SAN FRANCISCO -- The pharmaceutical industry is in a state of crisis and asks that consumers please cut down on usage.
The industry will be undergoing rolling drugouts, marking the 28th such interruption in the past three months.
Consumers are urged to conserve, and if possible split their pills in half. For example, diabetics could eat less so they'll require less insulin.
Such was the facetious plea of Dr. J. Leighton Read, former CEO and founder of Aviron, in his presentation at the Nasdaq International Biotech & Infotech Summit here on Tuesday.
He was indeed joking and, in fact, could barely finish without cracking up his words adapted from an actual speech by California Governor Gray Davis: "Friends... with your help and God's blessing we'll get through this."
It's ridiculous to think that people should have to cut down on the drugs they need to keep them healthy in order to keep the pharmaceutical industry afloat, but Read's point was that the pharmaceutical industry has been wrongly demonized by the public for charging too much for drugs.
Edward Penhoet, head of the School of Public Health at the University of California and former CEO at Chiron, a biotech company in Emeryville, California, concurred.
"There's a feeling of being singled out," he said.
He and other speakers on a panel, which discussed the biotech industry's role in the prescription drug debate, said drug companies will be less willing to take the substantial risks involved in developing drugs for diseases such as AIDS that are rampant in the Third World, if they are eventually required to give their product away for free.
It costs about $500 million to bring a drug to market -- about the same amount it takes to build a power plant.
The threat of price controls for drugs only increases the industry's hesitancy, they said.
"There's been no move by the government to help, and no move by other businesses to help," Penhoet said.
Read, who also founded Affymax, suggested that consumers rethink "anything assumed to be an entitlement."
"We need to feel some of the pain," he said.
But why should other entities or consumers have to bail out an industry with one of the highest profit margins in the country?
Tom Abate, biotechnology reporter for the San Francisco Chronicle, provided a necessary balance in this meeting of mostly industry representatives and venture capitalists.
The industry is demonized not only for its policies on distribution of drugs to the Third World but also because of what some consider exorbitant prices in the United States.
The U.S. public ranks pharmaceuticals third among industries perceived to make too much profit, Abate said, citing a survey done by Lehrer/Kaiser Family Foundation and the Harvard School of Public Health. Only tobacco and oil rank higher.
In the United States, the government has focused mainly on prescription drug coverage for senior citizens, but Abate said problems are not restricted to them.
In the Lehrer/Kaiser survey, 20 percent of respondents said they stopped filling their prescriptions because they were too expensive. Only 16 percent of those were seniors.
"It doesn't matter what I think," Abate said. "The electorate has decided that Medicare is the issue."
Legislation to cover prescription drugs under Medicare is scheduled to go through Congress by the end of this year.
But Sharon Cohen, vice president of health policy at the Biotechnology Industry Organization, said it's a "tremendously ambitious timeline," and worried the bill could get "stuck in the mud this summer."
If the bill doesn't make it through this year, it's unlikely to pass in 2002, because of House elections. By then, the oldest baby boomers will be less than a decade away from turning 65, which could cause legislators to see things differently.
Abate said that even if the bill stays on schedule, it's not a fix.
"A Medicare drug benefit would not solve the problem," Abate said. "It would only address the politics."
Dr. Alan Garber, a professor of medicine and director of the Center for Health Policy at Stanford University, suggested the answer to the conundrum hasn't yet been conceived.
"I think we have been too timid about looking at models other than controlled pricing," he said.
A possible solution, at least in this country, Garber said, would be fixed prices for insurance companies to purchase an unlimited amount of drugs.
Shekar Rao, of the Rao consulting firm, asked the panel why the semiconductor industry was so successful at bringing prices down, even though, like drug development, wafer fabrication involves a huge initial expense.
"The per unit cost kept coming down and the selling price kept coming down, yet they're able to maintain a profit margin," Rao said in an interview.
He suggested that the cost of sales and marketing, or money spent on "golfing and cruises, etc." could be reduced.
But Garber said it's an unfair comparison, because companies such as Intel can create a ubiquitous product with a constantly expanding market.
Drugs, on the other hand, inherently have a more limited customer base.
Pharmaceutical companies could learn from the semiconductor industry, however, to keep prices down in order to reach a wider consumer base.
"When drug prices are high, the people who need them don't benefit," he said, and drug companies don't make as much money as they could with more customers.
