Price Gouging

One simple action by the United States Congress could lower the cost of health care for millions of Americans and take a major step toward returning one of the nation’s largest entitlement programs to solvency. All Congress need do is enact legislation allowing Medicare to negotiate drug prices with pharmaceutical companies, as is done in every other developed nation in the world.

Since 2000, American spending on drugs has more than doubled – from $121.2 billion to $271.1 billion in 2013, the most recent year for which data are available. And the exorbitant drug prices charged here in America is a big reason why. Examples abound. Sovaldi got plenty of attention when it came on the market in 2012 as the only drug that cures Hepatitis C – at a cost of $1,000 a pill. That’s $84,000 for the entire three-month course of treatment. One of the most egregious examples of price gouging occurred about a month ago when Turing Pharmaceuticals acquired the drug Daraprim from another drug maker and promptly upped the price 5,500 percent – from $13.50 to $750 per tablet – to treat a parasitic infection called toxoplasmosis. It did so because it can., an online news site, reported that shortly after the Daraprim news hit the front page of The New York Times, another company, Rodelis Therapeutics, scrapped its plan to boost the price of a generic tuberculosis drug from $500 to $10,800. And in response to public outrage, Turing owner Martin Shkreli has now said he will cut the new price of Daraprim, although he has not said when or how much.

Governments in Europe, Canada and other developed nations take a practical approach to setting drug prices, acknowledging that if consumers can’t afford some products, they’re very likely to face premature death. Those governments attempt to balance a drug company’s quest for profit with the public interest in making a useful drug available and affordable. In America, we let drug makers set their own prices with no consideration of what it costs to make the medication. Medicare, the nation’s largest insurance plan, with 49 million seniors enrolled, is barred by law even from attempting to negotiate better prices with drug makers. Once the pharmaceutical company sets its price, Medicare is required to accept it.

Pharmaceutical companies will argue that their profit margins – the highest in the five main industrial sectors – are needed to fund research and development. But with margins averaging around 30 percent and running as high as 42 percent (Pfizer, in 2013), it’s blatantly obvious that they could earn a smaller profit with sufficient funding still available for R&D.

The consumer who needs a particular drug to fight an illness – perhaps to survive – has no leverage in buying that product. There is no alternative. And the drug makers know it. Profit rules, no matter the human cost.

President Barack Obama sought to include the idea of Medicare negotiating prices in his Affordable Care Act, but the powerful pharmaceutical industry objected. Members of the Republican majority in Congress have shown little interest in revisiting the idea.

Perhaps the time is right for making drug pricing a spotlight issue in the 2016 presidential election.


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