress doing the bidding of their money masters.
I just wish this article went further than it did. I for one have hep-c and could benefit from one of the new drugs. The BIG problem is I can’t afford it, I can’t get financial relief and my benefits won’t pay for it. In other words the profits of the drug industry are more important than peoples health. I’m not the only one affected by these practices. The generic drugs have seen a marked increase over the last several years too, and the ONLY reason for this are profits. I really think it’s time to start completely changing the health care industry by setting up a consistent pricing system not motivated by profit. My C-T scans cost 1600.0 at the state run hospital and 3700.0 dollars US at the private hospital just to name one case of price inequality. My monthly drugs have increased by 50% in the last two years. They are generic. Why then, other than profit and greed are these costs escalating at 49% more than inflation? Zaid has just started to scratch the surface of what I consider one of the most corrupt industries in the US. We need more investigation into the unethical behavior of the drug companies.
Your story is important and thank you for sharing it — we need to continue to spread these stories so that Americans and policymakers understand what it is we’re dealing with
Are you sure they didn’t ‘say’ that cancer was good for business?
I currently take Solvaldi 400 mg, Ribavirin 1.2 g and Daklinza 60mg per day. Because of the damage to my liver I need a 6 month treatment.
I was able to get the drugs for compassionate use. The cost is set at 250,000 dollars but the drug companies have given me the drugs for nothing.
http://www.theguardian.com/society/2015/dec/20/government-pledges-1bn-for-hepatitis-c-treatment-in-effort-to-eradicate-disease
A few interesting points to add to what Zaid has written:
Though not stated, the share of advertising spending in the US totally dominates the ad budget, because in most countries it is illegal to advertise prescription drugs directly to consumers. That may partly explain why although J&J is an international company, the lion’s share of sales are in the US. Presumably, if we adopted laws similar to those of other nations or alliances, say the EU, the company would be forced to reduce its advertising budget, with – perhaps – a beneficial effect on prices.
The second point is that the presentation shows profits of $4.2 Billion on sales of $17.1 Billion for 3Q 2015, a profit rate of over 25%!!! Oh, you might say, that is good for the shareholders, and you would be partly correct. Of the reported $1.49 adjusted earnings per share, the dividend payout for that quarter was $0.75 – effectively half of the earnings. So who got the other $.74 per share? Did they plow that back into R&D? Well, no, that’s a different budget line; earnings are net after expenses. Anybody know where the $2 billion went?
All that having been said, the real question concerns how much it costs to produce the drugs. As there is nothing in the referred to material that sheds a single photon of light on the costs of production, we cannot answer such questions. Only if we have complete transparency, going far beyond the rolled-up and massaged numbers fed to the analysts and shareholders, will we be able to accurately assess the degree to which we are being gouged.