It is hardly surprising that The New York Times comes out with an anti-pharmaceutical screed on a regular basis. I usually just ignore them, but Thursday's article in Business Day was so slanted and amateurish that I couldn't pass up the opportunity to call them out.
The headline itself was the worst offender: "Brand-Name Drug Prices Rise Sharply, Report Says."
I'm guessing that they hoped that their readers would simply read the headline, mentally file away yet another pharmaceutical industry crime against humanity (soaking the consumer even more), and move on to the sports section to read about the Jets (arguably another crime against humanity).
Because if anyone had bothered to read the whole article, what is really going on is staring you straight in the face. But first, let's talk about some of the more disingenuous aspects of the report.
The first sentence reads "The price of brand-name prescription medicines is rising far faster than the inflation rate, while the price of generic drugs has plummeted, creating the largest gap so far between the two, according to a report published Wednesday by the pharmacy benefits manager Express Scripts."
The increase in branded drugs is 13 percent over the past year, while the price of generics has fallen by 22 percent. These numbers are both misleading and meaningless.
The obvious conclusion from the headline is: Those awful drug companies are making out like bandits, while the "little guys"--the generic companies-- are suffering. And the difference between the rate of inflation and brand name drug prices is bona fide proof of this. Sounds good, but in this case, the use of the inflation rate as a surrogate measure of pharmaceutical company "greediness" is not only utterly meaningless, but intentionally deceiving.
Buried in the middle of the article are two sentences which give the real reason for the price increases, and I have to give them some credit for at least mentioning it. The report cited the growth of specialty drugs, which treat diseases like cancer and multiple sclerosis, as a major reason for the increase in spending on branded drugs. Spending on specialty medicines increased nearly 23 percent during the first three quarters of 2012, compared with the same period in 2011.
New brand name drugs are nothing like they were 10 or 20 years ago. We are talking about a whole different animal, so drawing any conclusion from these data is impossible. You might as well use the price of pork bellies on the Chicago Mercantile Exchange. Here's why.
The well-known "patent cliff" and supposed "lack of innovation" have put pharmaceutical companies in bad shape. This has not only led to the ongoing deconstruction of US-based research, but also a radical shift in the type of research that is being done.
A major consequence of this trend is that pills are pretty much passÃ©. Virtually the entire industry has rapidly re-focused on specialty drugs--very expensive and often individualized therapies (most are biologics) that are mostly new therapies for cancer and autoimmune disorders--the areas that people (and sometimes insurance companies) are willing to pay $100 thousand dollars per year for a new drug.
The Express Scripts report explains quite nicely what is really going on--almost all of the newly approved drugs since July 1 fall under the category of speciality drugs. And yes--they are very expensive.
This is why branded drugs are outpacing inflation (as if that has anything to do with anything)--not because we are seeing massive price hikes on older brand drugs.
The fact that this shift in drug research has led to the use of much more personalized, difficult to manufacture and expensive drugs is the real story. Blindly comparing meaningless inflation data to make a point is disingenuous and inaccurate. One would think that The Times would strive for higher standards than the junk they put out this week.