The Truth About the Drug Companies

[Guest guest]

The Truth About the Drug Companies

By Marcia Angell

Second, the pharmaceutical industry is not especially innovative. As

hard as it is to believe, only a handful of truly important drugs have

been brought to market in recent years, and they were mostly based on

taxpayer-funded research at academic institutions, small biotechnology

companies, or the National Institutes of Health (NIH). The great

majority of " new " drugs are not new at all but merely variations of

older drugs already on the market. These are called " me-too " drugs.

The idea is to grab a share of an established, lucrative market by

producing something very similar to a top-selling drug. For instance,

we now have six statins (Mevacor, Lipitor, Zocor, Pravachol, Lescol,

and the newest, Crestor) on the market to lower cholesterol, all

variants of the first.

http://www.nybooks.com/articles/17244

Every day Americans are subjected to a barrage of advertising by the

pharmaceutical industry. Mixed in with the pitches for a particular

drug—usually featuring beautiful people enjoying themselves in the

great outdoors—is a more general message. Boiled down to its

essentials, it is this: " Yes, prescription drugs are expensive, but

that shows how valuable they are. Besides, our research and

development costs are enormous, and we need to cover them somehow. As

'research-based' companies, we turn out a steady stream of innovative

medicines that lengthen life, enhance its quality, and avert more

expensive medical care. You are the beneficiaries of this ongoing

achievement of the American free enterprise system, so be grateful,

quit whining, and pay up. " More prosaically, what the industry is

saying is that you get what you pay for.

Is any of this true? Well, the first part certainly is. Prescription

drug costs are indeed high—and rising fast. Americans now spend a

staggering $200 billion a year on prescription drugs, and that figure

is growing at a rate of about 12 percent a year (down from a high of

18 percent in 1999).[1] Drugs are the fastest-growing part of the

health care bill—which itself is rising at an alarming rate. The

increase in drug spending reflects, in almost equal parts, the facts

that people are taking a lot more drugs than they used to, that those

drugs are more likely to be expensive new ones instead of older,

cheaper ones, and that the prices of the most heavily prescribed drugs

are routinely jacked up, sometimes several times a year.

Before its patent ran out, for example, the price of Schering-Plough's

top-selling allergy pill, Claritin, was raised thirteen times over

five years, for a cumulative increase of more than 50 percent—over

four times the rate of general inflation.[2] As a spokeswoman for one

company explained, " Price increases are not uncommon in the industry

and this allows us to be able to invest in R & D. " [3] In 2002, the

average price of the fifty drugs most used by senior citizens was

nearly $1,500 for a year's supply. (Pricing varies greatly, but this

refers to what the companies call the average wholesale price, which

is usually pretty close to what an individual without insurance pays

at the pharmacy.)

Paying for prescription drugs is no longer a problem just for poor

people. As the economy continues to struggle, health insurance is

shrinking. Employers are requiring workers to pay more of the costs

themselves, and many businesses are dropping health benefits

altogether. Since prescription drug costs are rising so fast, payers

are particularly eager to get out from under them by shifting costs to

individuals. The result is that more people have to pay a greater

fraction of their drug bills out of pocket. And that packs a wallop.

Many of them simply can't do it. They trade off drugs against home

heating or food. Some people try to string out their drugs by taking

them less often than prescribed, or sharing them with a spouse.

Others, too embarrassed to admit that they can't afford to pay for

drugs, leave their doctors' offices with prescriptions in hand but

don't have them filled. Not only do these patients go without needed

treatment but their doctors sometimes wrongly conclude that the drugs

they prescribed haven't worked and prescribe yet others—thus

compounding the problem.

The people hurting most are the elderly. When Medicare was enacted in

1965, people took far fewer prescription drugs and they were cheap.

For that reason, no one thought it necessary to include an outpatient

prescription drug benefit in the program. In those days, senior

citizens could generally afford to buy whatever drugs they needed out

of pocket. Approximately half to two thirds of the elderly have

supplementary insurance that partly covers prescription drugs, but

that percentage is dropping as employers and insurers decide it is a

losing proposition for them. At the end of 2003, Congress passed a

Medicare reform bill that included a prescription drug benefit

scheduled to begin in 2006, but as we shall see later, its benefits

are inadequate to begin with and will quickly be overtaken by rising

prices and administrative costs.

For obvious reasons, the elderly tend to need more prescription drugs

than younger people—mainly for chronic conditions like arthritis,

diabetes, high blood pressure, and elevated cholesterol. In 2001,

nearly one in four seniors reported that they skipped doses or did not

fill prescriptions because of the cost. (That fraction is almost

certainly higher now.) Sadly, the frailest are the least likely to

have supplementary insurance. At an average cost of $1,500 a year for

each drug, someone without supplementary insurance who takes six

different prescription drugs—and this is not rare—would have to spend

$9,000 out of pocket. Not many among the old and frail have such deep

pockets.

Furthermore, in one of the more perverse of the pharmaceutical

industry's practices, prices are much higher for precisely the people

who most need the drugs and can least afford them. The industry

charges Medicare recipients without supplementary insurance much more

than it does favored customers, such as large HMOs or the Veterans

Affairs (VA) system. Because the latter buy in bulk, they can bargain

for steep discounts or rebates. People without insurance have no

bargaining power; and so they pay the highest prices.

In the past two years, we have started to see, for the first time, the

beginnings of public resistance to rapacious pricing and other dubious

practices of the pharmaceutical industry. It is mainly because of this

resistance that drug companies are now blanketing us with public

relations messages. And the magic words, repeated over and over like

an incantation, are research, innovation, and American. Research.

Innovation. American. It makes a great story.

But while the rhetoric is stirring, it has very little to do with

reality. First, research and development (R & D) is a relatively small

part of the budgets of the big drug companies—dwarfed by their vast

expenditures on marketing and administration, and smaller even than

profits. In fact, year after year, for over two decades, this industry

has been far and away the most profitable in the United States. (In

2003, for the first time, the industry lost its first-place position,

coming in third, behind " mining, crude oil production, " and

" commercial banks. " ) The prices drug companies charge have little

relationship to the costs of making the drugs and could be cut

dramatically without coming anywhere close to threatening R & D.

Second, the pharmaceutical industry is not especially innovative. As

hard as it is to believe, only a handful of truly important drugs have

been brought to market in recent years, and they were mostly based on

taxpayer-funded research at academic institutions, small biotechnology

companies, or the National Institutes of Health (NIH). The great

majority of " new " drugs are not new at all but merely variations of

older drugs already on the market. These are called " me-too " drugs.

The idea is to grab a share of an established, lucrative market by

producing something very similar to a top-selling drug. For instance,

we now have six statins (Mevacor, Lipitor, Zocor, Pravachol, Lescol,

and the newest, Crestor) on the market to lower cholesterol, all

variants of the first. As Dr. Sharon Levine, associate executive

director of the Kaiser Permanente Medical Group, put it,

If I'm a manufacturer and I can change one molecule and get

another twenty years of patent rights, and convince physicians to

prescribe and consumers to demand the next form of Prilosec, or weekly

Prozac instead of daily Prozac, just as my patent expires, then why

would I be spending money on a lot less certain endeavor, which is

looking for brand-new drugs?[4]

Third, the industry is hardly a model of American free enterprise. To

be sure, it is free to decide which drugs to develop (me-too drugs

instead of innovative ones, for instance), and it is free to price

them as high as the traffic will bear, but it is utterly dependent on

government-granted monopolies—in the form of patents and Food and Drug

Administration (FDA)–approved exclusive marketing rights. If it is not

particularly innovative in discovering new drugs, it is highly

innovative— and aggressive—in dreaming up ways to extend its monopoly

rights.

And there is nothing peculiarly American about this industry. It is

the very essence of a global enterprise. Roughly half of the largest

drug companies are based in Europe. (The exact count shifts because of

mergers.) In 2002, the top ten were the American companies Pfizer,

Merck, & , Bristol-Myers Squibb, and Wyeth (formerly

American Home Products); the British companies GlaxoKline and

AstraZeneca; the Swiss companies Novartis and Roche; and the French

company Aventis (which in 2004 merged with another French company,

Sanafi Synthelabo, putting it in third place).[5] All are much alike

in their operations. All price their drugs much higher here than in

other markets.

Since the United States is the major profit center, it is simply good

public relations for drug companies to pass themselves off as

American, whether they are or not. It is true, however, that some of

the European companies are now locating their R & D operations in the

United States. They claim the reason for this is that we don't

regulate prices, as does much of the rest of the world. But more

likely it is that they want to feed on the unparalleled research

output of American universities and the NIH. In other words, it's not

private enterprise that draws them here but the very opposite—our

publicly sponsored research enterprise.

Over the past two decades the pharmaceutical industry has moved very

far from its original high purpose of discovering and producing useful

new drugs. Now primarily a marketing machine to sell drugs of dubious

benefit, this industry uses its wealth and power to co-opt every

institution that might stand in its way, including the US Congress,

the FDA, academic medical centers, and the medical profession itself.

(Most of its marketing efforts are focused on influencing doctors,

since they must write the prescriptions.)

If prescription drugs were like ordinary consumer goods, all this

might not matter very much. But drugs are different. People depend on

them for their health and even their lives. In the words of Senator

Debbie Stabenow (D-Mich.), " It's not like buying a car or tennis shoes

or peanut butter. " People need to know that there are some checks and

balances on this industry, so that its quest for profits doesn't push

every other consideration aside. But there aren't such checks and

balances.

2.

What does the eight-hundred-pound gorilla do? Anything it wants

to.

What's true of the eight-hundred-pound gorilla is true of the colossus

that is the pharmaceutical industry. It is used to doing pretty much

what it wants to do. The watershed year was 1980. Before then, it was

a good business, but afterward, it was a stupendous one. From 1960 to

1980, prescription drug sales were fairly static as a percent of US

gross domestic product, but from 1980 to 2000, they tripled. They now

stand at more than $200 billion a year.[6] Of the many events that

contributed to the industry's great and good fortune, none had to do

with the quality of the drugs the companies were selling.

The claim that drugs are a $200 billion industry is an understatement.

According to government sources, that is roughly how much Americans

spent on prescription drugs in 2002. That figure refers to direct

consumer purchases at drugstores and mail-order pharmacies (whether

paid for out of pocket or not), and it includes the nearly 25 percent

markup for wholesalers, pharmacists, and other middlemen and

retailers. But it does not include the large amounts spent for drugs

administered in hospitals, nursing homes, or doctors' offices (as is

the case for many cancer drugs). In most analyses, they are allocated

to costs for those facilities.

Drug company revenues (or sales) are a little different, at least as

they are reported in summaries of corporate annual reports. They

usually refer to a company's worldwide sales, including those to

health facilities. But they do not include the revenues of middlemen

and retailers.

Perhaps the most quoted source of statistics on the pharmaceutical

industry, IMS Health, estimated total worldwide sales for prescription

drugs to be about $400 billion in 2002. About half were in the United

States. So the $200 billion colossus is really a $400 billion

megacolossus.

The election of Reagan in 1980 was perhaps the fundamental

element in the rapid rise of big pharma—the collective name for the

largest drug companies. With the Reagan administration came a strong

pro-business shift not only in government policies but in society at

large. And with the shift, the public attitude toward great wealth

changed. Before then, there was something faintly disreputable about

really big fortunes. You could choose to do well or you could choose

to do good, but most people who had any choice in the matter thought

it difficult to do both. That belief was particularly strong among

scientists and other intellectuals. They could choose to live a

comfortable but not luxurious life in academia, hoping to do exciting

cutting-edge research, or they could " sell out " to industry and do

less important but more remunerative work. Starting in the Reagan

years and continuing through the 1990s, Americans changed their tune.

It became not only reputable to be wealthy, but something close to

virtuous. There were " winners " and there were " losers, " and the

winners were rich and deserved to be. The gap between the rich and

poor, which had been narrowing since World War II, suddenly began to

widen again, until today it is a chasm.

The pharmaceutical industry and its CEOs quickly joined the ranks of

the winners as a result of a number of business-friendly government

actions. I won't enumerate all of them, but two are especially

important. Beginning in 1980, Congress enacted a series of laws

designed to speed the translation of tax-supported basic research into

useful new products—a process sometimes referred to as " technology

transfer. " The goal was also to improve the position of American-owned

high-tech businesses in world markets.

The most important of these laws is known as the Bayh-Dole Act, after

its chief sponsors, Senator Birch Bayh (D-Ind.) and Senator

Dole (R-Kans.). Bayh-Dole enabled universities and small businesses to

patent discoveries emanating from research sponsored by the National

Institutes of Health, the major distributor of tax dollars for medical

research, and then to grant exclusive licenses to drug companies.

Until then, taxpayer-financed discoveries were in the public domain,

available to any company that wanted to use them. But now

universities, where most NIH-sponsored work is carried out, can patent

and license their discoveries, and charge royalties. Similar

legislation permitted the NIH itself to enter into deals with drug

companies that would directly transfer NIH discoveries to industry.

Bayh-Dole gave a tremendous boost to the nascent biotechnology

industry, as well as to big pharma. Small biotech companies, many of

them founded by university researchers to exploit their discoveries,

proliferated rapidly. They now ring the major academic research

institutions and often carry out the initial phases of drug

development, hoping for lucrative deals with big drug companies that

can market the new drugs. Usually both academic researchers and their

institutions own equity in the biotechnology companies they are

involved with. Thus, when a patent held by a university or a small

biotech company is eventually licensed to a big drug company, all

parties cash in on the public investment in research.

These laws mean that drug companies no longer have to rely on their

own research for new drugs, and few of the large ones do.

Increasingly, they rely on academia, small biotech startup companies,

and the NIH for that.[7] At least a third of drugs marketed by the

major drug companies are now licensed from universities or small

biotech companies, and these tend to be the most innovative ones.[8]

While Bayh-Dole was clearly a bonanza for big pharma and the biotech

industry, whether its enactment was a net benefit to the public is

arguable.

The Reagan years and Bayh-Dole also transformed the ethos of medical

schools and teaching hospitals. These nonprofit institutions started

to see themselves as " partners " of industry, and they became just as

enthusiastic as any entrepreneur about the oppor-tunities to parlay

their discoveries in-to financial gain. Faculty researchers were

encouraged to obtain patents on their work (which were assigned to

their universities), and they shared in the royalties. Many medical

schools and teaching hospitals set up " technology transfer " offices to

help in this activity and capitalize on faculty discoveries. As the

entrepreneurial spirit grew during the 1990s, medical school faculty

entered into other lucrative financial arrangements with drug

companies, as did their parent institutions.

One of the results has been a growing pro-industry bias in medical

research —exactly where such bias doesn't belong. Faculty members who

had earlier contented themselves with what was once referred to as a

" threadbare but genteel " lifestyle began to ask themselves, in the

words of my grandmother, " If you're so smart, why aren't you rich? "

Medical schools and teaching hospitals, for their part, put more

resources into searching for commercial opportunities.

Starting in 1984, with legislation known as the Hatch-Waxman Act,

Congress passed another series of laws that were just as big a bonanza

for the pharmaceutical industry. These laws extended monopoly rights

for brand-name drugs. Exclusivity is the lifeblood of the industry

because it means that no other company may sell the same drug for a

set period. After exclusive marketing rights expire, copies (called

generic drugs) enter the market, and the price usually falls to as

little as 20 percent of what it was.[9] There are two forms of

monopoly rights—patents granted by the US Patent and Trade Office

(USPTO) and exclusivity granted by the FDA. While related, they

operate somewhat independently, almost as backups for each other.

Hatch-Waxman, named for Senator Orrin Hatch (R-Utah) and

Representative Henry Waxman (D-Calif.), was meant mainly to stimulate

the foundering generic industry by short-circuiting some of the FDA

requirements for bringing generic drugs to market. While successful in

doing that, Hatch-Waxman also lengthened the patent life for

brand-name drugs. Since then, industry lawyers have manipulated some

of its provisions to extend patents far longer than the lawmakers

intended.

In the 1990s, Congress enacted other laws that further increased the

patent life of brand-name drugs. Drug companies now employ small

armies of lawyers to milk these laws for all they're worth—and they're

worth a lot. The result is that the effective patent life of

brand-name drugs increased from about eight years in 1980 to about

fourteen years in 2000.[10] For a blockbuster—usually defined as a

drug with sales of over a billion dollars a year (like Lipitor or

Celebrex or Zoloft)—those six years of additional exclusivity are

golden. They can add billions of dollars to sales—enough to buy a lot

of lawyers and have plenty of change left over. No wonder big pharma

will do almost anything to protect exclusive marketing rights, despite

the fact that doing so flies in the face of all its rhetoric about the

free market.

As their profits skyrocketed during the 1980s and 1990s, so did the

political power of drug companies. By 1990, the industry had assumed

its present contours as a business with unprecedented control over its

own fortunes. For example, if it didn't like something about the FDA,

the federal agency that is supposed to regulate the industry, it could

change it through direct pressure or through its friends in Congress.

The top ten drug companies (which included European companies) had

profits of nearly 25 percent of sales in 1990, and except for a dip at

the time of President Bill Clinton's health care reform proposal,

profits as a percentage of sales remained about the same for the next

decade. (Of course, in absolute terms, as sales mounted, so did

profits.) In 2001, the ten American drug companies in the Fortune 500

list (not quite the same as the top ten worldwide, but their profit

margins are much the same) ranked far above all other American

industries in average net return, whether as a percentage of sales

(18.5 percent), of assets (16.3 percent), or of shareholders' equity

(33.2 percent). These are astonishing margins. For comparison, the

median net return for all other industries in the Fortune 500 was only

3.3 percent of sales. Commercial banking, itself no slouch as an

aggressive industry with many friends in high places, was a distant

second, at 13.5 percent of sales.[11]

In 2002, as the economic downturn continued, big pharma showed only a

slight drop in profits—from 18.5 to 17.0 percent of sales. The most

startling fact about 2002 is that the combined profits for the ten

drug companies in the Fortune 500 ($35.9 billion) were more than the

profits for all the other 490 businesses put together ($33.7

billion).[12] In 2003 profits of the Fortune 500 drug companies

dropped to 14.3 percent of sales, still well above the median for all

industries of 4.6 percent for that year. When I say this is a

profitable industry, I mean really profitable. It is difficult to

conceive of how awash in money big pharma is.

Drug industry expenditures for research and development, while large,

were consistently far less than profits. For the top ten companies,

they amounted to only 11 percent of sales in 1990, rising slightly to

14 percent in 2000. The biggest single item in the budget is neither

R & D nor even profits but something usually called " marketing and

administration " —a name that varies slightly from company to company.

In 1990, a staggering 36 percent of sales revenues went into this

category, and that proportion remained about the same for over a

decade.[13] Note that this is two and a half times the expenditures

for R & D.

These figures are drawn from the industry's own annual reports to the

Securities and Exchange Commission (SEC) and to stockholders, but what

actually goes into these categories is not at all clear, because drug

companies hold that information very close to their chests. It is

likely, for instance, that R & D includes many activities most people

would consider marketing, but no one can know for sure. For its part,

" marketing and administration " is a gigantic black box that probably

includes what the industry calls " education, " as well as advertising

and promotion, legal costs, and executive salaries—which are whopping.

According to a report by the non-profit group Families USA, the

for-mer chairman and CEO of Bristol-Myers Squibb, A. Heimbold

Jr., made $74,890,918 in 2001, not counting his $76,095,611 worth of

unexercised stock options. The chairman of Wyeth made $40,521,011,

exclusive of his $40,629,459 in stock options. And so on.[14]

3.

If 1980 was a watershed year for the pharmaceutical industry, 2000 may

very well turn out to have been another one—the year things began to

go wrong. As the booming economy of the late 1990s turned sour, many

successful businesses found themselves in trouble. And as tax revenues

dropped, state governments also found themselves in trouble. In one

respect, the pharmaceutical industry is well protected against the

downturn, since it has so much wealth and power. But in another

respect, it is peculiarly vulnerable, since it depends on

employer-sponsored insurance and state-run Medicaid programs for much

of its revenues. When employers and states are in trouble, so is big

pharma.

And sure enough, in just the past couple of years, employers and the

private health insurers with whom they contract have started to push

back against drug costs. Most big managed care plans now bargain for

steep price discounts. Most have also instituted three-tiered coverage

for prescription drugs—full coverage for generic drugs, partial

coverage for useful brand-name drugs, and no coverage for expensive

drugs that offer no added benefit over cheaper ones. These lists of

preferred drugs are called formularies, and they are an increasingly

important method for containing drug costs. Big pharma is feeling the

effects of these measures, although not surprisingly, it has become

adept at manipulating the system—mainly by inducing doctors or health

plans to put expensive, brand-name drugs on formularies.

State governments, too, are looking for ways to cut their drug costs.

Some state legislatures are drafting measures that would permit them

to regulate prescription drug prices for state employees, Medicaid

recipients, and the uninsured. Like managed care plans, they are

creating formularies of preferred drugs. The industry is fighting

these efforts—mainly with its legions of lobbyists and lawyers. It

fought the state of Maine all the way to the US Supreme Court, which

in 2003 upheld Maine's right to bargain with drug companies for lower

prices, while leaving open the details. But that war has just begun,

and it promises to go on for years and get very ugly.

Recently the public has shown signs of being fed up. The fact that

Americans pay much more for prescription drugs than Europeans and

Canadians is now widely known. An estimated one to two million

Americans buy their medicines from Canadian drugstores over the

Internet, despite the fact that in 1987, in response to heavy industry

lobbying, a compliant Congress had made it illegal for anyone other

than manufacturers to import prescription drugs from other

countries.[15] In addition, there is a brisk traffic in bus trips for

people in border states, particularly the elderly, to travel to Canada

or Mexico to buy prescription drugs. Their resentment is palpable, and

they constitute a powerful voter block—a fact not lost on Congress or

state legislatures.

The industry faces other, less familiar problems. It happens that, by

chance, some of the top-selling drugs —with combined sales of around

$35 billion a year—are scheduled to go off patent within a few years

of one another.[16] This drop over the cliff began in 2001, with the

expiration of Eli Lilly's patent on its blockbuster antidepressant

Prozac. In the same year, AstraZeneca lost its patent on Prilosec, the

original " purple pill " for heartburn, which at its peak brought in a

stunning $6 billion a year. Bristol-Myers Squibb lost its best-selling

diabetes drug, Glucophage. The unusual cluster of expirations will

continue for another couple of years. While it represents a huge loss

to the industry as a whole, for some companies it's a disaster.

Schering-Plough's blockbuster allergy drug, Claritin, brought in fully

a third of that company's revenues before its patent expired in

2002.[17] Claritin is now sold over the counter for much less than its

prescription price. So far, the company has been unable to make up for

the loss by trying to switch Claritin users to Clarinex—a drug that is

virtually identical but has the advantage of still being on patent.

Even worse is the fact that there are very few drugs in the pipeline

ready to take the place of blockbusters going off patent. In fact,

that is the biggest problem facing the industry today, and its darkest

secret. All the public relations about innovation is meant to obscure

precisely this fact. The stream of new drugs has slowed to a trickle,

and few of them are innovative in any sense of that word. Instead, the

great majority are variations of oldies but goodies— " me-too " drugs.

Of the seventy-eight drugs approved by the FDA in 2002, only seventeen

contained new active ingredients, and only seven of these were

classified by the FDA as improvements over older drugs. The other

seventy-one drugs approved that year were variations of old drugs or

deemed no better than drugs already on the market. In other words,

they were me-too drugs. Seven of seventy-eight is not much of a yield.

Furthermore, of those seven, not one came from a major US drug

company.[18]

For the first time, in just a few short years, the gigantic

pharmaceutical industry is finding itself in serious difficulty. It is

facing, as one industry spokesman put it, " a perfect storm. " To be

sure, profits are still beyond anything most other industries could

hope for, but they have recently fallen, and for some companies they

fell a lot. And that is what matters to investors. Wall Street doesn't

care how high profits are today, only how high they will be tomorrow.

For some companies, stock prices have plummet

[Guest guest]

The most important of these laws is known as the Bayh-Dole Act, after

its chief sponsors, Senator Birch Bayh (D-Ind.) and Senator

Dole (R-Kans.). Bayh-Dole enabled universities and small businesses to

patent discoveries emanating from research sponsored by the National

Institutes of Health, the major distributor of tax dollars for medical

research, and then to grant exclusive licenses to drug companies.

Until then, taxpayer-financed discoveries were in the public domain,

available to any company that wanted to use them. But now universities,

where most NIH-sponsored work is carried out, can patent and license

their discoveries, and charge royalties. Similar

legislation permitted the NIH itself to enter into deals with drug

companies that would directly transfer NIH discoveries to industry.

bills944 wrote:

>

> The Truth About the Drug Companies

> By Marcia Angell

>

> Second, the pharmaceutical industry is not especially innovative. As

> hard as it is to believe, only a handful of truly important drugs have

>

> been brought to market in recent years, and they were mostly based on

> taxpayer-funded research at academic institutions, small biotechnology

>

> companies, or the National Institutes of Health (NIH). The great

> majority of " new " drugs are not new at all but merely variations of

> older drugs already on the market. These are called " me-too " drugs.

> The idea is to grab a share of an established, lucrative market by

> producing something very similar to a top-selling drug. For instance,

> we now have six statins (Mevacor, Lipitor, Zocor, Pravachol, Lescol,

> and the newest, Crestor) on the market to lower cholesterol, all

> variants of the first.

>

> http://www.nybooks.com/articles/17244

>

> Every day Americans are subjected to a barrage of advertising by the

> pharmaceutical industry. Mixed in with the pitches for a particular

> drug—usually featuring beautiful people enjoying themselves in the

> great outdoors—is a more general message. Boiled down to its

> essentials, it is this: " Yes, prescription drugs are expensive, but

> that shows how valuable they are. Besides, our research and

> development costs are enormous, and we need to cover them somehow. As

> 'research-based' companies, we turn out a steady stream of innovative

> medicines that lengthen life, enhance its quality, and avert more

> expensive medical care. You are the beneficiaries of this ongoing

> achievement of the American free enterprise system, so be grateful,

> quit whining, and pay up. " More prosaically, what the industry is

> saying is that you get what you pay for.

>

> Is any of this true? Well, the first part certainly is. Prescription

> drug costs are indeed high—and rising fast. Americans now spend a

> staggering $200 billion a year on prescription drugs, and that figure

> is growing at a rate of about 12 percent a year (down from a high of

> 18 percent in 1999).[1] Drugs are the fastest-growing part of the

> health care bill—which itself is rising at an alarming rate. The

> increase in drug spending reflects, in almost equal parts, the facts

> that people are taking a lot more drugs than they used to, that those

> drugs are more likely to be expensive new ones instead of older,

> cheaper ones, and that the prices of the most heavily prescribed drugs

>

> are routinely jacked up, sometimes several times a year.

>

> Before its patent ran out, for example, the price of Schering-Plough's

>

> top-selling allergy pill, Claritin, was raised thirteen times over

> five years, for a cumulative increase of more than 50 percent—over

> four times the rate of general inflation.[2] As a spokeswoman for one

> company explained, " Price increases are not uncommon in the industry

> and this allows us to be able to invest in R & D. " [3] In 2002, the

> average price of the fifty drugs most used by senior citizens was

> nearly $1,500 for a year's supply. (Pricing varies greatly, but this

> refers to what the companies call the average wholesale price, which

> is usually pretty close to what an individual without insurance pays

> at the pharmacy.)

>

> Paying for prescription drugs is no longer a problem just for poor

> people. As the economy continues to struggle, health insurance is

> shrinking. Employers are requiring workers to pay more of the costs

> themselves, and many businesses are dropping health benefits

> altogether. Since prescription drug costs are rising so fast, payers

> are particularly eager to get out from under them by shifting costs to

>

> individuals. The result is that more people have to pay a greater

> fraction of their drug bills out of pocket. And that packs a wallop.

>

> Many of them simply can't do it. They trade off drugs against home

> heating or food. Some people try to string out their drugs by taking

> them less often than prescribed, or sharing them with a spouse.

> Others, too embarrassed to admit that they can't afford to pay for

> drugs, leave their doctors' offices with prescriptions in hand but

> don't have them filled. Not only do these patients go without needed

> treatment but their doctors sometimes wrongly conclude that the drugs

> they prescribed haven't worked and prescribe yet others—thus

> compounding the problem.

>

> The people hurting most are the elderly. When Medicare was enacted in

> 1965, people took far fewer prescription drugs and they were cheap.

> For that reason, no one thought it necessary to include an outpatient

> prescription drug benefit in the program. In those days, senior

> citizens could generally afford to buy whatever drugs they needed out

> of pocket. Approximately half to two thirds of the elderly have

> supplementary insurance that partly covers prescription drugs, but

> that percentage is dropping as employers and insurers decide it is a

> losing proposition for them. At the end of 2003, Congress passed a

> Medicare reform bill that included a prescription drug benefit

> scheduled to begin in 2006, but as we shall see later, its benefits

> are inadequate to begin with and will quickly be overtaken by rising

> prices and administrative costs.

>

> For obvious reasons, the elderly tend to need more prescription drugs

> than younger people—mainly for chronic conditions like arthritis,

> diabetes, high blood pressure, and elevated cholesterol. In 2001,

> nearly one in four seniors reported that they skipped doses or did not

>

> fill prescriptions because of the cost. (That fraction is almost

> certainly higher now.) Sadly, the frailest are the least likely to

> have supplementary insurance. At an average cost of $1,500 a year for

> each drug, someone without supplementary insurance who takes six

> different prescription drugs—and this is not rare—would have to spend

> $9,000 out of pocket. Not many among the old and frail have such deep

> pockets.

>

> Furthermore, in one of the more perverse of the pharmaceutical

> industry's practices, prices are much higher for precisely the people

> who most need the drugs and can least afford them. The industry

> charges Medicare recipients without supplementary insurance much more

> than it does favored customers, such as large HMOs or the Veterans

> Affairs (VA) system. Because the latter buy in bulk, they can bargain

> for steep discounts or rebates. People without insurance have no

> bargaining power; and so they pay the highest prices.

>

> In the past two years, we have started to see, for the first time, the

>

> beginnings of public resistance to rapacious pricing and other dubious

>

> practices of the pharmaceutical industry. It is mainly because of this

>

> resistance that drug companies are now blanketing us with public

> relations messages. And the magic words, repeated over and over like

> an incantation, are research, innovation, and American. Research.

> Innovation. American. It makes a great story.

>

>

>

> But while the rhetoric is stirring, it has very little to do with

> reality. First, research and development (R & D) is a relatively small

> part of the budgets of the big drug companies—dwarfed by their vast

> expenditures on marketing and administration, and smaller even than

> profits. In fact, year after year, for over two decades, this industry

>

> has been far and away the most profitable in the United States. (In

> 2003, for the first time, the industry lost its first-place position,

> coming in third, behind " mining, crude oil production, " and

> " commercial banks. " ) The prices drug companies charge have little

> relationship to the costs of making the drugs and could be cut

> dramatically without coming anywhere close to threatening R & D.

>

> Second, the pharmaceutical industry is not especially innovative. As

> hard as it is to believe, only a handful of truly important drugs have

>

> been brought to market in recent years, and they were mostly based on

> taxpayer-funded research at academic institutions, small biotechnology

>

> companies, or the National Institutes of Health (NIH). The great

> majority of " new " drugs are not new at all but merely variations of

> older drugs already on the market. These are called " me-too " drugs.

> The idea is to grab a share of an established, lucrative market by

> producing something very similar to a top-selling drug. For instance,

> we now have six statins (Mevacor, Lipitor, Zocor, Pravachol, Lescol,

> and the newest, Crestor) on the market to lower cholesterol, all

> variants of the first. As Dr. Sharon Levine, associate executive

> director of the Kaiser Permanente Medical Group, put it,

>

> If I'm a manufacturer and I can change one molecule and get

> another twenty years of patent rights, and convince physicians to

> prescribe and consumers to demand the next form of Prilosec, or weekly

>

> Prozac instead of daily Prozac, just as my patent expires, then why

> would I be spending money on a lot less certain endeavor, which is

> looking for brand-new drugs?[4]

>

> Third, the industry is hardly a model of American free enterprise. To

> be sure, it is free to decide which drugs to develop (me-too drugs

> instead of innovative ones, for instance), and it is free to price

> them as high as the traffic will bear, but it is utterly dependent on

> government-granted monopolies—in the form of patents and Food and Drug

>

> Administration (FDA)–approved exclusive marketing rights. If it is not

>

> particularly innovative in discovering new drugs, it is highly

> innovative— and aggressive—in dreaming up ways to extend its monopoly

> rights.

>

> And there is nothing peculiarly American about this industry. It is

> the very essence of a global enterprise. Roughly half of the largest

> drug companies are based in Europe. (The exact count shifts because of

>

> mergers.) In 2002, the top ten were the American companies Pfizer,

> Merck, & , Bristol-Myers Squibb, and Wyeth (formerly

> American Home Products); the British companies GlaxoKline and

> AstraZeneca; the Swiss companies Novartis and Roche; and the French

> company Aventis (which in 2004 merged with another French company,

> Sanafi Synthelabo, putting it in third place).[5] All are much alike

> in their operations. All price their drugs much higher here than in

> other markets.

>

> Since the United States is the major profit center, it is simply good

> public relations for drug companies to pass themselves off as

> American, whether they are or not. It is true, however, that some of

> the European companies are now locating their R & D operations in the

> United States. They claim the reason for this is that we don't

> regulate prices, as does much of the rest of the world. But more

> likely it is that they want to feed on the unparalleled research

> output of American universities and the NIH. In other words, it's not

> private enterprise that draws them here but the very opposite—our

> publicly sponsored research enterprise.

>

> Over the past two decades the pharmaceutical industry has moved very

> far from its original high purpose of discovering and producing useful

>

> new drugs. Now primarily a marketing machine to sell drugs of dubious

> benefit, this industry uses its wealth and power to co-opt every

> institution that might stand in its way, including the US Congress,

> the FDA, academic medical centers, and the medical profession itself.

> (Most of its marketing efforts are focused on influencing doctors,

> since they must write the prescriptions.)

>

> If prescription drugs were like ordinary consumer goods, all this

> might not matter very much. But drugs are different. People depend on

> them for their health and even their lives. In the words of Senator

> Debbie Stabenow (D-Mich.), " It's not like buying a car or tennis shoes

>

> or peanut butter. " People need to know that there are some checks and

> balances on this industry, so that its quest for profits doesn't push

> every other consideration aside. But there aren't such checks and

> balances.

> 2.

>

> What does the eight-hundred-pound gorilla do? Anything it wants

> to.

>

> What's true of the eight-hundred-pound gorilla is true of the colossus

>

> that is the pharmaceutical industry. It is used to doing pretty much

> what it wants to do. The watershed year was 1980. Before then, it was

> a good business, but afterward, it was a stupendous one. From 1960 to

> 1980, prescription drug sales were fairly static as a percent of US

> gross domestic product, but from 1980 to 2000, they tripled. They now

> stand at more than $200 billion a year.[6] Of the many events that

> contributed to the industry's great and good fortune, none had to do

> with the quality of the drugs the companies were selling.

>

> The claim that drugs are a $200 billion industry is an understatement.

>

> According to government sources, that is roughly how much Americans

> spent on prescription drugs in 2002. That figure refers to direct

> consumer purchases at drugstores and mail-order pharmacies (whether

> paid for out of pocket or not), and it includes the nearly 25 percent

> markup for wholesalers, pharmacists, and other middlemen and

> retailers. But it does not include the large amounts spent for drugs

> administered in hospitals, nursing homes, or doctors' offices (as is

> the case for many cancer drugs). In most analyses, they are allocated

> to costs for those facilities.

>

> Drug company revenues (or sales) are a little different, at least as

> they are reported in summaries of corporate annual reports. They

> usually refer to a company's worldwide sales, including those to

> health facilities. But they do not include the revenues of middlemen

> and retailers.

>

> Perhaps the most quoted source of statistics on the pharmaceutical

> industry, IMS Health, estimated total worldwide sales for prescription

>

> drugs to be about $400 billion in 2002. About half were in the United

> States. So the $200 billion colossus is really a $400 billion

> megacolossus.

>

> The election of Reagan in 1980 was perhaps the fundamental

> element in the rapid rise of big pharma—the collective name for the

> largest drug companies. With the Reagan administration came a strong

> pro-business shift not only in government policies but in society at

> large. And with the shift, the public attitude toward great wealth

> changed. Before then, there was something faintly disreputable about

> really big fortunes. You could choose to do well or you could choose

> to do good, but most people who had any choice in the matter thought

> it difficult to do both. That belief was particularly strong among

> scientists and other intellectuals. They could choose to live a

> comfortable but not luxurious life in academia, hoping to do exciting

> cutting-edge research, or they could " sell out " to industry and do

> less important but more remunerative work. Starting in the Reagan

> years and continuing through the 1990s, Americans changed their tune.

> It became not only reputable to be wealthy, but something close to

> virtuous. There were " winners " and there were " losers, " and the

> winners were rich and deserved to be. The gap between the rich and

> poor, which had been narrowing since World War II, suddenly began to

> widen again, until today it is a chasm.

>

> The pharmaceutical industry and its CEOs quickly joined the ranks of

> the winners as a result of a number of business-friendly government

> actions. I won't enumerate all of them, but two are especially

> important. Beginning in 1980, Congress enacted a series of laws

> designed to speed the translation of tax-supported basic research into

>

> useful new products—a process sometimes referred to as " technology

> transfer. " The goal was also to improve the position of American-owned

>

> high-tech businesses in world markets.

>

> The most important of these laws is known as the Bayh-Dole Act, after

> its chief sponsors, Senator Birch Bayh (D-Ind.) and Senator

> Dole (R-Kans.). Bayh-Dole enabled universities and small businesses to

>

> patent discoveries emanating from research sponsored by the National

> Institutes of Health, the major distributor of tax dollars for medical

>

> research, and then to grant exclusive licenses to drug companies.

> Until then, taxpayer-financed discoveries were in the public domain,

> available to any company that wanted to use them. But now

> universities, where most NIH-sponsored work is carried out, can patent

>

> and license their discoveries, and charge royalties. Similar

> legislation permitted the NIH itself to enter into deals with drug

> companies that would directly transfer NIH discoveries to industry.

>

> Bayh-Dole gave a tremendous boost to the nascent biotechnology

> industry, as well as to big pharma. Small biotech companies, many of

> them founded by university researchers to exploit their discoveries,

> proliferated rapidly. They now ring the major academic research

> institutions and often carry out the initial phases of drug

> development, hoping for lucrative deals with big drug companies that

> can market the new drugs. Usually both academic researchers and their

> institutions own equity in the biotechnology companies they are

> involved with. Thus, when a patent held by a university or a small

> biotech company is eventually licensed to a big drug company, all

> parties cash in on the public investment in research.

>

> These laws mean that drug companies no longer have to rely on their

> own research for new drugs, and few of the large ones do.

> Increasingly, they rely on academia, small biotech startup companies,

> and the NIH for that.[7] At least a third of drugs marketed by the

> major drug companies are now licensed from universities or small

> biotech companies, and these tend to be the most innovative ones.[8]

> While Bayh-Dole was clearly a bonanza for big pharma and the biotech

> industry, whether its enactment was a net benefit to the public is

> arguable.

>

> The Reagan years and Bayh-Dole also transformed the ethos of medical

> schools and teaching hospitals. These nonprofit institutions started

> to see themselves as " partners " of industry, and they became just as

> enthusiastic as any entrepreneur about the oppor-tunities to parlay

> their discoveries in-to financial gain. Faculty researchers were

> encouraged to obtain patents on their work (which were assigned to

> their universities), and they shared in the royalties. Many medical

> schools and teaching hospitals set up " technology transfer " offices to

>

> help in this activity and capitalize on faculty discoveries. As the

> entrepreneurial spirit grew during the 1990s, medical school faculty

> entered into other lucrative financial arrangements with drug

> companies, as did their parent institutions.

>

> One of the results has been a growing pro-industry bias in medical

> research —exactly where such bias doesn't belong. Faculty members who

> had earlier contented themselves with what was once referred to as a

> " threadbare but genteel " lifestyle began to ask themselves, in the

> words of my grandmother, " If you're so smart, why aren't you rich? "

> Medical schools and teaching hospitals, for their part, put more

> resources into searching for commercial opportunities.

>

> Starting in 1984, with legislation known as the Hatch-Waxman Act,

> Congress passed another series of laws that were just as big a bonanza

>

> for the pharmaceutical industry. These laws extended monopoly rights

> for brand-name drugs. Exclusivity is the lifeblood of the industry

> because it means that no other company may sell the same drug for a

> set period. After exclusive marketing rights expire, copies (called

> generic drugs) enter the market, and the price usually falls to as

> little as 20 percent of what it was.[9] There are two forms of

> monopoly rights—patents granted by the US Patent and Trade Office

> (USPTO) and exclusivity granted by the FDA. While related, they

> operate somewhat independently, almost as backups for each other.

> Hatch-Waxman, named for Senator Orrin Hatch (R-Utah) and

> Representative Henry Waxman (D-Calif.), was meant mainly to stimulate

> the foundering generic industry by short-circuiting some of the FDA

> requirements for bringing generic drugs to market. While successful in

>

> doing that, Hatch-Waxman also lengthened the patent life for

> brand-name drugs. Since then, industry lawyers have manipulated some

> of its provisions to extend patents far longer than the lawmakers

> intended.

>

> In the 1990s, Congress enacted other laws that further increased the

> patent life of brand-name drugs. Drug companies now employ small

> armies of lawyers to milk these laws for all they're worth—and they're

>

> worth a lot. The result is that the effective patent life of

> brand-name drugs increased from about eight years in 1980 to about

> fourteen years in 2000.[10] For a blockbuster—usually defined as a

> drug with sales of over a billion dollars a year (like Lipitor or

> Celebrex or Zoloft)—those six years of additional exclusivity are

> golden. They can add billions of dollars to sales—enough to buy a lot

> of lawyers and have plenty of change left over. No wonder big pharma

> will do almost anything to protect exclusive marketing rights, despite

>

> the fact that doing so flies in the face of all its rhetoric about the

>

> free market.

>

> As their profits skyrocketed during the 1980s and 1990s, so did the

> political power of drug companies. By 1990, the industry had assumed

> its present contours as a business with unprecedented control over its

>

> own fortunes. For example, if it didn't like something about the FDA,

> the federal agency that is supposed to regulate the industry, it could

>

> change it through direct pressure or through its friends in Congress.

> The top ten drug companies (which included European companies) had

> profits of nearly 25 percent of sales in 1990, and except for a dip at

>

> the time of President Bill Clinton's health care reform proposal,

> profits as a percentage of sales remained about the same for the next

> decade. (Of course, in absolute terms, as sales mounted, so did

> profits.) In 2001, the ten American drug companies in the Fortune 500

> list (not quite the same as the top ten worldwide, but their profit

> margins are much the same) ranked far above all other American

> industries in average net return, whether as a percentage of sales

> (18.5 percent), of assets (16.3 percent), or of shareholders' equity

> (33.2 percent). These are astonishing margins. For comparison, the

> median net return for all other industries in the Fortune 500 was only

>

> 3.3 percent of sales. Commercial banking, itself no slouch as an

> aggressive industry with many friends in high places, was a distant

> second, at 13.5 percent of sales.[11]

>

> In 2002, as the economic downturn continued, big pharma showed only a

> slight drop in profits—from 18.5 to 17.0 percent of sales. The most

> startling fact about 2002 is that the combined profits for the ten

> drug companies in the Fortune 500 ($35.9 billion) were more than the

> profits for all the other 490 businesses put together ($33.7

> billion).[12] In 2003 profits of the Fortune 500 drug companies

> dropped to 14.3 percent of sales, still well above the median for all

> industries of 4.6 percent for that year. When I say this is a

> profitable industry, I mean really profitable. It is difficult to

> conceive of how awash in money big pharma is.

>

> Drug industry expenditures for research and development, while large,

> were consistently far less than profits. For the top ten companies,

> they amounted to only 11 percent of sales in 1990, rising slightly to

> 14 percent in 2000. The biggest single item in the budget is neither

> R & D nor even profits but something usually called " marketing and

> administration " —a name that varies slightly from company to company.

> In 1990, a staggering 36 percent of sales revenues went into this

> category, and that proportion remained about the same for over a

> decade.[13] Note that this is two and a half times the expenditures

> for R & D.

>

> These figures are drawn from the industry's own annual reports to the

> Securities and Exchange Commission (SEC) and to stockholders, but what

>

> actually goes into these categories is not at all clear, because drug

> companies hold that information very close to their chests. It is

> likely, for instance, that R & D includes many activities most people

> would consider marketing, but no one can know for sure. For its part,

> " marketing and administration " is a gigantic black box that probably

> includes what the industry calls " education, " as well as advertising

> and promotion, legal costs, and executive salaries—which are whopping.

>

> According to a report by the non-profit group Families USA, the

> for-mer chairman and CEO of Bristol-Myers Squibb, A. Heimbold

> Jr., made $74,890,918 in 2001, not counting his $76,095,611 worth of

> unexercised stock options. The chairman of Wyeth made $40,521,011,

> exclusive of his $40,629,459 in stock options. And so on.[14]

> 3.

>

> If 1980 was a watershed year for the pharmaceutical industry, 2000 may

>

> very well turn out to have been another one—the year things began to

> go wrong. As the booming economy of the late 1990s turned sour, many

> successful businesses found themselves in trouble. And as tax revenues

>

> dropped, state governments also found themselves in trouble. In one

> respect, the pharmaceutical industry is well protected against the

> downturn, since it has so much wealth and power. But in another

> respect, it is peculiarly vulnerable, since it depends on

> employer-sponsored insurance and state-run Medicaid programs for much

> of its revenues. When employers and states are in trouble, so is big

> pharma.

>

> And sure enough, in just the past couple of years, employers and the

> private health insurers with whom they contract have started to push

> back against drug costs. Most big managed care plans now bargain for

> steep price discounts. Most have also instituted three-tiered coverage

>

> for prescription drugs—full coverage for generic drugs, partial

> coverage for useful brand-name drugs, and no coverage for expensive

> drugs that offer no added benefit over cheaper ones. These lists of

> preferred drugs are called formularies, and they are an increasingly

> important method for containing drug costs. Big pharma is feeling the

> effects of these measures, although not surprisingly, it has become

> adept at manipulating the system—mainly by inducing doctors or health

> plans to put expensive, brand-name drugs on formularies.

>

> State governments, too, are looking for ways to cut their drug costs.

> Some state legislatures are drafting measures that would permit them

> to regulate prescription drug prices for state employees, Medicaid

> recipients, and the uninsured. Like managed care plans, they are

> creating formularies of preferred drugs. The industry is fighting

> these efforts—mainly with its legions of lobbyists and lawyers. It

> fought the state of Maine all the way to the US Supreme Court, which

> in 2003 upheld Maine's right to bargain with drug companies for lower

> prices, while leaving open the details. But that war has just begun,

> and it promises to go on for years and get very ugly.

>

> Recently the public has shown signs of being fed up. The fact that

> Americans pay much more for prescription drugs than Europeans and

> Canadians is now widely known. An estimated one to two million

> Americans buy their medicines from Canadian drugstores over the

> Internet, despite the fact that in 1987, in response to heavy industry

>

> lobbying, a compliant Congress had made it illegal for anyone other

> than manufacturers to import prescription drugs from other

> countries.[15] In addition, there is a brisk traffic in bus trips for

> people in border states, particularly the elderly, to travel to Canada

>

> or Mexico to buy prescription drugs. Their resentment is palpable, and

>

> they constitute a powerful voter block—a fact not lost on Congress or

> state legislatures.

>

> The industry faces other, less familiar problems. It happens that, by

> chance, some of the top-selling drugs —with combined sales of around

> $35 billion a year—are scheduled to go off patent within a few years

> of one another.[16] This drop over the cliff began in 2001, with the

> expiration of Eli Lilly's patent on its blockbuster antidepressant

> Prozac. In the same year, AstraZeneca lost its patent on Prilosec, the

>

> original " purple pill " for heartburn, which at its peak brought in a

> stunning $6 billion a year. Bristol-Myers Squibb lost its best-selling

>

> diabetes drug, Glucophage. The unusual cluster of expirations will

> continue for another couple of years. While it represents a huge loss

> to the industry as a whole, for some companies it's a disaster.

> Schering-Plough's blockbuster allergy drug, Claritin, brought in fully

>

> a third of that company's revenues before its patent expired in

> 2002.[17] Claritin is now sold over the counter for much less than its

>

> prescription price. So far, the company has been unable to make up for

>

> the loss by trying to switch Claritin users to Clarinex—a drug that is

>

> virtually identical but has the advantage of still being on patent.

>

> Even worse is the fact that there are very few drugs in the pipeline

> ready to take the place of blockbusters going off patent. In fact,

> that is the biggest problem facing the industry today, and its darkest

>

> secret. All the public relations about innovation is meant to obscure

> precisely this fact. The stream of new drugs has slowed to a trickle,

> and few of them are innovative in any sense of that word. Instead, the

>

> great majority are variations of oldies but goodies— " me-too " drugs.

>

> Of the seventy-eight drugs approved by the FDA in 2002, only seventeen

>

> contained new active ingredients, and only seven of these were

> classified by the FDA as improvements over older drugs. The other

> seventy-one drugs approved that year were variations of old drugs or

> deemed no better than drugs already on the market. In other words,

> they were me-too drugs. Seven of seventy-eight is not much of a yield.

>

> Furthermore, of those seven, not one came from a major US drug

> company.[18]

>

> For the first time, in just a few short years, the gigantic

> pharmaceutical industry is finding itself in serious difficulty. It is

>

> facing, as one industry spokesman put it, " a perfect storm. " To be

> sure, profits are still beyond anything most other industries could

> hope for, but they have recently fallen, and for some companies they

> fell a lot. And that is what matters to investors. Wall Street doesn't

>

> care how high profits are today, only how high they will be tomorrow.

> For some companies, stock prices have plummet

>

>

>

>

>