The Problem With “Big Pharma”
Tags: Healthcare, Big Pharma, Public Health, Pharmaceutical, Affordable Care Act

Despite the United States boasting the world’s most expensive, technologically advanced, and sub-specialized health care system in the world, we continue to lag behind any other high-income nation in most measurable health outcomes (Ellner & Phillips, 2017). The rising costs of prescription drugs is a key contributor to the seemingly infinite inflation of healthcare costs. Between 2013 and 2015 net spending on prescription medications increased 20% and prescription medications now comprise 17% of total health care costs (Kesselheim et al. 2016). The pharmaceutical industry has played a major role in this phenomenon via increasing prices. For example, Novartis raised annual costs of a leukemia treatment from $31,930 to $118,000 over the course of 10 years. Gilead Sciences is another perpetrator as they set prices of Solvadi at $1,000 per pill, which now accounts for 64% of Hepatitis C spending in the US alone. One last abhorrent example occurred when Turing Pharmaceuticals obtained distribution rights to 60-year-old medication, Daraprim, and subsequently inflated prices from $13.50 to $750 per pill overnight (Gronde et al. 2017).

This heinous price gauging, although inherently wrong, is perfectly legal by virtue of the privatized US health care system and the political power of the pharmaceutical industry. In 2013 US per capita spending on prescription drugs was $858 compared with an average of $400 seen in 19 other advanced industrialized nations (Kesselheim et al. 2016). In other industrialized countries a governing body negotiates drug prices or rejects prices that are not cost effective, whereas US drug manufacturers are entitled to set their own prices (Kesselheim et al. 2016). In theory, competition of the free market will drive down prices and promote innovation, however the pharmaceutical industry is savvy to this and has strategically curtailed competition. Upon FDA approval of a novel small-molecule drug, a 5–7 period in which generic drugs cannot be sold is automatically guaranteed; new biological drugs receive a 12-year period (Kesselheim et al. 2016). Furthermore, intellectual property patents of a new molecule can be granted an exclusivity period up to 20 years, although the median length for post-approval market exclusivity is 12.5 years (Kesselheim et al. 2016). During this exclusivity period pharmaceutical companies can set prices at any arbitrary number as competition, aside from treatment alternatives, is non-existent (Kesselheim et al. 2016).

Innovative health policies including the ACA and the Medicare Drug Benefit Plan have provided extended drug coverage for most Americans, however cost-containment strategies have shifted drug coverage costs onto patients. Private insurers initiated this shift by increasing deductibles, copays, and adding an additional tier of payment for specialty drugs (Kesselheim et al. 2016). A survey of over 4,000 Americans taking prescription medications for 1 of 5 chronic diseases showed the pressing consequences of this price gauging as 31% reported either cutting back on necessities, increasing debt, or underusing medications (Heisler et al. 2004). Among the 18% of patients who underused their medications, 67% also had to increase debt or cut back on necessities, furthering health disparities among at risk groups.

Under current laws pharmaceutical companies are able to set prices independent of production costs and raise them arbitrarily when protected by market exclusivity granted by the FDA and US Patent and Trademark Office (Kesselheim et al. 2016). Unlike free market for most commercial goods, the pharmaceutical market has been distorted by the government’s research funding, granting market exclusivity, enforcement of strict product requirements and standards, and acting as the ultimate purchaser for large segments of the population (National Academy of Sciences, Engineering, and Medicine, 2017). These government-granted monopolies have left the American people subject to tyranny by the pharmaceutical industry and unable to afford lifesaving medications, exacerbating health disparities for many at risk groups.

References

Ellner, A. L., & Phillips, R. S. (2017). The Coming Primary Care Revolution. Journal of General Internal Medicine, 32(4), 380–386. doi: 10.1007/s11606–016–3944–3

Gronde, T. V. D., Groot, C. A. U.-D., & Pieters, T. (2017). Addressing the challenge of high-priced prescription drugs in the era of precision medicine: A systematic review of drug life cycles, therapeutic drug markets and regulatory frameworks. Plos One, 12(8). doi: 10.1371/journal.pone.0182613

Heisler, M., Wagner, T. H., & Piette, J. D. (2005). Patient Strategies to Cope with High Prescription Medication Costs: Who is Cutting Back on Necessities, Increasing Debt, or Underusing Medications? Journal of Behavioral Medicine, 28(1), 43–51. doi: 10.1007/s10865–005–2562-z

Kesselheim, A. S., Avorn, J., & Sarpatwari, A. (2016, August 23). The High Cost of Prescription Drugs in the United States. Retrieved from https://jamanetwork.com/journals/jama/fullarticle/2545691

National Academy of Sciences, Engineering & Medicine. (2017, November 30). The Affordability Conundrum. Retrieved from https://www.ncbi.nlm.nih.gov/books/NBK493099/