John Connor, then Merck’s president, said he had “deep sympathy” for people unable to afford medicine. So did Schering’s boss, but he said it wasn’t the industry’s fault.
“Undoubtedly some people find it difficult to pay for needed medication. They will also have difficulty in meeting their rent and food bills,” said Francis Brown, Schering’s president at the time. “It is a matter of inadequate income rather than excessive prices.”
The executives urged Congress to create government programs to help people pay for health care, which it did a few years later. Today Medicare, Medicaid, and subsidies for private health coverage cost taxpayers more than $1 trillion annually.
But drugs are still unaffordable for many. A fourth of Americans in a recent survey by the Kaiser Family Foundation said somebody in their family skipped doses or left prescriptions unfilled because medicine costs too much. (Kaiser Health News is an editorially independent program of the foundation.)
Sixty years ago, as now, policymakers wondered why Americans pay so much more for medicine than people elsewhere.
“I still don’t understand why druggists in London buy this drug for $7.53 and our drugstores have to pay $17.90,” Sen. Kefauver told Connor, the Merck executive.
“We meet different market conditions in different countries,” was Connor’s response. Americans were getting “a reasonable bargain,” he said. “Merck’s Head Defends Drug Prices” was the front-page headline the next day in The New York Times.
Senators accused companies of marking up the cost of drugs by thousands of percent. Then as now, executives defended high profits as necessary to finance research and development, even though they often spent more on ads and marketing than R&D.
“They were advised that whenever the senators mentioned high prices, just mention research and how difficult it is, how expensive it is,” said Donald Light, a health policy professor at Rowan University in New Jersey. “Since 1959, that is the repeated and successful theme of Big Pharma.”
“The few successful products have to pay for the hundreds of research failures,” Alvin Brush, president of American Home Products, told Sen. Kefauver’s committee.
Like those of today, patients of 1960 were baffled about what medicine cost until they got the bill. Such obscurity led to overpayment.
“The consumer, in this field, cannot exercise his normal, economic prerogative of shopping or pricing before a purchase,” the head of a generic-drug manufacturer told the committee. “The normal laws of supply and demand have no application here.”
Drug companies engaged in a “pharmaceutical numbers racket” by promoting different strengths of established drugs as new medicine and charging more, Louis Lasagna, a pharmacology professor from Johns Hopkins University, told the committee.
“Now this is like saying that a dime is more potent than two nickels because you can use one coin instead of two,” he said.