Profiteering

We all know that pharmaceutical companies provide an essential service. They produce all the drugs needed to keep us healthy, and fund a large portion of the research into new therapies.

However, it is also the industry with the highest profit margins, higher than oil and gas, higher even than the banking sector. And an industry doesn’t win that crown without their fair share of underhandedness.

Vials

A pretty blatant example of this was reported in the New York Times recently. They described a study, published in the BMJ (the British Medical Journal), which highlighted a simple but effective way the drug companies force consumers in the US to buy more than they needed. All they do is package it in a bigger vial than required.

The authors highlight Keytruda, a new drug for lung and skin cancer, as an example of this. An average patient would need around 136 milligrams of the drug, but the company only make it available in the US in 100 milligram vials.

As a result, doctors give the patient their dose and then usually discard the rest of the vial, ensuring a high level of waste. However, the patient/insurer gets charged for the full amount, inflating the profit of the drug company.

The study examined the top 20 cancer drugs that are dosed by body size and packaged in single dose vials. This accounted for 93% of all such drug sales. The study showed that an average of around 10% of the drug was discarded due to packaging. The therapy ipilumumab, for example, would have an average of 7% left over in each vial. Considering that a dose costs $29000, this means that the company are making an additional $2000 for every single vial they sell.

You can find a nice little tool here which shows the estimated wastage per drug that was analysed in the study.

In total the authors estimate that in 2016 alone pharmaceutical companies will make an additional $1.8 billion from this practise. And this is just from cancer drugs. The asthma drug omalizumab is dosed in multiples of 75 milligrams, but the company only sells 150 milligram vials in the US, even though it has an approved 75 milligram vial size. The authors estimate that the drug infliximab (used for intestinal disorders and arthritis) generates around $500m each year in additional revenues from leftover drug. Overall, the profit made from this forced wastage is significantly higher than the $1.8 billion that the companies get from cancer drugs, probably around $3 billion.

To add insult to injury, this is just the increased revenue that the pharmaceutical industry makes from leftover drug. Patients in the US are also charged a mark-up by doctors and hospitals, which is usually dependent on the amount of drug in the vial, not the amount of drug used. This is thought to add an additional $1 billion to what consumers are being charged each year.

It is worth pointing out that this is largely a problem with the American health care system. In most other countries (where the government has more control over what is spent on health care) the drugs come in various size vials, so the waste is minimised. Keytruda, for example, is sold in Europe in 50 milligram vials (as opposed to 100 milligram vials in the US), so while the waste is still considerable, it is far less than that in the US. Furthermore, it is standard procedure to prepare a number of patient’s doses at same time and share the vial, so that the amount of waste is minimised and money saved. This is not a common practise in the US.

I have touched upon the pricing of pharmaceuticals in a previous blog post, and it is quite a controversial issue. The industry likes to present itself as largely ethical, generating high levels of profit primarily to fund further research. However in this case companies are deliberately producing waste in order to maximise profit. Unfortunately, blatant profiteering like this (at the expense of the consumer) undermines this argument.

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