To cope with rising drug prices in the US, the government should encourage pharmaceutical companies to lower prices or promote other companies to act as competition. If none of these solutions work, then resort to government regulations. By promoting competition, drug companies will have the pressure to lower prices to keep up with competition while also increasing quality to gain consumer trust. By encouraging pharmaceutical companies to lower their prices it will allow for the companies to be continually profitable while still keeping up the quality of the drug. I believe to convince these companies to lower their prices, the government must take initiative to remind these companies that without lowering their prices, the government can place a ceiling. I would say that the last resort is to set up government regulations on pharmaceutical drug pricing. With setting up these the drugs will of course be more affordable to a wider range of users. However, these regulations may lead to a lower quality of potentially life-saving drugs or result in companies no longer having a desire to produce or do research on new drugs since the process will be no longer profitable.
Nancy D., Milgard School of Business
Two key points I don't see addressed:
1. I have heard that drug companies use underhanded methods to limit competition in generic drugs. That would keep prices up when they should come down.
2. What are drug company profits like? That's the best measure of whether they are overpricing their products. We need them to make money or they won't be able to produce improved drugs. But if their profits are out of line with other industries, it could indicate an unfree market.
Drug prices are a perfect example of the failure of our existing democratic system to respond to the needs of the governed. It is a direct consequence of institutionalized graft, wherein corporations trade cash ( contributions ) for laws. The public good “be damned”.
As a start, why can’t there be a referendum to amemd the constitution to exclude the “personhood” of corporations that was created by the “Citizens United”.
Ironically, it is the abusive power of Citizen’s United that prevents it’s reversal.
Pre-Reagan tax rates protected the country from profit excesses. They could be returned, to recycle money back into the general economy including for healthcare. And at some point society will have to make difficult decisions regarding the carrying capacity for exotic and expensive new drugs that have limited efficacy for chronic illnesses. It is impossible that thousands of biotech companies will each succeed in marketing billion-dollar treatments.
BTW, for those who might imagine that drug price should just naturally increase along with other medical expenses, the history up to about 1980 is that drug prices rose very slowly, less than inflation overall and significantly less than other health care costs.
One might reasonably infer that it is the growing distortion caused by insurance payments which is fueling price inflation of drugs. Note the surge in prices with the expansion of Medicare to prescription drug coverage and then Obamacare's mandates.
Am I the only person who noticed that UK and Germany keep prices low by refusing to allow the sale of higher priced drugs? No one else would prefer a choice to pay $1000 a week for a drug that really worked for them versus saving the money but not having the effective drug??? True, not everyone would have the financial ability to make that choice. But I wouldn’t deny those who did. It disturbs me that some people would.
I did not see mention of the middlemen PBMs (pharmacy benefits managers) like Optum, Express Scripts, CVS/Caremark, who are responsible for exploiting the system via practices whereby they receive legalized “kickbacks.” The resulting escalating drug prices are outrageous. Glad the Trump Administration (hopefully with bipartisan support) is acting on this.
https://www.physiciansagainstdrugshortages.com/how-gpo-cartels-caused-the-crisis.html
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@Laura H
Here’s a simplified explanation of the games PBMs play to make big $$$ at the expense of the American public
Repeal safe harbor laws!
https://youtu.be/15IQO_jTMUM
Wasn't that the marvelous---ah hem!---decade of the Clinton administration?
TV advertising and 'price gouging' together works wonders to relive the drug companies' headache and "Pain of Only Moderate Profits" ---- they bring fast fast fast relief to Drug Corporations' CEOs!!
1
The fact that the Fed slashed interest rates to zero and started printing dollars like a crazy man beginning with the 2000 dot.com burst, creating a housing bubble from 2000 to 2007, and in the process inflated away the real value of the dollar during this time period (Gold went from $300 to $1900) I'm sure had nothing at all to do with the prices of drugs.
People still dont get it, it wasnt a housing bubble, housing is a fixed real asset, house prices merely reflected the INFLATIONARY attack on the USD. You can see this clearing in the price of Gold denominated in USD. The Fed has destroyed the value of the dollar by 95% in the past 80 years...and you think monetary inflation had nothing to do with drug prices? Drugs are a real asset, just like gold or housing.
Stop blaming the drug companies. Start putting the blame where it belongs, the destruction of the USD by Fed inflationary money printing.
2
Drug companies have shouldered the burden of paying for R&D as well as television programming and newsstand magazines. What would happen to the quality of life of old sick folks if their televisions were to go blank? I hate to think...
The relationship between Big Pharma and Big Government is more like communism than capitalism.
It’s called big pharma greed.
The drug companies have become loan sharks and Congress has done nothing to protect the consumer. Our politicians, instead, have taken the money the lobbies have provided. They sold off the American public for their personal profit
1
I’m tired of paying.
I’m tired of buying Europe’s safety with our army while they subsidize their citizens’ healthcare and drugs with the savings of having tiny little defensive forces.
I’m over it.
We need real and effective regulation. We won’t get it from our current politicians.
Sigh. America, the tragically flawed Superpower. We are like the Golden Retriever of nations.
2
@Lake Monster. I very much like that analogy. Let us become the German Shepherd of nations. Smart. Loyal. Protective. BAMF if someone messes with our wards.
Drug prices are just another example of the need for regulation, which of course is anathema to the industry and conservative ideologues. "Free markets" aren't free when individuals and companies can manipulate them in many subtle ways. Greed provides the motive.
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@Biker
Wow, regulation like how Venezuela "regulated" their country? How's that going? They got any caravans, heading "el norte?"
3
@Urko No regulation like how France spends 11% of GDP on healthcare and we spend 18% on healthcare. If we had France's cost we would save $1 trillion annually.
9
@Biker
Greed also provided the motive for the drug companies to research and market those life saving drugs.
Health care is broken, no doubt. But there are two sides to the coin here and I don't have an answer. Got to be careful with over-regulation though, it stifles innovation. But it is grandma getting stuck picking between buying food or paying for her heart medication (not mine, it's an example.) Healthcare is expensive and the longer we live, the more expensive it will become.
It becomes a question of who pays for it.
1
I say those of us paying ridiculous USA prices for life essential patent drugs should form a caravan, and march to the Canadian border and ask for life saving medical asylum.
138
@RM
You must be joking. You think CDN has giant surpluses of pharms? That is stone-cold wrong, wrong, wrong.
Canada has high taxes -- it has to be thrifty -- no big inventories. And that's why CDN lets the USA pay for global pharm research and its nuclear umbrella. And that day is over, thanks to the new U.S. president.
1
On a recent trip to the UK I found that I had miscalculated my travel supply of a prescription medication and needed an emergency supply for 3 days. When I went to a pharmacy I was astonished to find that the brand name medication was available in the UK over the counter, and that the full retail price was about $4 per day, not $50 as per my US pharmacy claim declaration.
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@William
Its a shame you weren't visiting Egypt. You probably would have paid 50 cents a day.
9
We need single-payer. I'm an internal medicine doctor. It breaks my heart seeing sick patients not being able to afford medications that could help keep them alive. Only in America do we further punish people who are sick, by driving them in to bankruptcy.
219
@MC - According to census data, out of every medical dollar, 11c goes to drugs, while 65c goes to doctors and hospitals. Would you therefore recommend pay cuts for doctors and hospitals?
11
@Carol Gebert
I would not recommend pay cuts to doctors. Physician pay isn't a major contributing factor to high health care costs -- I think it's in the range of 1% off the top of my head. I think high compensation helps to attract the best and brightest to this field.
As for hospitals, yes, I'd recommend decreased pay -- 30% is overhead for totally unnecessary billing related issues that would be eliminated when single payer goes through.
44
And the other 24 cents? I'd start with making cuts there myself.
6
I sat across from my patient looking at her blood sugars and off the chart Hemoglobin A1C. Tell me what is going on here. You know that allowing your sugars to be that high can make you blind, give you kidney disease, heart disease and strokes?
“Doctor it is the price of my Lantus insulin. Last year a vial cost me $30, this year it is $300. The insurance company refuses to pay for it. I can’t afford it. So I try to use as little as possible. The same thing happened to my daughter who has diabetes. Her insulin costs went from $60 to $600 she started taking half of what she needed and ended up in the hospital and lost her job.”
Lantus is out of patent. This should not be happening and could not be anything but pure greed and short sightedness. Looking across the board prices for insulin, symbicort ( a drug for COPD) are unaffordable and not covered by insurance companies that can arbitrarily decide to make essential drugs non-formulary.
These are essential medicines. Clearly our political policies have allowed this to happen. Outsourcing of essential drugs to maximize profits has caused shortages of everything from saline I V bags for drug Administration to local anesthetic agents which are now outrageously expensive when attainable to necessary anesthesia agents. The long term costs of these policies is astronomical. There must be corrections.
257
@Jan Newman, M.D., FACS Th is is so very true. I cannot afford the Anoro or other inhalers my doc prescribed. He helps patients like me by providing us with as many samples as he can. This is no way to live when the CEOs of these pharma firms make millions in bonuses, if not more.
23
@Jan Newman, M.D., FACS
I agree drug prices are too high, but we also need to look at our prescribing culture. Lantus has no benefit over twice a day dosing of NPH. A large study showed that there was actually less hypoglycemia on the older cheaper insulins then the newer analogs. NPH is cheaper and achieves steady state in just 5 doses. We must make sure we attack this problem on both ends to really make a dent. Same is true for medical procedures, tests and studies. We over use, over test and over prescribe.
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@Jan Newman, M.D., FACS
For those struggling and willing to switch to NPH and Regular from the newer analogs, ReliOn $24.88 per vial at WalMart
4
The article did not mention the cost of litigation. Every time a new drug comes to market, about 6 months latter there are TV commercials from Lawyers begging for people to join class action suits. All drugs have side effects. If the side effect is disclosed and the doctor believes it is worth the risk, and something happens, it is not the drug company's fault. Even if the drug company wins the defense can add up to a significant dollars.
2
Standard health care should cover only common problems manageable with generic drugs and cost-effective interventions. People concerned with more exotic or self-inflicted diseases should buy supplemental insurance and not burden the majority of the population. I am well aware that the upper middle class and the rich have an advantage in that case, but as a nation we have been neglecting the working poor who deserve better in order to take care of disease sufferers with better lobbying groups or drug company lobbyists .
1
@Kim from Alaska Considering the bulk of health care spending in the US is due to people being overweight your idea would cut off insurance for about 75% of Americans. As being overweight is more prevalent among the poor, it would most impact those people, you profess to being concerned about.
“[Biologics] have no meaningful competition, and therefore command very high prices.”
No matter how many times this is said, it's still not true. A monopoly on one active ingredient does not give a company a monopoly on treating a disease. Just take a look at all the NEW drugs that can treat psoriatic arthritis (https://psoriatic-arthritis.com/medications):
•Cimzia® (certolizumab pegol)
•Cosentyx® (secukinumab)
•Enbrel® (etanercept)
•Humira® (adalimumab)
•Orencia® (abatacept)
•Remicade® (infliximab)
•Simponi® (golimumab)
•Stelara® (ustekinumab)
•Taltz® (ixekizumab)
•Inflectra® (infliximab-dyyb)
•Renflexis™ (infliximab-abda)
•Otezla™ (apremilast)
I agree that we must get drug prices under control, but perpetuating an misconception isn't the way to do it.
3
Drug companies are just running wild. They have paid off the foxes guarding the chicken coop, and are reaping the benefits.
Although the total picture is, of course, complex, I offer my own personal experience with generics. I take several drugs that have been around for 30-50 years, and have done so for decades. In the past 15 years the price of these drugs relative to their historic prices has EXPLODED.
Regulation of US Pharma is a fantasy.
If you want to fix this problem, start with public funding of elections, and putting some teeth into bribery laws. Anything else is a waste of time.
9
He government should encourage the ease of entry to new generic manufacturers. If Martin Shkreli could create a new pharma company other honest players should be able to too.
1
Part of the problem may be patent trolls and piracy, which drives up costs by promoting expensive legal battles.
Greed is another reason.
And maybe the Feds decision to allow widespread advertising to the masses, including via expensive television commercials — something that had been both prohibited and frowned upon prior to the 1990s.
7
Intellectual property laws in the US are primarily to blame for the cost of drug prices in the US. You can say that Pharma lobbying did it too, or decreased public funding for research, or the medicare not being able to negotiate drug prices. But it's really the patent law.
2
Could you clarify?
The other European countries used for comparison have similar patent laws. And they don't violate international agreements respecting foreign patents by manufacturing copies of drugs developed by US firms. They just pay less for the same drugs or choose other treatments.
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@ Avid NYT reader:
Oh yes they do violate patents, as do US pharmaceutical companies. Both lead to costly international and domestic legal battles that might be part of the reason costs have risen.
In an otherwise excellent column on some of the causes for the high prices of drugs in the US, the following factor is omitted. The VA and Medicaid can negotiate with drug companies over prices, but Medicare can not. Why is that?
A skeptical observer might wonder if our congress people have stock in pharmaceuticals, and want to keep it that way. Whatever the reason, this needs to change. Now!
14
@Jim Dawson The no-negotiation rule was the Republican giveaway to Big Pharma. Sure, Big Pharma needs to make a profit, but sick people need to be able to afford their medicine. My guess is that Big Pharma would continue to rake in ample profits even without the Medicare non-negotiation rule.
This article is extremely misleading - it ignores the fact that a combination of rocket science billions of private capital are both required to enable US companies to discover the anti-cancer drugs that save lives and from which the rest of the world benefits with zero investment of effort, intellect, risk or money. To be clear, new drugs aren’t discovered in India, China or Nigeria.
The author also focuses on pharmaceutical companies only - who makes the money? Is it them, the distributors, the hospitals, or the physicians who dispense them? The answer to these questions matter.
4
America is not the Atlas of drug developers or drug producers; drug developers are world-wide and pharmaceutical companies are transnational. America may be exceptional but it should not be in the realm of drug prices. This article is a compilation of red capes arousing the bulls, or maybe I mean the opposite.
Drug prices rose because they CAN. I find the arguments about "but researchers deserve more!" despicable. ALL researchers deserve more - car researchers, telephone researchers etc. The prices for those goods have come down. Today's $25,000 car is much more advanced than yesterday's $25,000 car. The US drug procurement market is obviously fundamentally broken because it contains an unlimited funding mechanism. Only a country that is both wildly rich and completely ignorant could come up with the system we have today.
There is a better way, and it has to do with covering basic illnesses and drugs universally, and allowing high tech therapies to be done on a cash basis for the affluent, and for the poor on a charity basis. Our current procurement mechanism is guaranteed to fail and it does. As someone under 65, I do not get free drugs. Our system is a disaster and a plague.
5
Thank you Upshot for providing the kind of reporting that was completely missing when the Times produced 7 or 8 - or more - articles about skyrocketing cost for the Epipen, none of which contained a single line on Epipen price in another country. At that time I found that the cost of an Epipen in Sweden was a small fraction of the cost in the US.
I as a reasonably healthy 86 year old living in Sweden have prescriptions for the most comment medications taken by such individuals. When I first would pick them up at my neighborhood clinic I would comment that I did not need a card that would guarantee that over a year I would not pay more than x SEK total, because the cost was so much lower than I would pay in the US.
Most recently I discovered that the cost limit must kick in automatically because my latest pickup cost me almost nothing.
I see Sweden on the graph is at the bottom - where bottom means best! One more reason to live in SE.
I wonder what will happen in the US as a result of "research that allowed us to isolate the genetic basis of certain diseases open(ing) a lot of therapeutic areas for new drugs...” Gina Kolata writes occasionally about some new genome-based breakthrough but never mentions the cost implications. Watching that in UHC countries and the US is going to be interesting.
Thanks Austin Frakt, come back soon.
Only-NeverInSweden.blogspot.com
Citizen US SE
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Drug prices are high in the US, because Congress does not allow CMS to negotiate lower prices. Big Pharma is an extremely powerful lobby (I include device manufacturers here). Seems fairly simple. If CMS had been able to negotiate the price of Hepatitis C therapy for those with government-funded insurance, Gilead would not have made several billion dollars in profit. We reward companies for producing cancer treatments that may cost $1million/patient (with no 'guarantee' of 'cure'), but we're okay with a shortage of nitroglycerin, insulin, epinephrine...all time-tested and essential medications that should be cheap...because it's not cost-effective for companies to produce them. We pay more for drugs, because our elected representatives are paid more by drug companies.
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Very interesting reading the reader discussion of the cost of insulin, discussion under Reader Pick number 1, Jan Newman MD.
As Jan Newman would surely know, the incidence of childhood-onset diabetes (type 1) in Finland is highest in the world with Sweden 2d. Since Sweden has some of the best databases in the world on health histories and patient SES information, it is possible to carry out studies difficult or unthinkable elsewhere. I am familiar with long-term research searching for the underlying reasons for this incidence, which recently due to reanalysis of the data has been found to be even higher than previously thought.
I mention this as a preface to my hoping to run into several of the people who come to the Red Cross for weekly meetings, people who have diabetes and take insulin and can tell me about their costs and their treatment. Not in time for an addition here but maybe the next time US-SE cost comparisons turn up.
1
@Larry Lundgren Larry I'm going to the international diabetes patient association meeting (for the first time - I have never met them before) on Saturday 24 November to present on biosimilar versions of biotech insulins. Maybe they could help your research?
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@adrian Hi Adrian, no I am a long retired professor but not a medical researcher. It just happens that my wife and one or more doctoral students were part of a major diabetes research project led by a professor here in Linköping. I will take a look at the announcement for the meeting you are going to.
All my best
Larry
1
There are many factors that explain this - notably much higher healthcare costs in the US and new drug prices are based on a comparison with those costs. The opinion of VKG from Boston is also very relevant. One key point missiong from the article however is that the US has missed the boat entirely on biosimilar medicines competition to specialty biologicals. The US was 10 years behind Europe in regulation and the BPCIA is basically a law of barriers to access for biosimilar medicines competition. The US payer system is also completely disfunctional at stimulating competition for products that are not substitutable by a pharmacist - which is the case for biological medicines. Wake up US and learn the lessons from biosimilar medicines compeititon in Europe!
As someone running drug discovery programs for big pharma during the relevant periods I can tell you that your article missed the boat entirely. It basically concludes that drug spending is high because new drugs are expensive. That explains nothing. Why are new drug prices so high, and why have the costs of old drugs, even those off patent, not lowered as much as they should? The answer, or one of the answers, is that investors became much more active in the affairs of pharma in the mid-90s after the failure of the Clinton health care proposals. This is obvious in the sea-change in the way these companies do research, having almost no in-house research facilities relative to traditional periods, instead relying on the purchase of promising new drugs at exorbitant prices from small biotech firms. High deal prices lead to even higher drug prices. Estimates put the cost of discovering and developing new drugs at close to $1B, which is ridiculous, except in light of deal costs amid competition for new drugs. This is coupled with a trend to initially target small subsets of patient populations, orphan indications, that provide for extended periods of market exclusivity and desperate patients willing to pay whatever they must for access. The new Biologicals have no generic equivalents yet as well. There is much more to this, but not enough room here to flesh it out. Suffice it to say no politicians have had the backbone to put any brake on this, and no evidence they soon will.
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@VKG I applaud this and would add that blaming the prices on a change in human nature unique to the USA in our times - "greed" - is misguided as well. Greed occurs worldwide and has been a part of humanity for 20,000 years. It does not explain what is going on. Monopolistic pricing drug laws? Much closer. In that case, drug price does not depend on cost of researching and producing it. It depends on, one supposes, "greed" of the seller. Which is a highly unusual market situation.
3
Drugs don’t invent themselves and highly qualified Ph.D. researchers don’t work for free. Research and development must be funded somehow; the capitalist society offers the most efficient way to do this by allowing companies to charge high prices for their drugs that cover the costs plus an adequate profit margin.
Bringing up greed is utterly nonsense since we live in capitalistic society that is driven by profit optimization – per definition. “Greed” motivates people to deliver maximum performance, hence the US is by far the most productive in drug discovery. By the way, the researchers who actually do the discovery work (I’m one of them) are typically not in for the financial reward and we earn only average salaries.
To all people who scream “greed”: Look in your 401k funds, I’m sure you own a good amount of pharma/biotech stocks… talking about double standards… Yes, Big Pharma is trying to optimize profits – just like any other industry… there is no conspiracy... just mentally-challenged people who can’t connect the dots..
1
@Peter V. Tisch
They (Ph.D. Researchers and others) don’t work for free, but their salaries are a negligible component in drug pricing. Their salaries are on a par with academic colleagues, as you know. While no one would deny proper incentives for the pharma or any other industry, and they are not alone or even the most egregious in their overpricing of health care, their pursuit of outrageous levels of profit has gone hand in hand with a reduction in targeting of many therapeutic areas in an effort to reduce risk. Part of the ‘deal’ historically has been to provide high profit for high risk, including covering areas where the risk was higher. As you should know this has broken down completely, with high risk areas like CNS being largely ignored until risk is reduced by someone else. When greed incentivized value to society then within limits it’s a good thing, when that begins to disappear then it’s high time for effective regulation.
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@Peter V. Tisch Greed is indeed a universal human attribute. So is envy. The envious universally resent those who have more. They plot their downfall, no matter what harm may come to themselves. No judging, just saying.
In 1990 all shareholders wanted THEIR company to have a billion dollar product, a blockbuster. Celgene developed and gained approval for a life-saving drug for a rare genetic disease called Gaucher disease.
With only 2,500 patients worldwide conventional wisdom suggested this would be a near-charity product. Instead, knowing that insurance companies would only have a few patients each the question was posed, "What is $1 billion divided by 2,500?" And that became the price in the US.
Its success set the tone for pricing future specialty drugs, especially those with a small patient population.
5
I wonder if the price increases correlate to republican administrations.
4
You say that US patients use fewer drugs, and a higher proportion of the drugs we use are generics... but the small fraction of name brand super expensive drugs are 'actually' driving the increase in spending. Could you please cite some numbers and quantify this? This is the Upshot--let's put numbers on this stuff? Is our differential really *mostly* about a handful of patients taking stupendously expensive cancer (or hepatitis) drugs? Or is there a major contribution due to generics becoming substantially overpriced, relative to both production costs and other nations?
Come on, y'all can do better than this!
6
Bush2 and his republican Congress voted new prescription benefits, but this law also included provisions that prohibit negotiation of lower drug prices and import of other countries cheaper versions of medicines into the US. Also, the need for ever increasing profits in the medial industry leads to much higher costs and, in general, is an abomination.
4
As hinted in the article, there are many reasons for high drug prices in the US. Greed is certainly an easy culprit, except that the P/E ratios of big pharma stocks are not out of line with other large corporations. Others including TV advertising, middlemen (insurances, PBMs), lack of strict cost control by government, lawsuits, all have their impact. Not mentioned in the article is the $1.5-3Billion cost to discover and develop a safe new drug (including cost of failed attempts). Foreign restrictions and regulations on drug prices force the American taxpayer and government to be saddled with funding the golden goose. Drug pricing including R&D, needs to be addressed globally, and should be added to the UN's list of 17 sustainable development goals.
3
The mid-90s were a time of myriad new drug introductions - and direct-to-consumer advertising (remember the sad little Prozac bubble?). Patients started to ask physicians for particular medications - and overworked physicians simply signed away. Primary care providers became the major prescribers for the entire SSRI/SNRI class...expanding access to many more patients.
At the same time, health insurers initiated three-tiered drug pricing (generic, preferred and brand) as a way of mitigating rapidly rising drug costs at a time when premium prices were rising about 2-4% pa because there was so much competition for new members.
Finally, we saw the major pharmaceutical pipelines begin to dry up. In order to make certain that their me-too drugs kept market share, the pharma companies began to subsidize out-of-pocket cost to members.
Now we are generally stuck with limited choice - tight formularies (often with several hoops to jump through), tighter networks....and premiums still rising at an outrageous pace that has little to do with actual healthcare costs (notice I didn't say healthcare spend).
2
Back in the 2000's and onwards, I was obtaining a prescription med, still under patent here, from a Canadian pharmacy (I grew up in Winnipeg, living behind my grandfather's pharmacy, so I know the players, can avoid those not trustworthy), with full price for a three month supply less than the Medicare copay here for one month!
The Canadian pharmacies had to stop selling it to Americans. So many were doing the same, the manufacturer -- Pfizer -- declaring they would watch for order levels for the medication that were out of line with the pharmacies' other drugs and cut off any Canadian pharmacy they detected as selling more than would be expected from obtaining any of their products, for any of its customers. Pure blackmail.
Big Pharma is, in a word, rapacious. And they own Congress, both parties, all bought and paid for. I see little hope for a change.
15
Prescription drugs are one of those very few industries that can legally say "your money or your life". That's why price doesn't affect demand all that much, which is why Martin Shkreli and his ilk are raising their prices to dramatic new highs.
This, in turn, sets up a dynamic where drug companies are sucking the middle class dry for the benefit of their investors. What, you thought the massive returns for shareholders of Pfizer, Bristol-Myers Squibb, etc were just coming out of thin air?
4
@Dave Plenty of other products affect your lifespan. Drugs are unique in that the primary patients DO NOT pay for the item. The government pays. The patient rarely pays, as a percentage of total revenue. If they did, prices would be low to attract customers.
I for one am concerned that this mania for demonstrated "effectiveness" may infringe on the freedom of our leading corporations to profit from their hard work and dedication. Every person is a unique individual, not some statistic, so studies really can't tell us anything. I also can't help but question the effectiveness of extending subsidized health care to people who experience shows will just go out and smoke cigarettes, drink cheap liquor and God knows what else. I say let the free market pick the winners and the losers as God intended. Freedom!!
1
@Keitr And which verse from which of the two Biblical testaments persuades you that god is a laissez-faire capitalist? Especially when providing or denying a drug to a sick patient can mean the difference between life and death.
I remember the verse urging humans to "go forth and multiply." I missed the one where god implores Its children to "sally forth and profit maximally, create monopolistic entities or enterprises, and pry from thy neighbor all that is his, even to his last coin, by profiting from threats to his prosperity, yea, even to his health and his well-being."
This is pure unbridled greed. If we spent even half the money promoting and encouraging healthy diets, exercise and meditation- the health benefit would far outweighs any of these “advanced drugs” on a population scale. Imagine subsiding vegetable and taxing sugar and junk food- it is very likely that it would have a far greater improvement in population health than any drug introduced since 1990. In fact, Americans are sicker that ever!
10
The United States is the only industrialized country in the world that has no universal healthcare, where drug prices are negotiated and held in check. The U.S. is basically the pharmaceutical companies piggy bank, we are at their mercy.
Healthcare is not a business, not in the usual sense of the word. Too many corporations from insurance to drugs, to medical supplies, IV pumps, wheelchairs etc. And they all want a piece of the billions of dollars. They can raise prices, of drugs, insurance companies raise premiums to cover losses. While we Americans get sicker, and have less and less access, insurance companies are posting billions in profits.
We the people deserve better, we will pay one way or another, so why not pay a federal sales tax, to get access to healthcare.
11
One word explains why U.S. drug prices are so high: GREED.
Greed is the salient aspect of the unique American medical-industrial complex that provides wealth care for the executives and shareholders of its corporations rather than health care for people. Pricing and access to prescription drugs is further complicated by insurance companies and pharmaceutical benefit management companies. Patients' access to prescription drugs and the price they pay-- the arbitrary, ever-changing "tiered formularies"-- depends not on what what they need or what is most effective, but on the current deals, kickbacks, and back-room arrangements all these middlemen negotiate to serve their own executives and shareholders. Those without insurance, who can least afford it, pay greatly inflated "retail" prices.
Every other "developed" country has rejected capitalist wealth care in favor of a regulated system focused on delivering affordable health care to its citizens. They regulate the prices of drugs, and make them available based on efficacy and cost-effectiveness.
The regulated prices in other countries clearly allow drug companies enough profit to make selling their products worthwhile for their shareholders. But in the U.S., the lack of regulation lets them make spectacular profits by gouging us. I think it's time we yell and scream at our elected officials loudly enough to make them look beyond the campaign donations that give Big Pharma license to gouge.
10
People may dislike the profit motive in health care, but it is a strong motivator.The best and brightest enter drug development for a variety of reasons and financial gain is a big one.The biologics, new oncology and cardiac meds which have extended life for millions would be unlikely to exist were it not for powerful monetary incentives.This does not excuse the recent drastic price increases for generic drugs..That is pure manipulation of the market without public benefit, but if we want top level future R&D then we won't get it by killing off profit in the drug industry.We have to find a happy medium and we are not there now.
1
@Michael
Apparently you don't know, that for the most part we pay for the development of drugs, the pharmaceutical companies for the most part are handed drugs that the CDC has developed on the tax payers dime.
And lets not forget that Europe doesn't have these issues, so why should Americans have them.
8
@James Young - Would like you to develop that single statement: "...the CDC has developed..." at least with a reference to an article about CDCs role in the development of drugs.
Also that phrase "these issues" needs a such as phrase.
In other words, just for clarity and/or emphasis give me an example of an issue in the US that Sweden does not have. I prefer single country comparisons, not least because I do not know anything about European drug development, that is the actual history of development of a specific drug in Europe.
Only-NeverInSweden.blogspot.com
Citizen US Se
Only another,albeit, deadly, example of legislative and regulatory capture by the army of lobbyists waving money like a weapon in a Wild West environment with absolutely no effective regulation and certainly lacking in any moral compass. We live in what has , essentially, become a mafia state it's citizens either victims of corporate criminality or soon to be victims of these economic predators.
12
I'm surprised that Medicare Part D was not mentioned as a contributor to price increases. Being relatively new to retirement, I've been getting quite an education. A generic that I used to get at Kaiser for $17, at my local Rite Aid is $81 cash, $121 through Medicare part D insurance, and $40 from an online pharmacy. The only way to explain these huge differences, is the price fixing (plan pricing) allowed insurance companies under Medicare Part D. The chain pharmacies like it too. Have you noticed their proliferation over the last decade? Like everything in America, follow the money.
14
@Mark Hamlin I believe Medicare Part D was referenced in the sentence that says, "And Medicare adopted a universal prescription drug benefit in 2006."
4
I would suggest modeling countries economic health (GDP if you like). American drug spending increased relative to that of foreign countries during periods in which I think our economy was doing relatively better than theirs.
Two words go a long way to explaining the reasons for the price difference between Europe, Asia and here: private equity.
All aspects of medicine (geriatric especially) are profit centers for private equity firms. The list of interlocking investments is long. Ambulance services. Medical practices. Pharmaceuticals. Rehabilitation centers. Cancer Treatment centers. Laboratory testing services. Assisted Living facilities. Health insurance.
Multi-level private equity investments = multiple 30%, 50%, 100% markups at every step in the supply chain, how a 3¢ aspirin ends up being billed at $10.
“Profits before patient care”. American Medicine is an extractive industry, like mining, the value extracted the life savings and investments of middle class Americans.
So-called “Obamacare” threatens to derail this lucrative gravy train, why private equity did everything in its power to strangle it in its cradle. Methods include sustained propaganda campaigns against it through sponsored speech, the dissemination agency right-wing media (talk radio shills) and Republican errand boys (and girls) in Congress. Did, and still does.
23
@Steve Singer
That's exactly right which is why the republicans kept claiming that it was harming the economy. The only people it was "harming" is the rich remember there was a 3% tax on income to help pay for the ACA, and corporate america.
5
@Steve Singer
When drug companies are asked why the high prices for their branded drugs they will invariably reply that the R&D costs are so high as are the regulatory hurdles. However, people familiar with the advertising industry tell me that the 6 largest drug companies spend more money on advertising to the public than they do on R&D! Of course this is never mentioned by the company. Oh, and by the way we along with New Zealand are the only western countries that allow advertising directly to the consumer of prescription drugs. Part of the solution to high prices should be obvious.
8
Why do drugs cost so much? Because that's what big pharma can get away with charging--it's GREED. It is that simple.
10
@Pondweed...I worked in drug research for a major pharmaceutical company for 30 years, and you're right, it is greed. But drug companies are no more guilty of greed than are all corporations in general. With the pharmas it is just more obvious to the public.
6
@W.A. Spitzer
One bit of difference is in the price elasticity of these products. Whereas the price elasticity of medicine is practically zero, one would use that medicine the same way regardless of its price, many other products, say cars have a lot more elastic price which may change the consumer preference. Using brand A car instead of B is not life-threatening. But, using half the medicine dose or not using at all because the price is high is not something most people will consider. This fact makes raising drug prices much easier for big pharma.
@W.A. Spitzer But healthcare is scarcely the equivalent of selling "widgets." It's by no means obvious that our health care should be a for-profit industry. If I break a widget, I can replace it or I can forget it. Even if I overpaid, it's still just a widget.
But if my life is in danger, I want a fair shot at meeting the threat and surviving. And that requires in part that necessary medications are within financial reach.
It is high time that Americans be relieved of the burden of subsidizing the cost of medicine around the world! But that would take a Congress willing to buck Big Pharma. None too likely.
Part of the solution is removing incentives for profit in “disease management” and moving vigorously towards an actual health-promotion model. The current model “works” when people are alive, but not well. That’s sick! Think of how much money (including for insulin) could be saved if diabetes type 2 were prevented. Why does our government subsidize disease-promoting food (processed grains, sugar/HFCS) which is so ubiquitous? The solution is complex, more complex than a slogan “Medicare for All,” but the concept is sound. One necessary step in moving towards a single payor is to require pharmaceutical companies to sell the US drugs at the same price they sell to Canada. Then we slowly lower the Medicare age. And we reform our educational system to teach children how to safeguard their health. And we stop subsidizing health-destroying “fluffed up carbs” that currently comprise 80% of our supermarkets. www.PNHP.org
8
@Emily Kane...."require pharmaceutical companies to sell the US drugs at the same price they sell to Canada."....You have it backwards. We should require Canada to pay the same price for drugs that we do. R&D is expensive and without the ability to recover the cost of discovery, development, and clinical trials new drugs would quickly disappear. But Canada and other counties should be required to pay their fair share of the cost of R&D.
@Emily Kane
The Hep C drug, costs 80,000 dollars for an 8 week course treatment. Insurance companies say no, we won't pay. So the patient gets sicker, and sicker, and eventually needs a transplant and after care that will cost one million dollars, that's the backward thinking of corporations.
Working in medicine and at one point researching utilization of drugs, I tell people not to automatically use the drug insurance benefits they have but to shop around, esp. for $$$ or unusual meds. Find out how much you have to pay with insurance and then check out places like Walmart, Costco, Target, Blink Health, etc. and ask how much you need to pay out of pocket. In some cases, NOT using your insurance - with any copays, deductibles, etc. - costs less. In one situation, with an expensive drug I needed, the cost differences among pharmacies were a few hundred bucks for a month supply.
This article should be followed up with one about the profits of drug companies over time. I am no anti-capitalist and invest in pharma but my sense is there is a balance between making a reasonable profit and taking advantage of sick suffering people.
10
This article was woefully incomplete in that it didn't speak to one of the largest drug price inconsistencies of all: insulin.
The out-of-line pricing of insulin is one of the single largest contributors to this misalignment. Millions of people use it -- actually depend on it to live -- and it costs up to $350 per vial of which most people need a few vials a month.
More important is the fact that NONE of the explanation of high pricing in this article explain what's going on with insulin pricing in the US.
There are only three manufacturers globally and they all hold the patents that prevent in most cases a biosimilar (a fancy word for generic) being created to compete. Why is this a problem? The patents are covering insulins that haven't been substantially modified in any way since the 1990s. But US law allows them to extend the patents for the smallest, most insignificant tweaks (if there even are any -- and generally there aren't).
In addition, the three insulin makers price insulin in a collusive fashion. The price increases -- which have averaged 13%/yr since 1996 -- if graphed would all be on top of each other almost to the $ and the day of the increase.
Essentially drug manufacturers in this case are holding people hostage for their lives (despite the inventors' intend to keep it cheap in 1921).
The fact that this article doesn't discuss patent issues, collusive pricing, etc. and on the drug with the widest combination of use and cost makes it miss the mark.
29
@GSB...."There are only three manufacturers globally and they all hold the patents that prevent in most cases a biosimilar (a fancy word for generic) being created to compete."....Human insulin has been off patent for many years. You may be referring to patents on small insignificant modifications, but insulin itself is generic and has been for some time. There is no reason why a highly effective version of insulin is not readily available to the public at a generic cost.
3
I'm surprised you did not mention the Bayh-Dole Act of 1980 — it changed the rules so that inventions and discoveries made with federal money could be patented by industry. Unfortunately, the federal government should have at least kept some ownership (like an early seed investor) so some money earned could go back into funding more research and should have retained veto power on prices or profits (or set a maximum profit with any product resulting from government investment). There is no altruism in the pharmaceutical industry -- gone are the days when scientists agreed to receive $1 each in exchange for giving their patent rights of insulin to the University of Toronto because it was a life or death drug. With small innovations on the original insulin, these companies are milking the life out of people so they can pay for their insulin.
13
@Jenn
That's right, the idea being the federal government cant own a patent.
1
One of the reasons European prescription drug cost are lower is because many drugs which are available only by prescription in the US are available over the counter in most other countries in the world. Many studies have shown that patients with chronic ailments like blood pressure are much more likely to take their meds as prescribed when they can purchase them over the counter. American fear mongering from drug companies about such practices have been found to be untrue. A drug Zylet used for eye issues in the US is $42 for 5ml (not very much) is available for $7 in Italy over the counter. Lastly the next time you are in a European pharmacy notice how small the inventory of prescription drugs are compared to your local Walgreens or CVS. This is because of the governmental restriction in the use of expensive drugs that have little to offer over existing drugs a part from a higher price tag. These issues which make perfect sense to the citizens are strongly opposed by the federal legislators who fear the grave consequences to Big Pharma's bottom line.
9
@ccweems....Your suggestion that limited availability of similar drugs helps to reduce the price may be true. But it is also true that within a family of similar drugs, drug A may be best for 80% of the people, while drug B may be best for 15% and drug C may be better for 5%. Do you really want to restrict the availability for 20% of the people to only be able to get drug A?
I'm alive and well today because of the drugs that help manage several chronic conditions. Drugs do save lives and prevent much more costly hospitalizations. And yes, Americans pay more than most.
That said, Americans' life span is not among the highest in the world nor is it projected to improve significantly with all the advances. So something else is going on here. It's just not that simple. https://www.thelancet.com/journals/lancet/article/PIIS0140-6736(18)31694-5/fulltext
3
In the graph itself, countries below USA have socialized medicine and have better health outcomes. Numbers do not lie. What the US has is designer medicine for profit.
14
@Uly
That's right, and the republican party to insure that pharma isn't hurt by price controls. After all, where is the cut in drug prices Trump said he was going to get. Oh wait, he also said that we would all get "better insurance than the ACA"
2
@Uly - Socialized medicine is not a satisfactory designation. I prefer Universal Health Care, at least where appropriate, as it is in Sweden.
In Sweden each of us who has a personnummer - similar to social security - is registered according to the place where we live and once registered has access to health care at the local health-care clinic and hospitals. We must have a valid photo ID that is shown at the checkin desk. Universal because everyone with a PN has access.
I agree completely with you that the term designer medicine is useful in the US, even more so now that an individual's genome can be mapped. Gina Kolata of the NY Times produces occasional columns describing some new potential advance using detailed knowledge about an individual's that can be used as the basis for a designer treatment that often entails a whole team of experts and can be expected to cost very much.
Only-NeverInSweden.blogspot.com
Citizen US SE
The article is very informative, but still leaves a lot of questions. Why are even US generic drug prices so outrageously high?
Three months of my drug is $1250 if I go through my insurance and their Rx carrier, (until I hit deductible yada yada), it costs $550 if I buy it with a GoodRx.com coupon which is incompatible with my insurance, and it costs - **$180** if I order it from Canada. This is a generic drug that has been around for decades, so this can't be about funding new drug research. How can there be a nearly seven times greater cost for the US than for a Canadian?
12
THis is simple. Big Pharma is in business to make big money- anyway they can- Humanity doesnt need another ACEI- yet drugs are produced for the potential profit, not benefit to society. That is research-lip service the companies employ when a scandle breaks. Until these companies come under a different method of regulation, this will not stop
5
@nlitinme...The people who work in drug research are also human. They die from cancer and heart disease just like everyone else. The money is nice, but most of my colleagues were not engaged in drug research for financial reasons.
@W.A. Spitzer I think @nlitinme was criticizing the companies for being rapacious, not your friends with advanced degrees in microbiology and the like.
It's a striking chart but in fact it dramatically understates the disparity between the U.S. and Europe.
I needed antibiotics in Paris; they were $15 at the pharmacy. A refill in the U.S. of the same standard antibiotic would have been $330 -- the "tax" we fools pay in the U.S. being a 20-fold price increase in this case.
Drugs aren't 40% cheaper in France on an apples to apples basis -- they're probably closer to 75% cheaper. The only reason the Europeans are paying anything close to what the U.S. pays is because Europeans are getting better health care in every way.
15
It needs to be recognized that the proportion of spending on drugs of overall medical spending is not necessarily a meaningful metric. To the extent that a drug, even an expensive drug, reduces spending on hospitalizations and other complications, additional spending on drugs can reduce total costs. When Medicare part D was implemented, Medicare spending on drugs ticked up, but overall per capita Medicare spending started easing down.
Americans pay more for drugs, but have far better cancer survival rates, so socialized medicine has adverse consequences.
The following three Trump initiatives will tend to push away from crony socialism to free market pricing for drugs. Too bad he hasn't gotten any credit for them.
The FDA can reduce prices for drugs by more efficiently approving generic competitors dropping the $5-25 million cost plus 3-5 year approval process.
Congress and the FDA should take an active role in eliminating the sue-and-settle lawsuits in which name brand drug manufacturers make false allegations that generic manufacturers are violating patents and then "settle" by making a payment to the generic companies an amount equivalent to their profit but substantially less than the excess profits for the continued monopoly position of the name brand company.
In addition, name brand companies should be required to sell samples to prospective competitors that they need to develop manufacturing.
1
Americans pay 30% more overall for healthcare than Canadians--and we have universal coverage. Let that sink in.
The US, and Canada for that matter, pay so much to big pharma because the governments have given that much lobbying power to big pharma. In a nutshell, it's all about corporate greed, which of course is rampant in the US.
There's a lot of value about the old saying by Ben Franklin, "an ounce of prevention is worth a pound of cure".
A healthier population contributes to a stronger economy.
But then again, Americans are fine with gun violence against children--remember there was zero action after Sandy Hook for gun reform-- so why bother caring about drug costs?
12
Take prescription drug commercials off of TV. The money spent there is a waste. If you have an ailment and want to research drugs for the ailment we now have the internet to help us.
I think it's ludicrous that I go into my doctor's office and say, hey, can you put me on that medication? If you have questions ask your doctor who is infinitely more qualified to answer your questions.
If companies were no longer allowed to sell their wares on TV it would represent a substantial savings of dollars and should drive down the cost of drugs.
19
@Linda Why stop at drug commercials? Take all health care-related marketing off TV... Why is there money for marketing when claims are denied?
1
Does anyone remember the late news journalist Paul Harvey? He had a program he called "The Rest Of The Story". In it he relayed a story the way it appeared in a publication, or other venue, THEN he told "the rest of the story". The unpleasant part! The effect of Big Pharma Lobbyists can not be ignored in this story. Every doctor's office in this country is invaded daily by "drug reps". They bring samples, they buy lunch for the staff, they give out tickets to sporting events, shows etc. They even send the doc on trips to places like Disney World. When is the last time you saw your doctor WRITE a prescription on a pad? It's all done electronically now. And the number of times he/she writes a script for the expensive new drug is monitored by the company which in turn rewards the doctor with "perks" both over and under the table. Our politicians at both the State and Federal level receive enormous contributions and gifts from Pharma lobbyists and in return make it unlawful for Medicare to negotiate drug prices. Prescription "management" plans (yet one more middleman feeder at the trough of human illness) regulate what drugs are "on the formulary" based upon which manufacturers render year end "rebates" to them. This is "Orwellian Newspeak" for KICKBACKS ! No, the biggest reason for unaffordable drugs is the "for profit" health care system in America. Other civilized nations believe that the very idea of making excess profit off human misery in unethical. We do not.
20
The writer begins with data on per capita drug spending, and that limitation requires him to spend the bulk of his time dismissing potential explanatory factors for the spending gap between USA and other G20 nations.
After the wheat is separated from the chaff, Mr. Frakt finally turns to “New and expensive drugs” developed and introduced in America during the 1990’s. The rest of the world benefits when R&D outlays and high-cost, low-volume production begins in the USA.
Similarly, G20 citizens benefit when America bears the development costs of other products and services — movies, music, aircraft, smartphones. I point this out without complaining; Americans benefit, too, when its companies and workers have access to a far larger global market.
2
Top Pharma CEO salaries:
IQVIA- 37.5 million
Pfizer- 27.9 million
Merck- 21.4 Million
J&J- 22.8 Million
Yea, I think it’s greed.
23
All the drugs I use are generic, and if I didn’t have insurance, they would range from 60 dollars to several hundred dollars per month. After reading this article, I still don’t quite understand why generic dugs that have been around for decades can be this expensive.
12
When I was a child I had asthma. In the early 1980s I was prescribed a Ventolin inhaler; Ventolin being invented back in the '60s and far from a "new, blockbuster" drug. 35 years later --last month-- my son had a terrible cough and was prescribed exactly the same thing to open his airways. My co-pay for it, after the insurance company had paid their part? $55. According to wikipedia, the wholesale cost of the inhaler is about $2, and an inhaler costs about $3 in the UK. Even if this was priced at $5 total the drug company would reap a massive profit. At $55+ it is pure rape by the rentier.
Why is drug spending so high? Because the system allows it to be so!
12
@Clotario
That would be 96% profit on a 2750% price markup. Nice work if you can get it.
2
Why does NO ONE complain about the legal kickbacks that were enacted years ago? There is a "deal" between the pharmaceutical companies, the PBMs (pharmacy benefits management companies that are contracted by healthplans to handle Rx claims) and the healthplans themselves. The healthplans restrict their formularies (the list of "plan-approved" drugs) and then get kickbacks from the pharmaceutical company. The PBMs ALSO get a cut. Who pays for these kickbacks? WE do. The consumers. I only know about this because I worked on a team to design a system to manage the data and dollars. And we are taking BILLIONS of dollars. Why is this still in place?
9
At the top of this article is this statement:
"It should be noted that relative to total health spending, American spending on drugs is consistent with that of other countries."
This seems to claim that the proportion of the health care dollar that's spent on drugs is about the same as in other countries.
This can only mean that not only do we spend excessively on drugs, we spend excessively on everything else related to health care. It ain't just drugs.
2
Greed, pure and simple, and Republicans refusal to regulate any corporation for the good of the people. Pharmaceutical companies cite the large amount of research that has to be paid for, but quite a bit of this "research" has been going on in other countries with non-US drug companies for years, in countries that care more for their citizens than U.S. Republicans do. It's just like all the other Republican lies that coincidentally often hurts their own voters most and more immediately. A few of them woke up and voted rationally last week.
1
@M.S. Shackley
When a Swiss or French drug company invents a new drug, they accept a low price from countries that impose price controls because they know they can recover their R & D costs from Americans. India, if they declare a drug to be essential but aren't willing to pay the price, order their drug manufacturers to ignore intellectual property rights and manufacture the drugs in India. China just cheats.
Other countries have managed to shift essentially all drug R & D costs to Americans.
It is difficult to imagine what law Congress could pass that would address the cost shifting. If you put a tariff on Swiss drugs they'd just manufacture in the US or add the tariff to the prices charged in America.
Republicans tinkered with the problem in the recent tax law, by increasing taxes paid on income earned in foreign operations. But the action doesn't fit the evil GOP narrative, so you are completely unaware.
Hypothetical: Swiss company invents a drug. They transfer ownership of the intellectual property to a tax haven. It costs $5 to manufacture and distribute the drug. They sell the drug in the EU for $50, and "pay" their subsidiary $40 for the license, booking a taxable profit of $5. They sell the drug in the US for $100, "paying" their subsidiary $90 for the license, booking a $5 US profit.
The tax law changes the transfer pricing rules. It doesn't reduce US drug prices, but increases tax revenue to partially offset.
1
No price controls & no meaningful competition could be tempered with showing corporate executives photos of dungeons with suspended leg irons on the walls & medieval racks in the corners.
How long do we have to put up with this insanity?
1
One of the elements of Trump’s proposed trade treaty with Canada includes provisions to limit Canada’s ability to sell lower cost drugs in America. Please note: I read this. I do not have first-hand knowledge of the negotiations.
1
@David Eike
For all of the people who believe drug costs would be lower if Americans were able to buy drugs from Canada and other countries that impose price controls, it is a fiction.
Let's say a Swiss drug company sells a drug in Canada for $50 and the identical drug in the US for $100. Canada has one tenth the population of the US and presumably one tenth the demand for this particular drug. The Swiss company sells one million doses in Canada and ten million doses in the more profitable US market.
The US passes a law that Americans can import drugs from Canada, and the existing illegal internet system is legalized and expanded. Canadian pharmacies market the drug at $80 to Americans, capturing a piece of the profit. The Swiss company, noting that Canadian consumption has tripled to 3 million doses and American consumption has dropped to 8 million doses, renegotiates its deal with Canada. It will sell them 1 million doses at $50 and anything over that is $100 per dose.
If Canada agrees, Canadian pharmacies will sell the million $50 doses to Americans for $80, and Canadians will pay $100. Canada will make it illegal for Canadian pharmacies to export drugs to America.
In reality, the drug companies are already limiting the quantity sold to price controlled countries to an amount proportional to domestic demand. The small amount of tourism and border town sales of Canadian drugs is leakage. Some of the internet drug companies are selling fake drugs.
1
@ebmem
I was assuming buying drugs manufactured in Canada. In any event, assuming “economies of scale” operate as typically described, the larger American market should generally result in lower prices. Unless, god forfend, bigPhrama is gouging us.
3
Prt of tue oroblem is the FDA makes ot too crazy expensive for tur average drug to get approved. Meanwhile many dangerous drugs like Risperdall which causes suicide in teens or its jewer form Invega not a lot better, somehow got approved.
I wish they would have prioritized Amisulpride but tue French sanofi-aventis knew it was going generic soon amd there was no money in getting it approved.
Therefore believe it or not Europe, India, Australia amd Canada are way ahead oh us
psycopharmacologically or pharmaceutically
on many things! That aren’t even bio-specific!
We were also twenty years later than Europe
getting an important diabetes drug that could have saved lives. If you’re okay with that....?
Having worked in drug research for a major pharmaceutical company for 30 years I readily agree that they are greedy - but no more so than any other corporation in any other business. Their problem is they sell a product that is more visible. Further, I have always been perplexed by the fact that Americans will readily pay $100 a month for their cell phone service, but complain bitterly if they have to pay $100 a month for a drug that keeps them alive
8
Should the approval process include relative price comparisons - here and abroad, price/effectiveness compared to "like" drugs, etc.?
@Nanj
Something that would be useful would be if the FDA or a Consumer Reports like entity put a healthy effort into publishing comparative data.
For example, Prolia has the same benefits and potential side effects as generic Fosamax, but costs $5,000 per year compared to $52 per year. It is advertised widely as convenient because it provides protection against osteoporosis with two annual injections in the doctor's office. The alternative is a weekly pill.
If you buy over the counter drugs at CVS or Walmart, the store brands have printed on them "compare to xxx". Almost all of them were at one time prescription name brand drugs. People with allergies and acid reflux sometimes find that one class of allergy medications or indigestion medications work better for them, but most people will try the generic instead of the name brand Prilosec because the price is 33-50%.
For prescription drugs, an alert pharmacist will sometimes suggest you get a generic substitute if you balk at your co-pay, but they are prohibited by law and ethical standards from recommending changes to what your physician recommended.
Wouldn't it be great if you could look at "Consumer Drug Reports" online when your physician prescribed a drug? You could check generic substitutes available as well as other classes of drugs for your condition.
If an old cheaper drug is available, the side effects are frequently well known, which is not true of new drugs.
Visibility to price and quality!
I feel like the logic is lost in this article. First you explain that US patients don't take more drugs or more brand-name drugs than those in other countries, then you start blaming direct to consumer and doctor advertising. These two statements do not seem compatible. If the rate and composition of drugs prescribed are the same, then more per capita spending is due to prices, not to TV advertising (which also means TV advertising is not effective, which seems counter intuitive, so some part of your premise is wrong).
Also, you don't mention that US drug companies have semi annual price increases, some in double-digit percentages. You also don't mention that old medications are somehow newly under patent, like that for gout which even the Egyptians used. You also don't go into the details of why there is no competition in generics, and if there is, sometimes it's one other drug priced just as high as the name-brand.
I think everyone understands that the problem is the prices, that drug makers charge whatever the market will bear, but worse, are happiest when there isn't a market at all.
International benchmarks are also deceptive -- their prices are increasing as well. Why don't you plot the revenues or profitability of the pharma sector on the same plot? Or at least the stock price index for the sector?
Also even if there are no government price controls, at least have the government decide what minimum set of drugs all insurance must cover.
2
@Not Convinced
The direct to consumer advertising argument is that advertising convinces patients to purchase more expensive drugs that may not yield better health outcomes.
@Not Convinced
Americans have no opportunity to understand what their own drugs cost. The degree to which we overpay is overstated, because the actual price paid by insurance companies is a trade secret and is also subject to hidden rebates to pharmacy benefit managers and insurers, which are not typically passed appropriately to consumers. So comparisons are made to American list prices [which nobody, even the uninsured, pay] and price controlled foreign prices.
We are informed that we pay double the price for name brand drugs, when the reality is that it is all over the map, and my best guess is that we are not paying a 100% premium over the Canadian price, but rather a variable 20-40% premium. Still more than our fair share.
It becomes problematic if you try to get the federal bureaucracy to create a crony list of drugs that must be covered. As it stands right now, when you select a drug insurance plan, some will cover Cialis at a low co-pay and Viagra at a high co-pay and generic equivalents at no copay. Other plans don't cover it at all.
If you take expensive drugs, you can examine the formulary and balance your expected co-pays with your premiums and attempt to minimize your total cost. If you take cheap drugs, you can get a cheap plan. If your circumstances change, you can change plans during the next open enrollment period.
@Arturo Belano
Yes but the direct to consumer advertising doesn't happen in other countries, and the article cites findings that people in the US aren't prescribed more drugs, or more brand-name drugs. So if advertising is effective, why aren't US consumers buying more brand-name drugs than in other countries where there is no advertising (i.e. the control group)? Contradiction. (I believe advertising does work - otherwise they wouldn't run the ads - so the answer must be that somewhere these studies of US vs other countries are wrong).
"84 percent of prescriptions are generic."....If 84% of prescription drugs sold in the U.S. are generic, the introduction of new biologic drugs has to be less than 16%, and can hardly account for the observed increase in drug prices. Generic drugs should be relatively inexpensive as the companies that make them do not have to recover discovery, development, and clinical trial costs.
2
@W.A. Spitzer
Drug prices have increased at 2.4 times the inflation rate since Obamacare became effective in 2014, caused by increased pricing opacity resulting from gaming opportunities introduced. There is no justification for the 84% generic market share to have experienced excess inflation.
Many of the generic drugs have a single manufacturer with no competition. The FDA should encourage competition for those that are widely used or high price.
The 16% of non generic prescriptions consist of the newest class, custom drugs developed for a specific person's genetics, that are showing high promise as a custom cure for cancer and genetic diseases, but cost $0.5 million plus per cure; biologics, which are expensive and difficult for quasi generic substitutes to compete; name brand, patented drugs; and name brand drugs that are out of patent but for which there are no generic competitors.
The FDA should encourage generics for name brand drugs out-of-patent and Congress should make it illegal for the sue-and-settle practice that allows the name brand drugs to pay generic competitors to not compete.
Insulin is a good biologic example. It uses a genetically modified organism to manufacture the drug. After the process patent has expired, a new competitor still has to replicate the expensive approval process. It seems like the scientists and lawyers could streamline that process, which would reduce the cost of the new entrants and increase competition.
The cost of Pharmaceuticals in other parts of the world was because the industry was allowed to increase its profits here in the US.
We should allow the NIH to conduct research and retain the Patents and provide the licences to Pharmaceutical manufacturers to produce drugs in bulk. This is how Penicillin was discovered/invented as a cure and then every pharmaceutical company who wanted to was allowed to manufacture it. It is a cure for many bacterial infection.
Currently in Pharmaceutical industry is not interested in the cure but in finding maintaining dozes for life, so they can keep us customers for life.
Research is geared not for cure but continuing need for their product.
If we move the research back to the Academic institutions and NIH and provide the funding, I am sure we would be able to reduce overall expenses in pharmaceuticals.
5
@Wizarat...This is how Penicillin was discovered/invented as a cure and then every pharmaceutical company who wanted to was allowed to manufacture it.....The real story was a great deal more complicated then what you describe. Penicillin is a family of drugs not a single entity, and the development of the fermentation process required to make penicillin in quantities was not trivial. Further, your assumption that the required research and development of new drugs could be carried out by academic institutions or NIH is simply not valid.
6
@W.A. Spitzer
So why couldn't academia or NIH develop new drugs if they were properly funded?
Providing health care for citizens should not be a function of profit-driven institutions. It's immoral IMO ---
2
@jabber
For every thousand drug patents issued, two or three make it to market. Academics study the drugs and winnow the list down to 100 that are not toxic to mice.
When they come up with something that looks promising [by this time, the patent is 5-10 years into its life], they attract speculators who are hoping to sponsor the cure for Hepatitis C that they will be able to sell for $100,000 per cure for six months and for $50,000 per cure for the next 2.5 years, at which point the patent will expire and competitors have come up with better cures for lower prices and the price will drop to $13,000.
Over the next 5-10 years, the investors continue to dole out money as the researchers get closer to the prize, and stop funding when it seems unlikely there will be a payoff. Two or three of the initial 100 funded patents are like winning the lottery, a couple address a small market and cover some of their costs and the rest never make a dime.
Let's say you come up with an excellent screening process and the National Institute of drugs gets a huge budget to dole out to academic and government scientists. Are the academic and government scientists going to inform the chief bureaucrat that their five year grant should be cancelled immediately when it turns out that although the drug doesn't kill mice, it does kill rhesus monkeys?
Private sector researchers are hoping for a piece of the prize. Civil servants are looking to keep their jobs.
Markets work if choices are transparent, there are multiple suppliers for equivalent products, and consumers can discriminate based on prize. That is Capitalim 101 as surely Adam Smith would assert.
If these the conditions are not met, regulators either have to create them or regulate. It is really that simple. Democracy in theory is the solution. But it fails if voters interest are distorted by false understanding.
A couple of questions: Do other countries permit drug companies to flood TV and magazines with ads for new, expensive drugs that have little or no benefit over existing medications?
We know that, in general, American health system outcomes (e.g., life expectancy, maternal mortality, infant mortality) lag behind other developed countries. What is the actual medical efficacy of America’s higher spending on drugs?
9
@David Eike
Well they don't permit that in Canada at all and I'm pretty certain it's the same in the EU and UK.
2
@David Eike
The only other country that allows direct to consumer advertising for prescription drugs is New Zealand.
Americans are big supporters of free speech and a series of lawsuits established that the value of informing consumers was more important than other considerations. Thus, we have been treated to ambulance chasing lawyer ads; doctors advertising the efficacy of their overpriced back braces, free to you if you have Medicare; and Prolia that costs 100 times the cost of its generic substitute. The Trump proposal that prices be included in drug ads is a step in the right direction.
American infant and maternal mortality are virtually identical to those of northern European countries adjusted for race. They do not count most premature births as live births, which causes their infant mortality rates to be understated and causes their life expectancies to be overstated. Europeans count as maternal mortality only deaths that occur during the 48 hours after delivery, while the US counts them within 12 months of delivery.
Both rates for African Americans are twice that of white Americans and 2.5 times that of American Hispanics, adjusted for income level. You can only fix things that you measure, so we have room for improvement.
Cancer survival rates are far better for Americans than for Canadians and Europeans. Faster treatment and more expensive drugs.
When travelling in France, I was able to buy the same drug I had to pay $700 here for $45.00! The difference is shocking and not right. If someone else had told me this story, I might have thought it to be a tall story. This tells us our congress has failed to pass limits for price controls. Keep in mind all the lobbists, for big Pharma, who work on our representatives in Congress.
Yes, R & D is important, but the question remains: why is the US being used as a milch cow by pharmaceutical companies while other countries work to limit profit-making companies?
17
@NM....That the cost of drugs in the U.S is too high is true, but there are some basic issues involved that you may have over looked. The cost of new drugs, discovery, development, and clinical trials, is very expensive and occurs before the first prescription is ever sold, while the actual manufacture cost of the new drug is often relatively inexpensive. This makes drugs rather unique as a item of commerce. The drug companies therefore need to charge a high price for the drug in the U.S. to recover the discovery, development, and clinical trial costs. Countries like France often impose price restrictions, and remember while discovery, development, and clinical trial costs are very high, actual manufacturing cost is low. As a result the companies are faced with not selling the drug in France and making no profit over manufacturing cost, or selling the drug at the price France demands and making some profit over he manufacturing cost. In essence France, and other countries. are getting something of a free ride on backs of U.S. consumers.
4
@W.A. Spitzer Not true -- many countries' research and available drugs are way ahead of what we have access to here in the US, because the FDA restricts introduction -- to keep drug prices high -- to fuel the greed of Big Pharma -- with poorer outcomes here in the US.
4
@GirlAuthentic
You can take issue with FDA policies, which are very risk adverse, and I agree with your assessment. Keep in mind, however, that the risk adverseness of the FDA was reinforced when the UK approved thalidomide as a drug for morning sickness, which resulted in many birth defects. The only American children affected were born to mothers who had traveled to GB while pregnant.
It costs much more to get the FDA to approve drugs and takes much longer. As a consequence, the drugs have a very short, typically 3-5 years, remining patent life when they become available in the US, which makes them very expensive for a short period of time. The FDA also, unnecessarily in my mind, drags its feet in approving generic competitors when the patents expire, costing $5-25 million and taking 3-5 years to approve a generic competitor, essentially giving the big boys an additional 3-5 years of exclusivity. That is how the famous Epi-pen had an 85% market share long after it was out-of-patent and was able to increase the price from $100 for a two-pack to $600.
Congress could do some work on the issue by passing a law that allowed the FDA to piggyback on the approval process conducted in countries with similar standards to ours. It would mean that if a drug were approved in France or Switzerland, that the manufacturer could use some or all of its approval work to achieve FDA approval, rather than having to duplicate it.
The only sensible answer is to base the prices for pharmaceuticals covered by Medicare,Medicaid, and insurance coverage for US government employees (and families) to an average of the prices charged for the same in Germany, The UK and Canada.
That might be coupled with opening the group policy now offered to US government employees alone to the population at large. That system is underwritten by the same companies that underwrite the group plans offered to employees by most private employers, who soon would follow suit.
4
@Penseur
Medicare imposes price controls on hospital services, doctor, lab, imaging fees. Medicaid does as well, with even lower prices. Providers claim the reimbursement rate doesn't cover the cost of care and cost shift to those who have private insurance.
The same thing would happen if you put price controls on drugs for Medicaid, Medicare and federal employees. Everyone else would pay higher drug prices.
Currently, Medicaid is entitled to a discount from the lowest retail price paid in the state. Ohio hired CVS as its primary pharmacy benefit manager for Medicaid in Ohio. CVS put together a complicated, but legal, scheme to inflate the prices paid to drug manufacturers, passing volume discounts through its subsidiaries. It funded a charity to give "coupon-gifts" to people who balked at high co-pays [which did not affect the calculated the retail price.] Drug costs increased for all.
The federal government is paying $30,000 to insurers for family coverage under its excellent group plan. The only non civil servants who would sign up for the plan are people who have medical costs in excess of $25,000 to $30,000 and also have cash to pay the premiums.
Your plan is not sensible, much less the only sensible plan. The sensible solution is to back federal government involvement out of the financing of health care and to facilitate a free market. Eliminate crony socialist profits and provide assistance for those who cannot afford the lower free market prices.
My BP medication costs a few hundred dollars in Canada, but several thousands in the US. Why? It has nothing to do with the cost of R&D. The answer is obvious. Congress prohibiting government to negotiate with drug makers has a cascading effect, making all drugs more expensive than they need to be.
13
@Professor Ice..... "It has nothing to do with the cost of R&D.'....Unless the drug is generic, how do you know this is true?
@Professor Ice
Assuming that you are not a Medicaid or Medicare beneficiary, if the government were to impose price controls on drugs for government insurance, the costs would be shifted to everyone else, just as happens with hospital costs.
That is obvious.
If our government is unwilling to “lead” through addressing the cost of prescription medicines it should at least “get out of the way” and allow overseas prescription purchase of approved medications for individual purchase.
Many, if not most of us, have experienced shocking revelations of the overseas costs to consumers of IDENTICAL prescription drugs when purchased overseas. Same manufacturer, same drug, same dosage sold at a fraction of the domestic pricing.
7
“What can explain it?” Greed — the last symptom of Stage Four Capitalism.
12
"What can explain this?" First, stop talking about prices as if they were barometric pressure. Prices don't rise or fall, people choose to raise or lower them. They raise them when they think they can get more, and lower them when they find out they can't.
Second, there are only two motives for raising prices: necessity and greed. When someone has raised the prices of your inputs, you will have to raise your prices, too. Just hope you can rasie them enough to cover the cost increases. And if you see that your product is selling well, you raise prices because you know you can get more. You hope you''ve raised them as high as possible.
Which of these motives has driven poeople to raise the prices of drugs? Since the same and similar drugs are cheaper eslewhere, it's mostly greed.
10
@Wolf Kirchmeir
Americans pay more for drugs because Canadians and other countries impose price controls since they cannot afford a fair price. The other portion of high American drug prices is that big medicine has purchased the best government money can buy.
1
If price controls were to be instituted in the USA similar to those in Europe, drug innovation would be severely impacted.
The cost of developing a successful drug ( with failures being amortized into that figure) can amount to over $1 billion.
With FDA and foreign regulations taking much time out of the patent life, there is a relatively short time time to recoup total costs, much less make a profit ..
Since much of the world limits prices - ie interferes with the market - pharmaceutical companies compensate by raising prices in the few markets they can do so.
Essentially, Americans are subsidising foreign consumers for the research costs of new drugs.
Solutions could be a) treaties to raise prices somewhat in regulated markets so that US prices could come down; b) extended patent lives to allow for more time to recoup ( the added-on extended periods could be semi exclusive to create some, but not totally open competition); c) revision of drug regulation to eliminate the need for efficacy clinical studies ( a major cost) ie only toxicology studies would be mandated for approval to market - efficacy studies would be up to the physician and patient to decide and Pharma companies would sponsor academic-led efficacy studies to enhance their market penetration ( this would place more justifiable burden on physicians to be cautious about using new drugs and intently to study the literature, rather than completely relying on FDA stamping as most do now)..
2
@jha...."Essentially, Americans are subsidising foreign consumers for the research costs of new drugs."....You are absolutely correct.
8
@W.A. Spitzer
That may be true and some suggested that the problem may be solved by negotiating a different model of price control with other countries - very complicated. However there is a very simple solution - rather than inventing more/different regulations open the market and allow American and US companies to buy drugs anywhere in the world - Canada, Europe,... That will obviously force Pharmaceutical companies to lower the prices here and increase prices in other countries.
1
@jha
Yeh--- OR we could just take all healthcare out of the profit-making sector....
2
If price controls were to be instituted in the USA similar to those in Europe, drug innovation would be severely impacted.
The cost of developing a successful drug ( with failures being amortized in to that figure) can amount to over $1 billion.
With FDA and foreign regulations taking much time out of the patent life is a relatively short time time to recoup total costs, much less make a profit ..
Since much of the world limits prices - ie interferes with the market - pharmaceutical companies compensate by raising prices in the few markets the can do so.
Essentially, Americans are subsidising foreign consumers for the research costs of new drugs.
Solutions could be a) treaties to raise prices somewhat in regulated markets so that US prices could come down; b) extended patent lives to allow for more time to recoup ( the added-on extended periods could be semi exclusive to create some, but not totally open competition); c) revision of drug regulation to eliminate the need for efficacy clinical studies ( a major cost) ie only toxicology studies would be mandated for approval to market - efficacy studies would be up to the physician and patient to decide and Pharma companies would sponsor efficacy studies to enhance their market penetration ( this would place more justifiable burden on physicians to be cautious about using new drugs and intently to study the literature, rather than completely relying on FDA stamping as most do now)..
1
@jhaor we could finance drug research through universities (as it used to be)rather than through private companies. The patents could be owned by the government and the savings as well as benefit to all of us (as patients) would be remarkable!
9
@Herje51...Having worked in drug research for 30 years, I can say without the slightest hesitation, that if Universities were responsible for the discovery of new drugs there would be very few indeed. They are simply not designed or capable to carry out the work which is essential to the process.
2
@jha
Silverman, J., and Lee, P.R. Pills, Profits & Politics. Berkeley and Los Angeles, CA: University of California Press, 1974.
Nothing like drug prices to get people emotional.
High prices do not necessarily mean greed.
CEOs salaries are a bigger issue than the pharmaceutical industry. The story does mention that the overall share of drug costs as part of healthcare costs is pretty much the same in the US as it is elsewhere.
To tackle the issue the questions are social: should tax payers fund drug development? Is so, taxes will be a little higher and patients will be a little better off. If not, then drug makers have a right to set a market price.
4
@Reader
CEO salaries in the charity hospital systems is a better gauge of medical crony socialism. Go to a listing of top paid CEOs of charities, and they are overwhelmingly "managing" government largess in the medical arena.
If we rely on the US government to fund R & D, we will get fewer innovative drugs at a higher cost. If Americans are going to fund R & D, better to do it through higher drug costs than through higher taxes.
I didn't see mentioned in this article that one of the reasons drug prices have been high is because the GW Bush administration (with AARP's approval) decided not to allow the government to negotiate drug prices with the pharmaceutical companies. More recently, the NJ senators, Melendez and Booker were among those that voted for a bill that passed which did not allow Americans to buy drugs from Canada. Need I say that many drug companies are headquartered in New Jersey?
10
@EF
The Democrats did not want the federal government to negotiate prices for drugs. They wanted to impose price controls on Medicare prescription drug prices. Had they been successful, it would have reduced the amount of money Medicare paid for drugs, but the costs would have been shifted to the rest of consumers, the same thing that happens with hospital services. The drug companies would not have settled for less revenue.
The drug prices paid by part D insurers are negotiated by the insurers and are as good as anything the federal government could have negotiated.
Hospitals negotiate the prices of drugs paid by Medicare part A, and do not pass the saving to the government.
AARP supported the taxpayer subsidies for seniors, which doesn't seem odd. It seemed odd that they supported the removal of $0.8 trillion from Medicare funding as the Democrats did. Until I followed the money. Their insurance subsidiaries were able to increase the cost to seniors for Medicare Advantage and Medi-gap policies. The $0.8 trillion defunded by the Democrats is coming out of the pockets of retirees and the disabled.
Every element of Obamacare increased profits to big medicine. It rearranged who was paying for what, but did not increase the supply of medical providers.
Drug prices did not explode during 2006-2013 after the introduction of Bush's Medicare part D. Since the 2014 implementation of Obamacare, they've increased at 2/4 times the rate of inflation.
One factor not mentioned, perhaps out of sheer politeness, is greed. The circumstances in the US allow the big pharma to use price gauging. I know this first hand. For many years I used an inhaler, Pulmicort Turbohaler and my co-pay was under $50. Suddenly, the insurance company decided not to cover it and repeated appeals raised my co-pay to over $100 with the full prescription price around $250. During a trip to Turkey, I was able to purchase the same medicine at the pharmacy for $9, yes nine dollars! It is extremely hard to explain this discrepancy with anything but greed protected and fueled by the politicians.
Shame on all!
10
@Cemal Ekin thank you for the logic. just so i understand, when amazon sets prices differently based on local market conditions it's ok but when pharma does it, it's greed. got it.
@Cemal Ekin
https://undark.org/article/asthma-inhalers-cost-bill-took-breath-away/
The Turkish inhaler uses CFCs to propel the drug, and it has long been out of patent. The Clinton administration ordered the FDA to prohibit the use of CFC and to phase them out by 2008. The FDA wanted to start a new 20 year patent period for friends of Bill big medicine. The amount of CFCs released by inhalers is so small that most countries gave them a waiver on the worldwide ban.
An irony of the Montreal Protocol is that the terrifying ozone hole was not caused by CFCs but by normal, natural fluctuations in the earth's magnetic field. Even if you believe the theory that CFCs are a culprit, the other irony is that they are now claiming that the substitutes for CFCs are an even greater cause of global warming. Expect the dark state FDA to restart a 20 year patent period, with a higher price, with a new propellant, just as we are approaching the 20 year patent expirations.
Even if Trump does what Clinton should have done 19 years ago, we are at risk of a future Democrat deciding to give his friends a gift. We need to get Congress to pass a law prohibiting the FDA from creating a stupid regulation.
The other irony of the situation is that China is emitting more CFCs than were being emitted during the 1980's period of terror [in violation of their signing of the Montreal Protocol] but we are still on track to close the ozone hole by 2050.
@ebmem, The medicine I got from the pharmacy in Turkey was made in Norway and imported to Turkey. Despite that, the ultimate price is a fraction of the cost in the US.
Medicare for all and regulated drug compensation, as is done successfully in other countries. Appropriate regulation is not socialism - it's just stopping theft by corrupt drug companies. I can't sell you the Brooklyn Bridge, but a drug company can tweak an aspirin and sell it for 50 bucks a pill. That's fraud and although it is not illegal here (yet), it should be,
8
@Brez sorry, this makes no sense. pharmaceutical companies can charge whatever prices they wish -- as can any industry in the absence of price controls -- but this doesn't require a physician to prescribe the drug, much less the patient to take it.
physicians prescribe certain drugs based on efficacy, safety, tolerability and other factors. cost should be a factor as well.
To give you an idea of just how much money the pharmaceutical industry is awash in, you just need to look a their advertising. They used to sponsor virtually all the evening news shows on the major channels, then the ads began usurping almost all other time slots, and now, even on those stations which show reruns of the "Beverly Hillbillies" and "Leave it to Beaver" and which used to carry ads for $29.95 garden hoses, you routinely see the same pitches for $10,000 a year medications - for conditions that one in a million people have.
Why hasn't anyone in Congress made the same simple observation I have? I know, they're all bought. I haven't even heard a reasonable proposal from Democrats. The best they will come up with is a cap at current levels.
6
Gosh, lemme think...do you think it could be price gouging? ...
Maybe it's got to do with that "uncritical " attitude toward the value of claimed efficacy?...Direct to consumer marketing--"Go ask your doc about new Wondermed?"...
All of these are policy issues to be corrected by legislation and (has this word come back into polite use yet?) regulation.
4
What about private equity firms buying established drugs and raising the prices to unconscionable levels?
5
Here in the UK, the NHS (in general) only uses treatments which are cost effective, i.e. the cost of the treatment per year of good-quality life gained (cost per QALY). The NHS considers around $50k/QALY good value. There are some consequences of this which may be surprising to Americans.
1. Some incredibly effective but incredibly expensive treatments are actually easier to access in the UK than for many Americans.
2. Drugs are not only compared in terms of cost/QALY with each other but also with other treatment modalities such as surgery, talking therapies or doing nothing.
3. In the UK it's hard to access treatments which are not very effective through the NHS, although people are of course free to purchase them with their own funds. So you can get treatments which work for free, but if you want treatments that don't work you have to pay for them.
10
This is a really roundabout way of saying that the UNIT PRICES of drugs -- generic or brand-name -- have skyrocketed. Each pill, each milliliter, is more expensive that it was 20-25 years ago, way outpacing inflation. There is absolutely no incentive for drug companies to moderate prices because there's no competition. It's a captive consumer market. Consumers have no way to shop around, unless they are able to go to another country. For example, I took the exact same drug -- Copaxone -- for multiple sclerosis from about 2000 to 2018. That drug rose in price from about $10,000 a year to $100,000. In Canada, it's about $12,000 now. Why is this happening? Because there's nothing to stop it. It's just greed, pure and simple.
10
My co-pay for a 5 day course of Azithromycin was $30 in Minnesota last December. My wife developed the same respiratory infection in January when we visited Puerto Vallarta MX and her five days of Azithromycin cost a total of $20 without insurance for the same brand there. Pfizer Viagra cost $48 per pill, but only $4 in Mx. Pfizer is still making a profit or they would not sell their drug in MX. American's are be robbed by our so called "Free Market".
7
While many Americans are not in the plans, most of us are in employer plans that have relatively low co-pays for most drugs. We do not know how much the drugs really cost until we leave the plans or go on Medicare. Then we get shocked. Even then, the costs get obscured. Very little transparency exists. Consequently most people’s personal understanding is faulty. We should clear up the fog before first before deciding where to steer the ship.
4
What can explain it? Greed. Any other questions you would like answered just let me know, it's raining and can't ride my bike, so I've got time.
9
The guts of the matter is that our “representatives” place profits above the needs of the nation.
Stephen Rinsler, MD
10
Big Pharma is the OPEC of drugs, morally equivalent to the Cali cartel.
11
I find this article curious as to what it does not discuss. When the drug coverage option was added to Medicare Big Pharma’s advocates in Congress extracted a boon for Big Pharma. Medicare would not be able to negotiate with drug companies in order to control pricing. Every other country mentioned in this article directly negotiates with the drug companies. Another allowed diversion is that in their cost formation US drug companies, including US subsidiaries of foreign drug companies, are allowed to include costs for sales and marketing denied in other countries into the base cost of drugs to be sold in the US.
I hardly think that “costly new drugs” are the primary driver. The opioid crisis raging through this country currently is causing medical costs increase. This crisis is caused by the mendacity of the suppliers both the makers and distributors, ineffective oversight by the FDA, and the corruption among members of Congress and administration funded by Big Pharma. One only needs to research who supports and introduce laws that benefit the drug companies.
Another problem is the tolerance of monopolistic behavior of the drug companies. The granting of patent extensions for tweaked formulas to tamp down competition without any increased efficacy on the covered drugs. Brand name drug makers buying and squelching competitive drugs or just paying the competitor to withhold production.
It was disappointing that the NYT published an opinion piece that was a fig leaf for Pharma
22
So the Pharma companies are being allowed to rip off people with Cancer ,Hypertension etc because there are no alternatives.Time for government to do their job and mandate prices and profitability
5
There is one simple fact and one only for the high cost of drugs in the U.S. The companies charge the high prices because they can, plain and simple.
The costliest of drugs are those that people require to live or make life bearable. The option is pay the high price or die or suffer. Medical blackmail, plain and simple!
10
Thanks for this. I hope we see many more of these types of articles. We're being robbed by the pharmaceutical companies
3
Another reason Americans pay more for our medicines is Billy Tauzin, who in 2004 passed the Medicare Prescription Drug Bill which prohibited the government from negotiating drug prices. Tuzin resigned his U.S. Representative seat (LA) and became the highest paid drug lobbyist for PhRMA, making more than $2 million per year.
15
This article does not adequately explain the spike in drug prices between 2012-2016. As other comments noted, this spike includes exorbitant increases in prices on certain generics. Did "greed" suddenly increase in 2012? Did research costs suddenly increase in that time frame? I don't think so.
5
As long as big pharma companies make contributions to political parties and candidates/office holders I doubt that there will be any significant improvement in pricing. The profit motive is what drives pricing. Will the Dems or the Repubs do something to constrain that? Don't hold your breath!
5
There was no mention in this article of the fact that Medicare Part D, which is probably the largest player in paying for drugs, is prohibited from negotiating prices.
8
If our politicians were truly concerned about the ability of Americans to receive health care when and where they need it rather than when they can afford it and the accompanying aggravation(s), they would be working on ways to bring the cost of prescription and over the counter medications down, ending the ridiculous narrow networks put in place by the wealth insurance industry, and they'd end their own wonderful wealth care plans so that they could understand what we go through by joining the same plans we're forced into when we don't get insurance through our employers.
One of the reasons our so-called health care industry gets away with such outrageous behavior is because the people who can regulate it aren't part of it. They are lobbied by it, pandered to by it, but don't have any stake in its smooth functioning for us as patients or family members.
Why does any CEO need to be compensated with enough money and stock to fund a small country? Why shouldn't new drugs be thoroughly tested by the FDA to ensure that they are effective and as harmless as possible? Why should drug companies be allowed to advertise (and lie) to the public about their medications? The drug industry has medicalized menopause, simple upset stomachs, normal coughing, aging, grief, etc. Not because they care but because doing so makes money for them.
We don't need more drugs for everyday problems that resolve themselves by the next day. We need a real health care system we can use.
7
Congress is what happened to American drug prices. Medicare was forced to accept whatever prices big Pharma demanded while our OECD counterparts drove a much harder bargain. The result is that Americans subsidize drug costs for OECD nations. Wall Street is also a significant cause of America's exorbitant drug costs, demanding quarterly profit growth that can come only from individual consumers of drug company products. It's time to tie our cost schedules to the OECD averages that the rest of the developed world pays. It's time to dust off the anti-trust laws and break up companies and industry lobbies that have outsized influence in our national healthcare policies.
6
To be sure, there are very high-cost drugs available to some Americans that contribute to the relative rise in drug costs in the U.S. But Austin Frakt’s data/analysis sounds wrong and too convenient for American Pharma companies. Ordinary drugs, like Nasonex, cost a fraction of the price over the counter without a prescription or insurance in, say Germany, than they do in the U.S. Please run these facts
down and publicize them. Thank you.
4
Pharmaceutical companies can now write off the cost of print, broadcast and social media advertising. But guess what? This glut of advertising is being subsidized through the rising cost of prescription drugs being passed on to consumers. This is wrong. I do not need to subsidize a marketing campaign designed to make a pharmaceutical company, its executives, and shareholders, rich. We need to return to the days of when drugs were marketed to physicians by company reps, not to consumers through constant advertising.
13
Things that start out as solutions sometimes end up as problems.
Health insurance was started by doctors and hospitals (the Blues) and this third party payment systems raised the cost of health care to where it was not affordable without insurance.
It was one thing to pay Doc Brown with chickens, it's another to pay Doctor Brown Medical Inc. When I was young doctors lived in your area. They may have had a nicer home or car but their kids went to your school and they may even have made house calls.
Health insurance was the best thing that ever happened to doctors and hospitals from an economic standpoint. Removing any discussion or even actual knowledge of costs allowed costs to escalate and doctors and hospitals to prosper. There would be no Cleveland Clinic without the third party payer.
Of course there have been benefits in areas of research and care. But overall the lack of anything resembling a market and the profit motives of insurance and drug companies needs to be addressed
I believe we have reached the point that we need to take the profit motive our of health care and gradually move to a single payer system. Gradually raise the income levels for aid, perhaps gradually liberalize the opportunity to qualify or buy into Medicare, and perhaps explore some hybrid systems.
6
@mike If you are interested in how the change in the practice of medicine came about, read the first 4 chapters of "A Second Opinion" by Dr. Arnold Relman
My son has a disorder that causes seizures. Thankfully he tested a new medication 10 years ago that has helped reduce his seizures and remove some tumors.
Thankfully the hospital we worked with has ethics. Part of the agreement is he would receive his medication if it worked for free. I’ve seen the price - 100k per year.
We need a better way.
12
I’m all for reigning in drug prices, but one point is rarely made in prescription drug discussions: the R&D drug industry was born and thrives here in the U.S. because there are virtually no price constraints hampering innovation. With price controls, will drug R&D move to other countries?
3
@Karen Reina - Actually Karen many drugs and medical machines were discovered or invented in other countries or in academic situations.
Where were the most prescribed class of drugs, Statins (Lipator, et al), discovered?. In Japan by 3 academics. Where were MRI's invented? In Stony Brook, LI (Paul Lauterbur, hardware) and Nottingham England (Sir Peter Mansfield, software). Both of these people are academics. Where were the market forces?
4
@Karen Reina
Many drugs are discovered by acadmeic grad students for 28k/yr salaries.
That and many of the big companies are actually European.
6
cost per month would be nearly $650 a month were it not for my insurance. The high cost though throws me into the doughnut hole by midyear and I end up paying that amount for the rest of the year. As yet they haven't put us back on the old formulas which required constant daily glucose monitoring and numerous injections daily. I'm old enough to remember when we didn't have the glucose meters and had to check urine with litmus paper which is a major inconvenience when traveling or even during the work and school periods.
I can't help believing that the much lower prices Europeans pay is related to how much more Americans have to pay. There has to be a more equitable way to do this so prices are fairer.
3
As an explanation, this is putting the cart before the horses...
Drug makers have to recoup their R&D somewhere, and it's only the US (and Japan) markets that do that. Were there a global agreement in place to shift some of the cost to other markets I don't think they'd mind, but that's not feasible.
It is true the the US FDA approval process does not look at costs, but insurers do and can refuse to cover certain drugs.
The bottom line is that capping costs will limit new drug development (or will open the market to dangerous ones if the approval process is loosened).
The issue is that we think of cutting-edge miracle drugs (which do cost billions to bring to market) as a basic 'right' yet refuse to pay for them. Why not apply this approach to luxury cars and attack the car companies and government for not providing every citizen with a Ferrari?
2
I won’t die if I don’t have a luxury car. Big difference.
9
@Jennifer The drug companies have no moral obligation to make you healthy or live longer. They operate in a free market society. If you think the government have some moral obligation in regards to health (vaccines, basic health etc) make sure to vote for a government that explicitly taxes everyone to guarantee it.
7
@Reader I take issue with the idea that the drug companies "operate in a free market society". People do not freely choose their illnesses and look for the ones that are lowest cost. Illnesses are not part of a free market.
Also, who funded the human genome project that allows companies to provide 21st century medicines? While the companies do provide the drugs, they benefit from advances that were funded by the public, and the international public at that. While this may not mean they incur a moral obligation, don't you think they incur some societal obligation?
3
As a 90 year old in Britain I take 5 pills a day. When employed I paid National Insurance for all my health needs. Now my only expenses are the cost of getting to my doctor or the chemist. I think that if I was in USA I would belong since dead.
18
@irdac I agree. I had a sister who lived in the states from 1952 to 1960. She had ileitis, a pre-existing condition. She could not get insurance. She moved back to Europe with her husband and her child. She received all the care she needed and lived another 25 years. She would have died, had she stayed here. We need to elect politicians who truly care for the average person, the student, the worker the elderly. Sadly this present administration is all about money and power and vindictive.
25
The price increases coincide with drug companies being allowed to advertise directly to the public. Most drug companies now spend more on ads than on research on new drugs.
So much of the extra money we pay for prescriptions goes directly to ad agencies.
51
@Covert The irony perhaps is that the U.S. and New Zealand are the only two countries in the world that allow prescription drug advertising.
1. The American consumer subsidizes the world-wide pharmaceutical market.
2. The American political system has never been interested in affordability only profitability, as consumers do not fund politicians.
42
While it is true that there are many reasons that drugs are more expensive in the US and the law preventing Medicare and Medicaid from negotiating drug prices, there are at least two "dirty little secrets" that have factored into the disparity between us and the rest of the world since the 1980's. One is that the overwhelming portion of the cost of drug development is charged by drug companies on their corporate tax returns in the United States. As a result, sales in other countries are, to put it simply, considered "add-on" revenues that expand the market in places where the companies determine a higher price would not fly.
A second problem is connected with the increased fracture of the physician population into a myriad of sub-specialties, each of which seeks the "best' and "safest" treatments. By itself, this is not a bad thing. But the often unhealthy relationships between drug companies and practicing physicians has grown exponentially, mostly out of view from the public. Too often, practitioners become "salesmen" for a particular drug over other similar ones and the reasons in many cases are clouded by reasons that are not strictly medical. Specialists are the object of high pressure marketing by drug companies that, as some recent news reports have pointed out, include payments, Board memberships and investment opportunities that, in the final analysis, the American public pays for at the pharmacy counter.
8
I 've read several comments that other countries should pay more for drugs. That will not work because every country negotiates with drug companies individually and it would do nothing to lower drug costs here. All it will ensure is that the drug companies make even more money. The problem, other than greed, is with Congress which refuses to pass legislation the way other countries have. I guess it's still greed since the members of Congress benefit from their refusal either directly or indirectly thru their campaigns. While we're at it we need to look at middle men, pharmacies and hospitals. They are just as guilty of jacking up prices as manufacturers. And we need to stop thinking we can force other countries to do anything. As much as some people like to think so, they are not responsible for solving our problems, we are.
17
@Amy Meyer
We need to have a law that bans companies to pay for campaign advertising. We need to rid ourselves of "citizens united". Campaigns should be paid by tax payers money as it is in most western countries. We could do this by increasing taxes to the super wealthy, instead of letting them find loopholes via expensive tax layers not to pay any taxes. ( see Trump tax returns ).We need to get rid of the electoral college. The billions spend on campaigns, mostly for the GOP to get elected, will make it very difficult to ever pass laws that truly benefit the citizens.
7
Medicare D. Using taxpayer subsidies starting in 2000? Helped pushing up prices.
2
@Tom L - Yeah. At the time I said the Bill starting Medicare Part D should have been called:
"The Welfare for Big Pharma Act."
Gee do you think the rise of modern Conservatism with its 'Greed is good' mantra might've had something to do with it?
23
If the federal government secures the right to negotiate drug prices with pharmaceutical companies the federal government will also have to have the right to walk away from those negotiations if they feel the price or value is not right. Otherwise, the government would have no negotiating leverage. While I am good with that, it does raise issues for people who would (particularly in life and death situations) benefit from a drug that the government does not purchase.
4
@Schneiderman In Canada there are work-arounds for patients that need drugs that are not purchased by the various Provinvial health programmes. The prescribing physicians can & do make special applications to the health programmes or directly to the drug manufacturers themselves.
8
"Something Happened to U.S. Drug Costs in the 1990s
Two decades ago, the costs began rising well beyond that of other nations, and in recent years have shot up again. What can explain it?"
Clue: one word. Five letters. Starts with "G". Ends with "d".
Oh, I know, I know!!!
"Greed"
14
@Jim Brokaw you missed the entire point of the article. The point being that other countries refuse to pay more for drugs. Drug costs in other countries are subsidized by Americans.
Trump talks about how Europeans and others don't pay their fair share for Defense---It is equally true for Drugs! Virtually all the profit that the manufacturers make are from the wallets of Americans yet the rest of the world enjoys the health benefits of US funded R&D.
Trump -- do something to help the middle class and get tough on worldwide drug pricing.
6
@M
A Jama Internal Medicine study of cancer drugs "found each product produced seven times as much revenue as it cost in research and development — and the drugs will yield profits for years to come." Nine out of 10 big pharmaceutical companies spend more on marketing than on research, according to healthcare research firm Global Data. That research costs are the driver of high drug prices is a myth.
26
I buy my brand name antidepressants from a Canadian pharmacy with a 84 day supply costing less than my 30 day Medicare copay and Medicare pays an additional $600 per month. The Medicare donut hole makes it even more expensive. It's all thanks to George Bush and Republicans Medicare drug plan that doesn't allow negotiations with drug companies. We can protect Medicare and lower drug costs by billions by negotiating with the drug companies.
23
@View from the front porch
Medicare will also not pay for compounded drugs. It is willing to pay over $600 a month for a name brand hormone replacement drug but not $60 a month for the same drug produced in the local pharmacy using the same chemicals.
3
@View from the front porch I too have been paying out of pocket to a Canadian pharmacy for a brand name antidepressant. The med costs 4x more in the USA. How ridiculous is our system, and how dangerous for those who do not have the income to sustain their own health.
Speaking of outrageous costs, I know someone on Ibrance (metastasized breast cancer)that cost $11,797 for a 21 day supply(4th week is off drug). Ibrance is a relatively new drug that has good results. Does the research & development bring up these costs so high? Fortunately her health insurance is paying which she carries for her family. What if she gets too sick to keep working? and now has a Pre-existing condition. Keep our protections as is law under the Affordable Care Act. Thanks to Democrats who put this protection into law. Republicans voted over 50 times to get rid of it. John Mcain's 'No' vote saved us, for now.
23
The government should offer to fund a portion of R&D for private companies in exchange for an ownership share in the patent. The government can act as a silent partner and simply collect its share of the profits. Then use those profits to increase Obamacare subsidies.
5
@Daniel
The government has always funded a substantial portion of R&D. Since advertising costs now far exceed research costs, it is hard to assume the costs of research are the problem.
8
As is typical in America, we have talked this issue to death over decades, while Big Pharma continues to buy members of Congress via a system of contributions, conclaves, speakers fees, etc. Meanwhile back at the ranch/farm complacent constituents just keep paying because of our flawless "market system" which in reality isn't that at all. Granted, bringing new drugs to market is neither easy or cheap, but collusion, greed, and generous idiotic rationalizations are in the mix. What does it tell you when we spend so much for the same med than do consumers in other countries. That this is a big shake down while being milked for the last dime? Another example of "American exceptionalism"?
48
@MED In America drugs are purchased by individual consumers on a one off basis. In Ontario, Canada, where I live, the provincial government negotiates prices on behalf of millions on consumers covered under government insurance programs. It is not surprising that negotiated costs for millions of consumers result in drug costs that are significantly less than the prices charged individual US citizens with no leverage.
16
@MED
If it has not been resolved, clearly it needs continued attention.
Personally I think we should restrict drug advertising again.
There was nothing in this article we didn’t already know, however it did not touch on the real reason long time drugs such as insulin have gone through the roof. We watched it also happen with epinephrine and the company that owned the delivery system. Pure greed. Because they can.
34
@ Wende When EpiPens cost so much you had to mortgage your house to buy some they were still 12 euros in France. Americans elect governments that steal money from them, then they do it again.... and again.
1
The thing that the leftists STILL don't understand is that you can't just get "great new medications" without the associated cost. R&D has to come from somewhere and any attempt (wrongly) by the government to "strong arm" Pharma into giving away "the goose that laid the golden egg" is (rightly) going to be met with "Hey, we will just take our toys and go somewhere else. The liberals need to understand that capitalism works that way... .You want cures? you pay for them.
1
@Ruben. Hi Ruben, the question I have is why do Germans, Britain’s Canadians and others get acces to the same “great new medications” at a much lower price than US citizens. I think the simple answer is as follows. In America drugs are purchased by individual consumers on a one off basis. In Ontario, Canada, where I live, the provincial government negotiates prices on behalf of millions on consumers covered under government insurance programs. It is not surprising that negotiated costs for millions of consumers result in drug costs that are significantly less than the prices charged individual US citizens with no leverage.
43
@Ruben Wrong. Research typically is 15% of a big pharma's budget. Sales and marketing is more and is often about 30%. Dividends and stock buybacks also often amount to 30% of budget. Most big pharma companies profit margins approach 50% Profit is their primary objective.
34
@Ruben your comment ignores the differential between the US and other countries. Americans aren’t benefiting more than anyone else in the countries on the graph. The problem is that there’s no cost-benefit done to determine whether the efficacy of the drug is worth the cost in our country. Right-wingers hear “death panels” from snake-oil salespeople and reasonableness turns into “leftists” are destroying our country.
11
"New" doesn't mean expensive.
What means expensive is unregulated monopoly.
21
There maybe umpteen causes for high prices of drugs. But the number one is exponentially rising prices of newer often lifesaving drugs. From there the high prices trickle down.
To me it's high time, as Bernie Sanders has been saying, to brake, even break the patent-system for drugs, especially life-saving ones.
Not many understand and fewer would agree with me that a novel method in the whole patent-system must be devised. I would argue for shorter & shorter duration, far less than the 20-year-window.
The proverbial argument about the high cost of drug-development is more hollow than real. Granted that it's all real for the sake of argument, what the taxpayers could do is pay part or almost the entire cost of that drug development. The argument against is that to bring one drug to the market the company may have to work on 10 or more potential drugs. So the payment needs to be a lot more than for just one drug. Here what can be done is let the company provide the cost for all failed research that led tot a particular drug.
Better still, let all drug-companies provide their annual R&D budget (about half is marketing, which could be eliminated). And let taxpayers pay the entire cost. In the US, that would come around $70 billion annually, if not much less. That is only about 22% of the price paid by US consumers. If no patent-system exists, the cost of drugs would be less than half.
An advantage is that companies could work on orphan drugs with little commercial value.
15
One thing that the author neglected to mention was the human greed is one of the main driver to higher prescription price. As long as patients can afford to pay, pharmaceutical companies will continue to raise the price. This works splendid in our healthcare industry. But in other countries such as India where population are poor, people simply cannot afford and refuse to pay the high price. In such an environment, local companies ignore the patent law and manufacture their own drugs with much lower price, thus forcing our pharmaceutical companies to lower the price to attract Indian population. Until our Medicare program can have the power to negotiate price with pharmaceutical companies, I do not see any hope to see lower price in the future.
3
Having lived in Italy for a number of years, I always found that the drugs were far less expensive than in the USA. Also, many, if not all, were available without a prescription. More recently, there has been an emphasis on a prescription. However, it seems to me that the decision to dispense a drug is often left up to the pharmacist.
I think there is more trust in the individual knowing what they need.
Delivery of drugs in Italy is usually in prepackaged sealed "bubbles" rather than requiring the pharmacist to count out and label a special container.
I've also been very impressed by the pharmacies themselves. Whereas, here in America,the drugs are openly displayed on shelves, in Italy they are contained in a neat wall of white drawers.
I can only assume that the entire process of dispensing drugs is a lot less expensive in Europe.
8
The US is the last, wild, wild west of drug pricing. Industry efforts to maintain unregulated pricing arise from this being the last major market in which companies can charge whatever the market will bear. In the US, drug companies, regulators, and politicians seem comfortable with the notion that excessive prices will result in under-utilization, with consequent poor outcomes - morbidity and mortality.
We hear drug companies whine that high prices are are the cost of drug innovation. Yet the same drugs are half or a tenth the cost in other countries. Does Novartis sell its products at a loss in Switzerland? Or in the EU? I kinda doubt that.
The one area where high prices can be justified is where the drug cost offsets probable avoided costs. The cost of an hepatitis-C drug ($80,000 for a course of treatment) is reasonable, given that a single hospitalization for hep-C will run in to the hundreds of thousands. But for many drugs - many given for a lifetime (e.g. insulin), incremental improvements in the technology do not justify massively increased cost to the patient, who may or may not see any improvement in outcome.
6
You all can thank the Republican Party and Bush II in particular for passing a law that prohibits the Federal Govt., the largest purchaser of drugs in the country (for Medicare and Medicaid),
from negotiating lower drug prices with Big Pharma. The solution? Vote Democratic and agitate for a single-payer insurance system, like the rest of the First World.
21
. There is a direct correlation to the time drug costs started accelerating and TV advertising. I think it's had more impact than your article notes. You can't watch the news anymore without seeing a dozen ads for this and that remedy and of course, it's always the "new and improved" medication that we should run out to our doctors and demand. These are slick and expensive ads.
If President Trump were serious about getting a grip on big pharma costs he'd reinstate the ban on advertising, not require them to state costs. Big pharma has no shame, they'll just pay more for longer ads to state the costs.
Another loophole is the re-branding (hence, re-instating the patent) on medications whose patents have expired. That happened to me with Restasis, drops for dry eye. The patent was set to expire in 2014 but was extended to 2017, and for another three years I could not afford it. Now one company has come out with another pricey eye drop -- Xiidra -- and it's at $600 a month for drops that probably cost about $15 to make. Advertising costs and re-branding loopholes -- these are factors we can control. I hope the new U.S. House will get Trump to consider taking some meaningful action to get drug prices to a reasonable level. What is the point of living in America with all those oh so wonderful medical advances if we can't afford them?
10
That's when ADHD drugs and opioids both really took off.
5
It's the pharma lobby and greed stupid...I am an American living in Greece now...brand name medicine that in the US costs in excess of several hundred dollars I can buy here for couple euros...
we just let pharma get away with any price they name...
14
Doesn't it all come back to the tile money plays in our politics? Big pharma=big $$
5
I have been taking Synthroid for many years, because the generics do not maintain consistent levels of thyroid hormone for me and many others. This is a very old drug, and the prices have been going UP in the last few years.
8
This article doesn't do justice to the disastrous consequences of allowing direct-to-consumer marketing of prescription drugs in the US, which started -- guess when? -- in 1997. The data (graph in the article) show a steep and almost immediate jump in the rate of prescription-drug spending that lasted a full decade.
But don't assume that sky-rocketing drug prices in that decade went right to Big Pharma's bottom line: All that advertising is EXPENSIVE and must be paid for. So America, as you're subjected to endlessly annoying, large-format and prime-time TV advertising by drug companies, understand that YOU'RE paying the bills for those commercials whenever you fill an expensive prescription. Or whenever you pay your prescription-drug insurance premium.
The other countries in the graph? Direct-to-consumer marketing of prescription drugs is illegal in ALL of them.
37
We should wonder just how many Americans skip or cut their medication because of cost. How many Americans avoid a doctor because of the cost? America, the only nation where you can go broke from medical care.
16
What happened? Pretty obvious to me. Under the 2003 pharmaceutical bill under the Bush administration and promoted by the Republicans and largely written by the drug companies themselves, the government cannot negotiate the price of drugs with the pharmaceutical companies. Wouldn't you like that in your business if your biggest customer couldn't negotiate what you are charging him?
14
In New Zealand we cap at $200 a year per family. Now plenty will argue it is subsidised by taxpayers, but for those who aren't permanent residents or citizens, they have to cover the entire cost. Before I became a permanent resident (and then a citizen) my costs for US drugs in New Zealand were 1/9th the cost and then with subsidy they dropped again to 1/20th the cost for the exact same medication made by US drug companies.
The reason is all drugs are negotiated with a single central organisation called Pharmac here in New Zealand and the second reason is we don't allow drug advertisements, and we don't have a lawsuit culture. All personal injuries go through ACC. These simple measures and the lack of them in the US is why the costs are through the roof in the US.
I couldn't afford to live in the US and my health statistically speaking is at greater risk in the US than here in New Zealand.
22
There is no question that many drug prices in the USA are scandalously high. Anyone who travels or has family and friends who live in other countries know first-hand that, although high quality medical treatment may be available, something is awry in the US market.
There are several causes for this reality, beginning with our population's overall "health and fitness habits" or lack thereof. The general population's overall lack of understanding of (or will to learn) nutrition and fitness is appalling.
The drug industry is corrupt, and one only has to study the origin of the opioid market to understand the extent greed creates a self-perpetuating crisis.
The healthcare professionals, in general, are not the source of the problem, although they may benefit from the status quo. Many of them have international connections and they are well aware of the differences in the cost and distribution of healthcare services. On the other hand, they may be inclined not to "rock the boat".
2
In a comment which is a reply to another comment, Dawn Moore says that advertising accounts for 40% of a drug's price. Since there is no consumer-end advertising for drugs in EU countries, that would explain why US prices are about 40% higher.
Is it really that simple??!?
1
@abo
No.
1
@abo - It's a bit more complicated. It's marketing in general. Besides Ads, it's the "pushers" that infest doctors offices. It's the payments to physicians for fake conferences at fancy resorts, etc. Also since the companies lump admin with marketing, it's the obscene compensation paid to executives.
The figures I have seen say Marketing and admin are about 35% of a drug companies budget
Look up the work of Alan Sager of BU.
3
@Len. Marketing costs in other countries must be less than 5% of the total cost. So the spread between the US and other countries in marketing cost must be at least 30% of the American drug price. If this is true, marketing would explain the lion's share of the difference in prices between the US and other countries.
If that's not right, could you please give a ballpark figure with the correct calculation?
No discussion about the rise of 'Pharmacy Benefit Managers' in the 1990s > 2000s...? or their earnings from manufacturer's rebates in exchange for formulary access?
13
I pay almost twice as much for levothyroxine, a synthetic thyroid medication, as I paid only two years ago. This drug has been on the market for a long time and I buy it in generic form. It is totally unclear to me why this drug is suddenly much more expensive.
In addition, not allowing Medicare to negotiate drug costs is hurting our country. With baby boomers retiring now, this will only get worse over the next decade unless Medicare is allowed to negotiate prices.
23
GREED is truly the most terrible challenge of our times, and capitalism is its tool, its means to power and more greed.
Greed is a (contagious) mental illness, an unfillable hole, a hunger that denies justice, a brutal expression of broken egos.
Greed is having a million times as much as the poor and still feeling you don't have enough.
Greed consumes the earth without respite, and is a cancer on humanity.
Greed destroys us and our children and their future.
Greed is death.
21
Thank you, William. Well said. If only more folks in this country would take it to heart!
1
@William Greed is one explanation for the behavior of US pharma, but it misses the point. Every corporation is "greedy" in the sense that it attempts to set prices at a profit maximizing level. Those who don't are quickly starved of the capital that goes to those who do. In many industries market competition is sufficient to deter price gouging; but for a variety of reasons not in pharma. So, as every nation except the US has learned, prescription drug prices need regulatory restraint that pure market forces simply cannot provide.
5
@Peter Nicholson -- not every "greedy" company in every industry has: limited competition, deep moats enforced by government regulation, price-unaware consumers driving market choice decisions, and products that enforce a lifelong dependency or death ('take the meds, or die...'). Big Pharma has all those special factors different than the traditional "capitalist free market" conditions that other "greedy" corporations face. Big Pharma needs close and careful regulation to insure that it does not abuse its special market powers. At present, Big Pharma has used these extraordinary factors to achieve excess profits, above those a true free-market condition would produce, due to the absence of those conditions. What other "greedy" corporation has laws preventing the government from bargaining with it for its products? More regulations, and better market competition, are clearly needed.
4
I read once that the biggest factor in drug cost is because the companies spend more money advertising the drug than they do developing it. If this is even close to being true, we have an obvious solution.
We can also end the Bush Drug Payoff to Big Pharma, and let Medicare and Medicaid use their buying power to bargain for prices. The Republicans now prohibit competition.
33
Easy to explain. Unmitigated greed on the part of the drug companies, combined with no bargaining by government. Its like taking candy from a baby.
I have to scratch my head when I hear the big pharma executives appear on financial shows, such as CNBC. They explain that they charge based on the "value" of the drug to a patient.
That sounds like a kidnapper or extortionist demanding a ransom of someone, based on what the shakedown victim is desperately willing to pay to not have the hostage person or property killed or destroyed.
And since setting a price based on a market value means that the price should not be set so low that 100% of the public is willing to pay, I guess some of us whose lives are mostly behind us should cut our losses, and instead of the life saving drug therapy, opt instead for low cost palliative care.
The idea of setting USA prices at the average of what these drug extortionists are willing to accept in other first world countries on a negotiated basis is an idea whose time has come.
65
@RM Every company, charity and government office is an example of unmitigated greed. What distinguishes this particular case is they have an unlimited funding source, the federal treasury without limitation. What would you do? Price for a monopoly good has nothing to do with cost, and everything to do with the quantity of money in the customer's pocket.
1
One possible contributor to the relative high cost of drugs not mentioned - advertising. Pharma even leaves the telephone companies and GEICO in the dust. Traveling overseas and catching some television, I don’t remember the onslaught of Pharma advertisements that provide white water river rafting opportunities, dual bathtub intimate moments, or solutions to problems I hadn’t known I had. Thanks for that.
16
The free-market approach to healthcare in the United States is immoral and often unethical. Individuals who need drug saving medications and surgery must crunch numbers before deciding to go to the hospital. People are bankrupt after life-saving interventions. Healthcare needs to be treated as a public good, if not a human right. For-profit hospitals and pharmaceuticals are indirectly killing people everyday as those ill cannot afford treatments -- and that's on all of us.
39
@Libelinha
I agree, with one caveat.
The giant "elephant in the room" (one of several) is that people need to take better care of their OWN health. They claim, "I try to lose weight, but I can't." But you look in their shopping carts and see the JUNK they buy to ingest instead of actual food. When they become 30, 50 and 100 pounds overweight, they feel so "unlucky" to develop Type II diabetes and heart disease.
Learn to cook, People--and maybe to grow a few of your own vegetables. Stop drinking soda (including diet soda). Band together with your neighbors to insist that your local markets offer real food--stop eating processed junk. And stop sitting; start moving.
Maybe lower demand would also help lower drug costs...
2
@MRM Blaming the victim is not an appropriate form of healthcare. If healthcare is a human right, which you agree that it is, then scrutinizing someone's weight or diet to determine if they're worthy of care is immoral and unethical.
Further, these "lifestyle" diseases you refer to aren't the only concern. Many people are born with congenital disorders, either developmental or genetic, through no fault of anyone. Many develop cancer, even as young children. Diseases such as Type 1 diabetes, cystic fibrosis, juvenile rheumatoid arthritis, and sickle cell anemia strike children, and are not brought on by junk food or inactivity.
We've seen recently that lower demand doesn't lower drug cost...it's an incentive for greedy CEOs to raise the cost of orphan drugs by a thousand-fold. We need legislation to prevent that. Life is hard enough for people with orphan diseases without having the one drug that can treat your disease suddenly increase in price to the point of ridiculousness.
If Medicare could negotiate price with the pharma companies, it would lower the cost for all of us, even those without Medicare. It would force other drug plans to lower their costs.
3
The explanation is simple and readily apparent to those from countries with universal healthcare: pure capitalism and healthcare don’t mix. The free market either will not provide or will not provide at an acceptable price. The outcome is that Americans either miss out or pay way over the odds. It’s crazy.
49
@Andrew
Spot on Andrew... free market capitalism is amoral, it only cares about profit. Intelligent regulation is needed and ,sadly, we can not seem find common ground on anything these days.
1
At least we here in The Land of The Free (old white men) have the right to overpay for medications in support of Big Pharma execs, unlike those socialist Euro nanny states that focus on their citizens' welfare. /s
77
@Miss Anne Thrope
I agree. It's wonderful how we're free to starve, free to die of being unable to afford medication or surgery, free to have slurs hurled at us and hateful messages scrawled all over, and free to be shot by any neighbor or police officer who gets annoyed at us. Unlike countries like Denmark or Norway, which have all that restrictive "providing people with necessities" and "laws against hate speech", and "highest happiness in the world". Aren't those terrible things?! /sarcasm
1
This article's subheading contains 25 words: "Two decades ago, the costs began rising well beyond that of other nations, and in recent years have shot up again. What can explain it?". The article itself should have consisted of just one word: "Greed".
So long as we have a healthcare system based on extortion, the situation will only get worse. This apples not only to pharma, but equally to the completely unnecessary layer of insurance companies standing between us and our doctors.
15
I was a biostatistician for medical research studies at Stanford in the 80's. That was when Congress cut the budget for the NIH and other government programs that funded R&D at American Universities.
Grant money dried up. Grant money was used for restricted trials in hopes of getting a future grant that would afford a proper trial. It was "depressing" to do research when all your time and effort was spent chasing grant money. i left, as did others.
MD-PhDs moved on to private companies to continue their careers. The cost of basic research more than doubled when done by for profit business.
This is why the cost curve climbs steeply for the US after 1980.
95
@OSS Architect
Yeah, you borrow too much, you either cut spending or become Venezuela.
Democrats lost that argument. They're starting to sound like JFK did -- cut capital gain taxes.
@Urko You could always raise taxes on the 1% or better yet tax capital the same as income.
5
Uh, maybe the U.S. law preventing Medicare from negotiating for lower drug prices, a $100 million lobbying effort from the industry that has returned $15 billion a year in higher drug prices? I pay $5 or less in Latin America and Asia, and $10 in Europe, for the same ashtma inhalator that costs $100 or more in the U.S. Europe and many other places negotiate collectively for better drug prices for their citizens. The U.S. allows drug companies to turn American health woes into a growth industry.
169
@Anne-Marie O'Connor. Amen, Ms. O'Connor. A couple years ago while on vacation in Paris, I suffered a crippling asthma attack and had no doctor and no prescription to obtain an albuteral inhaler. Luckily, I went to a pharmacy and was able to buy one off the shelf for about $7, no prescription needed. Not only is the price much higher in the US, it takes at least a day, maybe more, to get the doctor to call in a prescription.
27
@Anne-Marie O'Connor
Yes, and President Trump have told Europe, it is time they pay their fair share of global pharm costs, and the USA to pay less.
Thank you, President Trump.
@Anne-Marie O'Connor, while CMS doesn't negotiate drug prices, insurers definitely do. Problem is, they often pocket the discounts they receive.
3
What fraction of those drug costs were for viagra?
11
It seems that when generics do come on the market, they're not that much cheaper than the brand-name drugs. The price of the generic seems to be tied to the price of the original drug, rather than the actual cost of making it.
18
@Joanne S
The price of any good is based on the willingness of buyers to meet an asked price. This can be determined in auction or by display against competitive goods.
Prices can be negative if the seller faces transportation costs to a dump for a worthless good.
@5barris
In this case, the demand for the good (in this case, a prescription drug), is what economists would term 'inelastic', meaning that demand is not sensitive to fluctuations in price. Part of the problem with drug pricing is that most demand in this market is inelastic.
1
Best solution to this problem? Quit taking drugs. I take Motin. That's it. Nothing else. Exercise, eat correctly, keep your weigh down. It's wonderful how that works. My drug spending? Zero.
1
@Anita How nice for you. What about those with chronic conditions brought about through no fault of their own?
53
I believe as you do - exercise, eat right. Then one day, blindsided by cancer. Surgery, chemo, radiation, prescription. Although the drug has been around for ages, $400+ per month. Thank goodness I have insurance and am out of pocket only for my copay. This woke me up as to how fast all that is wonderful can be sidelined and then you're saddled with an expensive prescription. God help those without adequate insurance.
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@Anita - your compassion for others is zero too. Try saying what you did to a cancer patient, or a patient born with an illness that has to be treated constantly with drugs.
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The market system may be great for those seeking to buy new cars or toilet paper, but is it really the best for those who need life saving drugs?
If the answer is no, you have a good reason for seeking laws that regulate drug prices. Yes, we need government regulations to keep you healthy.
Democrats understand this. Do the Republicans? One way to make America great again is to have a country where drugs are affordable.
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@MTA Republicans understand it too. They just don’t care.
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What is the curve of price against direct to consumer advertising?
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@Marc BINGO! Advertising is 40% of the cost of drugs last time I checked. New Zealand is the only other country in the world that allows drug advertising.
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@Marc
Historically, ethical pharmaceutical company budgets are divided into four equal parts:
1) production
2) research
3) marketing
4) administration
@5barris I wonder what percentage of their budgets is allocated for advertising?
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Austin, I can sort of summarize your report in one sentence.
The cause of outrageous drug prices in this country as opposed to our peer countries is our de facto criminal health/drug care system.
Period.
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Because they can. Because the Congress let them.
That would be, mostly, the GOP, but not exclusively.
12
"The arrival of expensive specialty drugs for hepatitis C, cystic fibrosis and other conditions fueled spending growth. "
A distinction needs to be made for drugs, although expensive, are far better than the standard of care and those that are not. Before drugs for the treatment of Hep C were available, the option was a liver transplant, or die of liver cancer or cirrhosis. There is sticker shock, but there is value in regard to cost and quality of life.
It is noted that the cost of statins were high when they came to market, but now the generics are pennies per day. The cost of developing the drugs has to be covered, but after a period of time there is a broad health benefit at a low cost, e.g., as compared to the cost of a major cardiac event.
Increasing prices of old drugs by limiting who can manufacture or distribute off patent drugs needs to stop.
There are new and expensive drugs that provide value. We need to let physicians decide which patients need those drugs. We need to end direct to consumer advertising.
Investors will only invest if there is a reason to invest. Setting US prices based on international benchmarks will result in fewer choices and more decisions about your health being made by the government rather than a physician.
3
The FDA is approving new drugs at a higher rate. New drugs have the potential to make very high profits. However, they also have the potential to be harmful even after going through the FDA process. So, often the introduction of a new drug is highly profitable until it is found to be harmful and then the company will settle lawsuits. It is essentially that the companies are gambling the health of people for high profits. Thus the companies may not be any more profitable overall because of the eventual failures of the new drugs, but they are willing to take that chance. Additionally, the profits of some pharma companies are high, which drives the average costs up.
4
I don't suppose the addition of Medicare Part D had anything to do with this, did it? Medical insurance coverage is by far the biggest driver of all health care spending.
3
I was on Symbicort for years after Adult asthma onset. Seeing it made no difference, I tapered off to the turn of a $1500 med to taper off? I never went back to that doctor. I use albuterol in a nebulizer each morning. Not Inhalator that costs a fortune, but a nebulizer. $50 and lasts forever and three cents a treatment each morning.
Last year and this year I've spent $60 for prescription meds. A bit more this year as I had to have a $3 antibiotic before surgery.
I'm 74 and have eschewed appliances which means I work and work and exercise and exercise.
10
@Eva Not every asthma patient can do this. I react terribly to albuterol. In addition, albuterol only expands the bronchial tubes, while Symbicort, usually used for COPD, addresses inflammation in the lungs. I'm glad your drug bill is low, but some of us have more health problems and therefore higher bills.
3
One thing that is not explained by this article is the dramatic increase in the price of generics over the past decade. As a physician, I see first hand this increase. Certain items that I used to see in my practice, such as doxycycline, that a decade ago would sell a 100 pills for $10, now go for several hundred dollars. Something has changed for the worse when it comes to generics and no one seems to understand why.
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@Steven Caplan
Also, I have noticed that when generic drugs are first introduced, they're not much cheaper than the brand-name. The price seems to be tied to the price of the brand-name drug, rather than the actual cost of producing the generic.
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@Steven Caplan
Greed and fear that the gravy train will end with single payer.
Remember, greed is a mental illness.
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@William Greed is human. The solution for the civilized society is to tax the living tweedle out of the rich. Better corporate behavior guaranteed. See Picketty's "Capital in the Twenty-First Century".
4