Food, Drugs, or Lights?

“It is unacceptable that Americans pay vastly more than people in other countries for the exact same drugs, often made in the exact same place. This is wrong, unfair, and together we can stop it. And we will stop it fast.”

“I am asking the Congress to pass legislation that finally takes on the problem of global freeloading and delivers fairness and price transparency for American patients. Finally.”

These are the words spoken by President Trump during his recent State of the Union address. While many listeners perhaps heard familiar rhetoric and political promise, the high cost of medicine threatens the stability of American families daily. This instability is especially pervasive in the senior population. In 2019 a congressional report called “Manufactured Crisis: How devastating drug price increases are harming America’s seniors,” said the extreme price hikes show the need for further investigation to determine the “impact on healthcare system costs and financial burdens for the growing U.S. senior population.”

The report found increased prices of more than 10% for every brand name drug of the top 20 most prescribed brand named drugs for seniors every year in the last five years. This rate of increase is approximately ten times higher than the average annual rate of inflation.

Twelve out of the 20 most commonly prescribed brand-name drugs for seniors had their prices increased by over 50 percent in the five-year period. Six of the 20 had prices increases of over 100 percent. In one case, the weighted average wholesale acquisition cost for a single drug increased by 477 percent over a five-year period. 

Total sales revenue resulting from these prescriptions increased by almost $8.5 billion during the same period.

According to the Organisation for Economic

Co-operation and Development, Americans spend more on prescription drugs — average costs are about $1,200 per person per year — than anyone else in the world. Private insurers and government programs pay the largest portion of the costs, but high drug costs are ultimately passed on to the public through premiums and taxes. Costs are spiraling so out of control that the Justice Department is investigating possible price collusion by more than a dozen companies that make generic drugs. What started as an antitrust lawsuit brought by states over just two drugs in 2016 has exploded into an investigation of alleged price-fixing involving at least 16 companies and 300 drugs. The issue at hand is whether some executives worked together to raise prices violating anti-trust laws. But executives working together to plan simultaneous price hikes are not the sole source of outrageous drug prices. 

In return for researching and developing new pharmaceuticals, the companies that develop them are awarded to contracts of exclusivity. This means that only that particular company can sell the drug – for a small molecule drug, a period of exclusivity is five years. For an orphan drug for a small population, the period of exclusivity is seven years. For drugs intended for a larger population it’s 12 years. During that period of exclusivity, no other company can sell a drug of similar make up for to treat the same illness or symptoms. This benefit is supposed to stimulate and protect investment in pharmaceutical research and development. However, according to a professor of health policy and management at Johns Hopkins University less than 20% of total spending in drug companies is used for R&D. 

Rising drug prices affect all Americans. It burdens the uninsured or underinsured patients, patients with high-deductible plans, those in the deductible or doughnut hole phase of their plans, the government as a payer, and everyone in the form of higher premiums. While individuals, companies and political action committees (PACs) associated with the pharmaceutical industry contribute tens of millions of dollars to candidates on both sides of the aisle each election cycle, we need those elected to still develop policies that encourage innovation and the development of new drugs while protecting consumers and families’ right to life, liberty, and the pursuit of happiness.