Greed and Pharma: What is Behind the Rise in Prescription Drug Prices?



This blog was originally authored by me and published on and @BoldGlobalNews on Tuesday August 30, 2016 and is reposted here today…

Recently we have all heard about the significant price hike of the Epi Pen made by Mylan pharmaceuticals. While Mylan and CEO Heather Bresch are dominating the headlines now, other drugs are also increasing in cost. While we see a 500% increase in the cost of the Epi Pen, Ms Bresch has seen a nearly 700% increase in salary over the last few years. Mylan is definitely not alone in its greed. Last year the CEO of Turing, Martin Shkreli increased the price of an important (and relatively cheap) drug in the treatment of HIV related illness nearly 5000 percent. Price gouging is not limited to newly developed drugs–even the price of insulin has gone up nearly 300 percent. Healthcare reform has provided more Americans with access to insurance but many still cannot afford the drugs and care that they need.

So exactly why is this occurring and what can we, as healthcare consumers, do?

A new study published in the Journal of the American Medical Association this past week has shown that the average price of a drug has increased by nearly 165% in the last seven years. Buy why? Harvard researchers postulate that the most likely reason for inflated prices is the fact that government regulation allows for drug makers to have exclusivity and near monopolies over certain drugs.   Drug makers are able to do this because Medicare and Medicaid are not allowed to negotiate prices. Even though 1 in 3 Americans are insured by these two entities, federal law allows drug makers to charge (and Medicare and Medicaid) to pay whatever is asked. There is no negotiation. No other business in the world operates in this manner. If they did, they would not exist for long. Almost every other developed nation allows (and requires) their government- sponsored health care programs to negotiate drug prices as they would any other contract for goods and services. In the US we spend more money per person as a percentage of GDP than any other country in the world. Many drugs and procedures cost much more here than abroad.

The bottom line is that Americans pay more because their ability to push back is limited by an inept government and poorly organized government sponsored healthcare programs. In addition There is little or no transparency in pharma—drug makers pay each other to delay generic production and re-file for patent protection when the end of their exclusivity comes to an end—often using “new indications” as a way to continue to avoid generic competition. In addition, the pharmaceutical lobby is quite powerful and often works to stall any meaningful legislative reform in Congress.

The Pharma Response: What about Research and Development Dollars?

 When pushed, pharmaceutical companies will claim that the prices are necessary in order to fund research and development of new drugs. However, the United States seems to fund most of the R and D that happens throughout the world. In addition, many scientific breakthroughs occur at academic institutions where much of the research is funded through government dollars in the form of National Institute of Health (NIH) grants. In fact nearly half of the most important drugs that have been developed in the last 25 years have been created through publicly funded research in academic institutions. In reality, pharmaceutical companies on average reinvest only around 20% of their profits into R and D—the rest lines the pockets of their C level executives. In the case of Mylan, the technology that is utilized to create the injector of the Epi Pen was developed by the US military in 1970 when it was created in order to inject Atropine into battlefield soldiers during a chemical attack. Mylan simply acquired the technology from another player in the market.

So What Next?

The Epi Pen controversy should serve as a wake up call to us all. Over the last 10 years, the number of children with serious allergies has risen nearly 50%. Many of these children will have a dangerous life threatening reaction known as anaphylaxis and the Epi Pen may be the difference between life and death. All children should have access to these drugs—not just those whose parents have the means to provide them at an inflated cost. As healthcare consumers we must demand that our lawmakers act to prevent the greedy and despicable acts of CEOs such as Bresch, . Shkreli and others. Both Presidential candidates have vowed to allow Medicare and Medicaid to negotiate drug prices. Both have also suggested free trade of pharmaceuticals with Canada and other foreign suppliers. In addition, we must also work to reform the FDA and its expensive, tedious and incredibly lengthy regulatory process for drug approval. The answer to inflated drug prices is simple—competition and free market—we must abolish long-standing policies that allow for exclusivity and patent protection for pharma. We must promote the development of cheaper generic alternatives earlier in the life a of new drug or therapy. While name brand drugs only account for 10 percent of prescriptions in the US today, they account for nearly 75% of the cost. Something must be done in order to protect the healthcare consumer—the Patients that depend on drugs every single day—should have the ability to receive therapy without entering bankruptcy.

Mylan Follow up…

Mylan, in and effort to respond to the public outcry has reacted by developing a new patient assistance program—this too still falls far short. Those who can pay are still paying exorbitant prices. Today, Mylan has announced plans to make a generic version—albeit at a price of 300 Dollars. (remember their cost is approximately 6 dollars per unit)   While these concessions are certainly helpful they do not address the bigger issues—increasing deductibles and skyrocketing health insurance costs will not be able to continue to pay these types of inflated prices. Ultimately, the patient will suffer.





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