Where are these billions coming from | August 6 2010

Where are these $billions coming from?

A couple of recent large settlements in the drug industry got me to thinking . . .

GlaxoSmithKline has agreed to a $ 1 billion settlement of 800 claims that the company’s antidepressant drug Plaxil causes birth defects. A Pennsylvania boy who allegedly has severe heart defects because of Plaxil has been paid $2.5 million, and Glaxo has set aside a total of $2.4 billion to settle other lawsuits against the company for claims involving Plaxil and the company’s diabetes drug Avandia.

Merck & Co. has paid $4.85 billion into a fund for families of 3,468 users of its Vioxx painkiller who died of heart attacks or strokes. The fund is administered by a court-appointed administrator who made payment to families of 2,878 Vioxx users who died of heart attacks and 590 who died of strokes. Merck took Vioxx off the market in 2004 when a study showed that the drug doubled the risk of heart attack and stroke.

In reading these news items one cannot help but be impressed by the HUGE amounts of money involved. Where does all of this money come from? The obvious conclusion: the drug companies are making humungous profits if they can afford to pay out settlements of these magnitudes. Although this information is not new, it brings home the fact that Americans are paying outrageous prices for drugs compared to prices on the same drugs in neighboring Canada.