Montana Viewpoint
A prescription drug benefit program would allow significantly reduced prices for needy Montanans.

March 17, 2003

The price of prescription drugs is a big deal for people living on a fixed income, and it’s no picnic for working folks, either. If the Montana Legislature does what’s right for the citizens and ignores the self-interests of the pharmaceutical industry, we may see lower drug costs for many Montanans.

There are two bills that have been recently introduced in the Montana Senate that could lower drug prices: SB 474 by Fred Thomas, R-Stevensville, and SB 473, called “Healthy Montana” which I will carry for the AARP. Healthy Montana also has the support of the Montana Senior Citizens Association. Both bills will lower the cost of drugs, but will do it in different ways.

If you wonder why drug costs are such a problem, you are a very healthy person. While the average young adult may need 4 or 5 prescriptions a year, the older we get it’s more like 4 or 5 a month. Some older adults are spending between $200 to $800 a month in out-of-pocket prescription drug costs.

In 1985 the average cost of a prescription drug was around four or five bucks. Today, the average cost is about $49.50 [Nat'l Assoc. of Chain Drug Stores]. There are several reasons for the high cost of drugs, and at least two of them are avoidable: executive salaries and advertising costs.

According to Families USA, the average compensation for top executives at Pfizer is $15,688,335 a year. Nice work if you can get it. The total annual compensation for their highest paid executives is $94,130,007. Pfizer is tops in this category, but other outfits reward their top executives pretty well, too: Bristol-Myers, $14,874,834; Wyeth, $9,144, 196; Abbott, $4,247,409, and Merck, $1,971,055.

The other area thay’s driven prices up is “direct advertising to consumers,” known as DTC. Spending on DTC increased from $266 million in 1995 to $2.6 billion in 2001. That’s a 977% increase. Drug companies have always claimed that they needed to charge Americans high prices to cover the cost of research. Maybe that was true once, but in 2000 the top ten companies spent only13% of their profits on research and 34% on marketing, sales, and advertising [Kaiser Family Foundation].

They make good profits, too. According to Kaiser, pharmaceutical companies are the most profitable corporations in the United States, returning an 18% profit. Compare that to the corner drug store that makes between 2% to 3% profit.

Making sure the patents on their drugs don’t expire on schedule is another way they keep prices high. Once the patent expires, other companies can produce identical low cost, generic drugs. Filing for a new process for an existing drug extends the patent protection another 2 years past the usual 20 year patent lifespan. It may involve nothing more than adding a single molecule to an existing drug. The molecule adds nothing to the drug’s performance, and, in fact, “falls off” the drug as soon as it’s ingested.

Thomas’ bill is restricted to senior citizens, while the AARP bill also covers adults over 18 with disabilities and low income seniors over 65. AARP hopes to be able to expand the program to cover more people in coming years. Both plans have a $25 annual enrollment fee, and may also have a small dispensing fee per prescription. Healthy Montana will hold prices below wholesale by 6% to 25%, depending on the drug. That would mean that a prescription could be discounted by 10-20% with a small dispensing fee added. This might not seem like a lot on one drug, but it could mount up to some important and life-supporting savings.

Thomas’ bill is funded by spending up to $7.5 million of the Tobacco Settlement Trust. Healthy Montana will borrow less than $1 million from a state loan program, and is expected to be self-sufficient, using rebates from pharmaceutical companies and the $25 enrollment fee to run the program and pay back the loan. AARP has agreed to take on the promotion and handle sign ups free of charge.

Laws similar to Healthy Montana have been enacted in other states, with Maine leading the way in 2000. The drug companies have fought them tooth and nail, but the states have won in court every time. Both bills will be heard the week of March 24th in the Senate Finance Committee. If this is important to you, let your legislators know about it.


Jim Elliott
Phone: 406-444-1556
Mail: State Senate Helena, MT 59620