July 23, 2019 Uncategorized

Taxpayer-funded Drugs and a Pricing Crisis


Almost nine years ago, I woke up with excruciating back pain. I’d been having a lot of back pain over the preceding months, but I chalked it up to activities and, of course, my age. 

On this particular morning, however, it was worse. Standing in my room alone, I suddenly collapsed on the floor and couldn’t move.

I was in and out of the hospital for the next several days. I saw sports doctors, specialists, ER docs. Finally, I lay on a gurney in an emergency room and learned my diagnosis: a crushed T-11 vertebra. That’s when a man came in and announced he was an oncologist.

I said, Doc, I think you have the wrong room. And he said, Sorry. No, I don’t think I do.

Cancer broke my back. 

I have multiple myeloma, and it also broke my ribs and ate holes in my pelvis, arm bones, and skull. The fact that I am standing here today is a miracle of modern medicine.

Unfortunately, I’m afraid I’ll never be a cancer survivor. Multiple Myeloma is incurable. But with medication, I can keep it at bay for some period of time. 

So every two weeks I spend several hours at a clinic getting an infusion of drugs priced at more than $600,000 per year.

I am a very lucky man.

I’m lucky these treatments are keeping me alive. I’m lucky that I can afford the costs of these treatments.

But my journey taught me one simple fact: Drugs don’t work if people can’t afford them.


Now, standing here and telling you all that drugs are too expensive feels a little absurd. There isn’t a person in this room who doesn’t know that drugs cost too much. We would probably get different answers as to why–the reps from drug companies would blame the PBMs, insurers and hospitals. The hospitals, PBM and insurers would blame the drug companies. 

I am an equal opportunity blamer. The whole system is broken.

And I seem to be in the majority. A recent poll found that eighty percent of Americans say Congress’s top priority should be action to lower drug prices.

It makes sense because my story is far from unique.

When I first got sick, my doctors put me on a drug called Revlimid. I was able to pay for my prescription at $250 out-of-pocket every four weeks. But for Medicare patients on Revlimid, the median out-of-pocket cost is about $15,000 per year— over half their annual income.

Drug prices are bankrupting some of us. And when people begin rationing their drugs, or skipping them altogether, those prices can literally kill us.


That’s why we started Patients For Affordable Drugs—to raise the voice of patients and help them tell their stories. We have nearly 20,000 stories on our website. 

And we know we can lower prices. Because despite what companies tell us, we don’t have to have sky-high drug prices to have innovation.   

Their argument seems to make sense on its face: research and development are expensive.

But the risk companies cite is not the reality. 

Multiple studies show that there is no correlation between the cost of innovation and the price of a drug.

The $2.6 billion cost of R&D Big Pharma often cites for a new drug is based on a study from Tufts that drug companies paid for, supplied the data for—and they won’t reveal the underlying data citing trade secrets. Other independent studies show much lower numbers closer to one-quarter of the pharma amount.

But the money invested in research isn’t coming from companies alone; it’s coming from you and me.

U.S. taxpayers foot an enormous portion of the bill for the high-risk, early science leading to new drugs.

Every single drug approved by the FDA from 2010-2016 was based on some element of science funded by taxpayers through the NIH. Now some quarrel with the methodology of that study, so one output of this meeting should be a recommendation to better track taxpayer investments and resulting intellectual property.

The NIH is the single biggest source of investment into new drug research at $39 billion this year. Based on data from a survey of PhRMA’s own member companies, one out of every three dollars spent on drug research comes from American taxpayers. 

And even more tax-advantaged dollars flow through research foundations, academic medical centers, patient organizations, R&D tax credits. All courtesy of US taxpayers.

At a Senate hearing recently, all seven CEOs of major drug corporations admitted they benefit from the US taxpayer investment in research. And increasingly taxpayers are funding drug development.

IV. Specifics

Let me give you an example. 

There’s the coming cure for sickle cell disease that Francis Collins is excited about. He touted it on 60 Minutes a couple of months ago with great pride because it’s coming from NIH.

Here are the facts:

American taxpayers invested $300 million into one specific upcoming cure called LentiGlobin BB305. Right now, clinical trials are being run on that drug inside the walls of NIH. NIH is even recruiting patients to participate in the clinical trials. 

Step back from this one specific sickle cell drug, and we know that NIH is spending $100 million per year in general to find a cure for sickle cell. We know because NIH publicly announced it. 

This could be a cure for a disease that is devastating and disproportionately impacts marginalized communities. Currently, these potentially curative treatments are being priced at $500,000 to more than $2 million. Are we going to have a price set at the million dollar benchmark developed with taxpayer support? 

That would cost $100 billion for our nation to treat.

As a blood cancer patient, I also care deeply about the prospects for CAR-T. So I want to spend a minute there. 

Taxpayers invested $200 million in basic CAR-T research through NIH. Even the seminal paper published in August 2011 by Carl June and his team at U Penn reporting that CAR-T worked was paid for in part by taxpayers through the NIH. Then in 2012, Novartis swooped in and acquired the global rights in perpetuity to all the CARs developed at UPenn.

Taxpayers didn’t just pay for the basic science. 

Doctor June said: “When Novartis licensed the CAR-T from us in 2012, it was ready to go. They were in catchup mode compared to where the clinical trials were. All the trials had happened in academia.”

The price…$475,000 per dose for Kymriah. 

Or take Yescarta–the Kite drug sold to Gilead with two NIH patents. SEC filings showed $321 million in R&D by Kite prior to the sale. But the acquisition price was $11.9 billion. So we are paying not on the basis of cost of research or cost to develop. We are paying based on the anticipated future returns coming from sky high prices. 

If history is any guide, we know that drug companies are going to continue to charge as much as they can unless we stop them. And with 400 trials for gene therapies–we cannot afford to pay just whatever price the drug companies demand. 

Here’s the bottom line: It may have been OK for NIH to wash its hands of price when drugs cost $200 or $2,000. But at $2 million a dose, it’s time to reconsider our approach. It’s not the 1990s and drug corporations rely on the huge portion of basic science taxpayers are providing.

It’s time we addressed price. Because if we don’t, then the NIH will keep fueling the drug pricing crisis. 

Now, drug companies will point out all the savings to the health care system when they set high prices:

It’s cheaper than existing alternatives. But those alternatives in most cases were already over-priced so it’s a bad benchmark.

Then they say: Look at all the health care dollars that will be saved. They often fail to mention the patients that would have died and not required care. But regardless, we don’t pay anyone else in our system that way. We don’t pay the surgeon who repairs a congenital defect at birth that way. We didn’t price the polio vaccine I got when I was six years old based on all the kids who would not have to live in iron lungs.

Yes, drug companies should make money when they create truly innovative new drugs. But we are way out of balance, and it’s costing us all—in bankruptcies, health outcomes, and lives.


Dr. Kesselheim will spend a lot of time on solutions, but I will touch on a couple generally;

  • NIH should reinstate the reasonable pricing provision in every CRADA and exclusive licensing agreement. 
  • NIH should address price at the point of technology transfer. Right now, pharmaceutical companies have unchecked power to turn taxpayer investment into unrestrained profit. It ignores affordability and accessibility to breakthrough treatments.
  • NIH scientists don’t want to deal with prices, so Congress should establish an entity to do it for them. 
  • There are a variety of approaches to establish appropriate price from value analysis to international reference pricing.


Right now, drug corporations want us to be asking only one fundamental question. And it’s this: What are we willing to pay to save a life?

And well…that’s easy. When it’s your child’s lungs on the line, when it’s your wife’s diabetes, your cancer, the answer is “anything.” Yes, we will empty our 401Ks; take out a mortgage on our homes; yes, we will give every precious thing we have for one more year. One more month.

But that’s the wrong question. We should be asking: What is the right amount of money that drug companies should make on these drugs? How much can we as a society keep sending to drug companies in the face of so many other health care and societal needs? Surely that number cannot be unlimited.

Recently, I met a woman named Ruth Rinehart. Ruth has primary immune deficiency, and her treatments cost around $52,000 per year. She and her husband were getting by, but when he became sick and lost his job, they had to file for bankruptcy. They lost their home. Today, Ruth and her husband are in debt, living paycheck to paycheck, and in her late 60’s, she’s back at work. 

I feel incredibly grateful to spend my retirement fighting so that people like Ruth can one day enjoy theirs.

Because no one should have to choose between their health and their home.

Yes, we’re up against daunting odds. We will never have the money that Pharma spends. We’ll never have the sheer number of lobbyists they do.

But we have other tools: Righteous anger. The power of millions of patients who are fed up. Political barriers that are cracking under the weight of a system that cannot hold. This is a fight that we can win. That we must win.

The reason my cancer is incurable is that it mutates and finds its way around drugs. I am failing on my current drug combination–I’ll soon be triple refractory. And eventually, I will run out of options.

So, when I say that I care about drug innovation, I mean that for me it’s a matter of life or death. But we must rebalance the need for profits with public health.

Cancer broke my back but it stiffened my spine. I am not a survivor, but I am a fighter—and this is the fight of my life. Thank you for our time today.



Patients For Affordable Drugs is the only independent national patient organization focused exclusively on achieving policy changes to lower the price of prescription drugs.