Pharmaceuticals
Senator Bernie Sanders “grilled” Danish drug giant Novo Nordisk’s CEO at a hearing yesterday. The CEO showed parallel black grill marks afterwards but was crispy on the outside and juicy on the inside.
Bernie asked why the magic weight-loss drug Ozempic costs $969 per month in the US, but $155 in Canada, and $59 in Germany. Bernie noted that the production cost for that one month supply is between 89 cents and $4.73.
Joe Denmark could have answered, “What do Canada and Germany have that the US doesn’t? That’s right. National health care. If we want to sell our drugs in Canada or Europe, we have to charge what they will pay. All of us in Big Pharma love American doctors, hospitals, and health insurers keeping the US free of “socialized medicine”. We (and they) can charge whatever we want.”
Instead, Joe Denmark dodged Bernie’s question. “We appreciate that each country has its own health care system but making isolated and limited comparisons ignores this fundamental fact.”
No, the fundamental fact is that you are charging nearly $1,000 for something that costs less the $1 to make.
The true answer is that Big Pharma’s success rate for new drugs is less than 5%. Tons of money is lost on drugs that prove ineffective, have significant side effects, and are subsequently rejected by the Food and Drug Administration. The FDA saved Americans from Thalidomide, a drug approved in Europe that caused significant birth defects there in the early ’60s. The drugs that make it to market have to refill the corporate coffers depleted by the drugs that don’t.
Also, the Lodestar of Capitalism is “Charge what the market will bear.” If Americans will pay $1,000 per month, that’s what you charge.
I had a personal experience with pharmaceutical manufacture. Ex-Lax was a popular laxative back in the day. It was disguised as a segmented chocolate bar, not unlike the original Hershey bars. It was even chocolate-flavored. A classic prank was to feed Ex-Lax to a drunken fraternity pledge. Not that Pledge Marshall Ed ever did anything like that.
Ex-Lax’s active ingredient was phenophtalene. In ’75, Air Products got the contract to manufacture phenophthalene. It involved a 50 gallon stirred reactor and a centrifuge/drier about the size of a garbage can. Engineer Ed was Project Manager for the installation. I was aware that phenophthalene was not something that humans wanted to breathe in. Operators wore masks when exposed to the product. What I wasn’t aware of was that phenophtalene particles were so small that they easily escaped through the seals on the 1000 rpm centrifuge during drying. Our guys beat a steady path to the men’s room all day long. We quickly sealed the area and thoroughly ventilated it.
Pharmaceutical manufacture is not easy or without hazard. Still, a 1,000% profit margin is excessive.
By Ed Dufton