Friday, February 5, 2016

Why GOP Complaints about Pharma Price-Gouging of Vets is a Hypocritical Smokescreen

by Nomad

One Republican complaints against a drugmaker's price-gouging may be applaudable. As long as you have only half of the facts. 

In yet another example of mainstream media failing to properly inform the public, we can point to CNN and its posting of US Rep. Jeff Miller's op-ed piece. The article demonstrates how, when critical information is left out of a story, the news becomes nothing less than a lie.

The subject of Miller's piece is price-gouging by pharma companies, particularly when it comes to medication for veterans. The company in question, Gilead Sciences, has been scrutinized on several occasions in this blog. (here, here and here)

In his article, the Congressman for Florida's First district writes:
If not for the service and sacrifice of those who have worn the uniform, the United States would not be the extraordinary place it is today. Unfortunately, this concept seems lost on the people at drugmaker Gilead Sciences.
Whenever we try to qualify patients by who "deserves" life-saving treatments more, we run into ethical questions. It is all in keeping with Republican efforts to be percieved as actually caring about veterans.
The record tells a different story. In fact, the GOP has a fairly dismal record when it comes to veterans. Last year, the House Appropriations removed more than $1.4 billion from President Obama’s proposed 2016 budget. As one source notes:
As a result of the cuts, it was estimated that 70,000 fewer veterans would be able to receive needed care.

In October last year, the House voted on HR 1314 - Bipartisan Budget Act of 2015 which, according to one Congressional source, attempting offset "the strain that the ongoing budget uncertainty has had on the ability of our military service branches and government agencies like the VA to appropriately plan and program for future years." 
Like 166 Republicans in the House, Congressman Miller voted against the bill. Fortunately the bill passed both Houses and was signed into law by President Obama in November.

But the appearance of concern for vets is necessary in an election year. If voters don't look to closely, it seems patriotic and commendable. 
So this is a ideal time to go after Gilead.  
The company is the maker of the hepatitis drug sofosbuvir, which can potentially cure hepatitis C, a chronic liver disease that affects about 3.2 million Americans, including nearly 200,000 veterans. The fact that Gilead is making this landmark medication available to consumers is an overwhelmingly positive development that deserves recognition.
The problem, according to the Florida Republican, is the way the company is "picking and choosing  who gets affordable access to the drug." The company is charging the Department of Veterans Affairs upward of staggering $40,000 for its curative treatment. The actual manufacturing cost? $1400.
The extraordinary prices Gilead is charging U.S. customers for sofosbuvir are making the company rich, bringing in more than $10 billion in the drug's first year on the market.
Shrekli and the Bitter Truth
Yet, whether Miller likes it or not, Gilead's actions is really what the unregulated free market actually looks like. In the conservative world, that's none of government's business. 

The pharma industry has actually cited this particular drug in its defense. 
The high cost of drug treatment actually saves money to the consumer in the long term, so says Stephen Whitehead, chief executive of the Association of the British Pharmaceuticals Industry (ABPI).
With sofosbuvira's cure rate of 90%, Whitehead explains, patients can expect never to need surgery (like a liver transplant) and long term periodic treatment will be avoided. Isn't that worth the cost?

For the rest of us, it is a perfect example of the need for tighter regulation of industry, which is prone to life-or-death exploitation.

In the last few months, truckloads of outrage and hatred has deservedly  been directed at Martin Shkreli and yet, as awful as he is, he is merely following the same business model established by Gilead and other drug makers.

This is a problem for Congressman Miller- who was never a veteran but started out as a real estate mogul. In the past, he has professed to be a proponent of limited government and an opponent against federal actions that inhibit business.
In immediate danger of running into a significant ideological conflict, the Republican is forced to hedge somewhat in his piece: 
The government shouldn't be in the business of telling private companies what to charge their customers. But by the same token, companies such as Gilead shouldn't price-gouge one group of consumers to subsidize its preferential treatment of another. 
On several fronts, Miller's position is irreconcible. On one hand, he begins by saying veterans belong in a special class, and in the next paragraph, he condemns preferential treatment and classification of consumers. 
Nevertheless he carries on:
Gilead's price discrimination against American veterans and the organization established to care for them is a slap in the face to the millions who depend on VA health care as well as the taxpayers who generously fund the department.
The truth that Miller would rather ignore is that while Gilead is dicriminating against veterans, the company's price gouging operates across the board for all consumers.

So much so that last month, the Attorney General in Massachusetts warned it would take legal action against the company unless it lowers the price of two popular hepatitis C medicines.
Free market advocates, like Miller are caught in a trap when they condemn Gilead. They should, in theory, be applauding the pharma industry's approach. According to their philosophy, this is a success story and a vindication of their heart-felt principles. That's not going to go over well with the public at the moment.
So Miller finds a nifty way to re-direct this anger.

The Egyptian Distraction
What really seems to bug Miller is that developing countries are getting the pricey drug on the cheap. That, in his mind, is not acceptable.

In Egypt, he notes, the Gilead drug is available at  around $900 for the full 12-week regimen. But, what really annoys Miller is that Egyptians are given a discount denied to American vets. And- although he doesn't say it- even Muslim countries are getting this drug cheaper than our own "warriors." Hypocritical to say the least, since he has just complained about "picking and choosing" who does and who does not receive treatment.

Congressman Miller is perhaps unaware that Egypt has the world's highest prevalence of the virus. And in fact, this 99 percent discount to the U.S. price was arranged two years ago. Plenty of time for him to fume.

Unfortunately, Miller also seems unaware that the price that Gilead charges in Egypt is equally exorbitant. The average weekly wage in that country (as of 2013) was something around $92. Think of that, less than $100 dollars a week. According to stats provided by the Central Agency for Public Mobilization and Statistics:
Twenty six percent of Egypt’s population lives inpoverty, while forty nine percent of Upper Egypt cannot provide the basic needs of food.
Should anybody any place in the world be forced to choice between food for their family and the drugs they need to stay alive? Is that something we can now justify in the name of business?

A one month box will run about $300 as part of a 12-week drug regimen. This means would be about $900 if Sovaldi is used as part of a 12-week drug regimen. Doctors warn, however, that the true cost would be higher if the treatment was applied for 24 weeks, which is also an option based on different drug combinations. 

So to compare prices from the US to Egypt is missing the point. Of the millions of patients in Egypt, the majority will not be able to afford the treatments that could save their lives. (The only saving grace for these people is that Egypt- unlike the US- has universal healthcare.)

Strictly from a business perspective- given the actual cost to manufacture the drug, it was a wise corporate decision. Profits continue and the company gets street cred for being kind to the developing world.

Actually, Gilead was facing a backlash. As we reported last year, the drug maker has run into problems selling its drugs in three developing nations where courts there have ruled against its price-gouging tactics. 
So reducing the price in poor countries was a bit more than just a PR stunt. 

Tamiflu and Rumsfeld 
But there's one more important point that Miller fails to point out. The mama mia of all ironies. The former chairman of the company from 1997 to 2001 was none other than the Secretary of Defense under George W. Bush, Donald Rumsfeld.

It would not be the first time Rumsfeld's connection to the company has been questioned. Back when Rumsfeld was in charge of defense there was  bird flu scare  and the administration backed  moves to stockpiled the only drug recommended to combat this threat, Tamiflu. The manufacturer was Gilead Sciences and reportedly its major stockholder was Donald Rumsfeld. 
In 2009, when the story broke, Rumsfeld refused to comment on whether he still held shares in the Californian firm. If he had dumped his stock, surely he would have announced it to deflect any question of conflicts. 
It gets worse.

In his defense, Rumsfeld allegedly recused himself from any decisions involving Gilead, and he directed the Pentagon's General Counsel to issue instructions outlining what he could and could not be involved in if there were an avian flu pandemic and the Pentagon had to respond.
Still questions remained about conflicts. According to sources, it was Rumsfeld himself who ordered the vaccination of all US military personnel and who budgeted the more than $1 billion for Tamiflu stockpiling. So, despite his professed recusal, and a pretense of independent oversight, the result remained the same. 

And there's one more detail to add.
In 2014, UK research showed that Tamiflu did not prevent the transmission of flu, and indeed, had "a number of adverse effects, which included "psychiatric adverse events, renal adverse events and metabolic adverse events… over and above what you would normally see in flu".
Said one professor who analysed the data, the drug was not effective and "caused really serious harm in otherwise healthy people".

But for Gilead and its stockholders, it was business as usual. Create a market and exploit that market by charging according to demand. It was a very successful strategy too. Based on the Bush administration's stockpiling decision Gilead stock reportedly saw a 700% increase.

Whether the former Defense Secretary owns Gilead stock today is unclear. Since he refused to talk about it when the press directly accused him of conflicts of interest back in the Bush administration, there's no reason to believe he has sold off his stock since then. 
It would have been a very strange business decision considering the consistent profitability of the company.

Republican Rep. Miller's failure to mention the Rumsfeld connection could just have been an oversight on his part. If so, then perhaps Miller needs to do a bit more research. He is after all, the chairman of the House Committee on Veterans' Affairs

And many of those veterans served under the Defense Secretary Rumsfeld and were his Tamiflu pawns in the past.
Of course, Miller seems much more willing to blame the sick and poor in Eygpt who no more afford this life-saving treatment than American veterans.