Drug Costs

Fact Checking David Mitchell

August 13, 2019 1:21 pm

Patients for Affordable Drugs founder and President David Mitchell appeared on C-SPAN’s “Washington Journal” on August 12. While showing great empathy for the callers who dialed in with devastating stories of how the health-care system has failed them, Mitchell also engaged in a lot of hyperbole.


We will attempt to tackle some of his most outrageous statements here.



Mitchell said the National Institutes of Health (NIH) “gives” hundreds of “wonderful drugs” to the private sector to produce.


Let us state clearly: the NIH does not develop or manufacture drugs so it has no drugs to “give.”


As we have noted in the past, we refer readers to this Forbes column by PureTech Ventures Senior Partner John LaMattina. LaMattina compared early stage NIH research to a marathon. With taxpayer money in hand, the NIH sometimes runs the first (very important) mile in drug development, but “you still have 25.2 miles to go and each mile gets more difficult.” In other words, without significant additional private sector investment, cures never would make it to market. LaMattina explains, for example, that the rheumatoid arthritis medication Xeljanz was the result of “an important observation made at the NIH,” but also needed $1 billion more private sector investment and “19 years of hard work” to make it into patients’ hands. 



Mitchell said drug companies make “a lot of money.” This claim was an oft-repeated one in the Democratic presidential candidates’ debate earlier this month, and we addressed it then. The fact is, however, only 8 percent of publicly traded biopharmaceutical companies ever make a profit. And the sector as a whole has lagged other industries for years in terms of profits.



Mitchell said there is “no correlation” between research and development spending drug companies and list price. We obviously disagree, but acknowledge it might be more precise if we talk about the correlation between innovation and list price, rather than research and development of a single drug.


Commentators like Mitchell often conveniently forget that 9 out of 10 potential new treatments that make it to Phase 1 of the Food and Drug Administration’s exhaustive testing process are never approved. Those drugs will never be sold. There will never be profit from them, but, as all scientists understand, failure paves the way to breakthrough. The cost of these valuable failures are the nature of innovation, and this process is reflected in the list prices of drugs that do make it to market.


If it were not, there would be even fewer companies willing takes chances in hopes of discovery. Which brings us to Mitchell’s comments …



Mitchell mentioned the words “monopoly” and “oligopoly” several times during his C-SPAN interview. He does not like them. And neither do we. (Which is why we think companies should be encouraged to price their medications to make at least some profit. Because it encourages more entrepreneurs to engage in this work.)


Mitchell alleged that “there is no free market for prescription drugs in America.”


The United States has a strong system for protecting intellectual property and that prevents would-be competitors from stealing an innovation (and profits). This system, as we think Mitchell implies, does not guarantee a monopoly, however.


Institute for Policy Innovation Resident Scholar Merrill Matthews has explained how quickly drug manufacturers are met with competition after bringing a new drug to market. He noted these companies currently receive 20 years of patent protection on new products. “After that, generic companies are free to create and sell knockoff versions,” he says.


Twenty years seems like a long time until you consider that the patent countdown clock does not start when a medicine hits the shelves. It starts “as soon as a company files a patent application” or, as Matthews says, when “a medicine is better described as a hope than a product.” Since the average new drug takes 10 years to develop, patents could expire within just a few years of a new treatment hitting the market.



Here we find some common ground with Mitchell. He said, “Canada cannot possibly supply all of our drugs.” As we explain here, that is right. Our issue with importation is not only a matter of scope, however. Importation is dangerous.


Period. (Read more here.) 



Mitchell said “we don’t need to eliminate [these] middlemen.” Perhaps that statement is correct, but this issue is about more than just transparency. Lawmakers and regulators need to ensure these administrative middlemen, which are hired by insurers and health systems, are passing to patients the millions of dollars in rebates provided by drug manufacturers. 



While he acknowledged that Americans care about their out-of-pocket costs, Mitchell insisted that patients also care about list prices. This argument is a convenient one because it often allows Mitchell to focus on the list prices of the drugs he takes to manage his own cancer. To a “Washington Journal” caller, though, Mitchell was forced to acknowledge he pays $0 out of pocket for his medications. 


We cannot understand the physical and emotional pain of undergoing treatment for multiple myeloma (like Mitchell is), and we cannot understand the pain endured by the callers that appeared with Mitchell on C-SPAN. The nation’s health-care system has failed too many people, but hyperbole will not help. And policies built on incorrect talking points about profits and the value of private sector research certainly will hurt.