Medication has become an integral part of the American lifestyle. As I was growing up, I have seen many members of my family take prescriptions and this is not an uncommon occurrence. “Nearly half of all Americans over the age of 12 have a prescription to one or more medication” (Harris). And prescriptions may take a toll on your wallet as the average American spends an average of $1,112 on prescription drugs yearly (Coco). This brings one thing to question, why are these drugs so expensive in the United States and how did it come to be that way? Although many people associate high prescription drug prices to research and development costs and the supply chain; however pharmaceutical companies take advantage of loopholes and public perceptions in order to inflate their pricing.
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The most obvious attribution to the high price of drugs is the research and development that goes behind each one. Although many people know that drugs are expensive to produce, few actually understand the numbers and where they come from. Drugs take a lot of time and energy as well as resources to develop, test, and approve them. It is estimated that the development cost of a new drug is around 2.6 billion dollars (DiMasi). However, that investment does not guarantee the success of the medication. The approval rate of developing a drug is only around twelve percent and if a drug is approved, an additional cost of around 312 million dollars is used for further testing and optimization of the approved drug (DiMasi). You can see that the expenses that Pharmaceutical companies have can pile up pretty fast. And afterward, the fully developed drug still has to pass through the supply chain before it can reach the consumers. The supply chain for prescription drugs acts in a similar way to other products. The consumer purchases the drug from a pharmacy which bought it from a distributor who received it from a manufacturer. And at each step, the cost of the medication will increase.
From this data, the huge cost of new prescription medication seems certainly justified. If they won the development lottery, they should be able to collect the rewards. But this should only be the case for the newly developed drugs since unlike the lottery many people depend on these types of medications in order to live. The drug company that creates the drug can file for a patent and basically monopolize the production, output, and price of the medication for the duration of the patent which is around 20 years (Drug Patent Life). This power allows them to recuperate from the losses of the failed medications and give them the opportunity to gain massive profit. Drug companies are given the opportunity to fully recover from their losses, and they fully take advantage of this.
Some people may argue that the price of medication in the United States is reasonable in comparison to other countries. While it may be true that medicine is more affordable in the United States than countries like Brazil, Chile, and Mexico when you adjust the prices with the income of the countries, however, when you compare the United States pricing with those from similarly affluent countries such as Australia, Canada, France, Germany, Italy, Japan, Spain, and the United Kingdom, the United States claims the highest prices (Machado 49). It makes sense that less developed countries will have less affordable drug prices because the income of their citizens and their medical programs will not be as refined as in other countries. But the high costs of U.S. medications seem to stand out. What causes drug prices in the United States to be the highest with respect to their peers? One of these reasons lies in the laws that govern drug pricing in the United States.
Drug prices are also dependent on the laws that are affecting them. There exist obvious antitrust laws that prevent a company from monopolizing certain products or industries. However, these laws contain an ambiguous consumer welfare clause which allows corporations to take advantage of its loopholes (Marciarille 45). The loosely written clause could, in theory, be interpreted and used to reduce consumer savings in favor of more research and development because the production of new drugs would technically benefit the consumer. This has generated many conflicts between public health and pharmaceutical circles. It becomes fair competition laws versus public health laws where the fair competition side does not understand the consumer welfare definition while the public health side does not truly understand the complex nature of pharmaceutical drug acquisition (Marciarille 45-46). It is exactly this lack of understanding that causes many issues with the pricing of drugs. Because they do not understand each other’s position, this could lead to a stalemate. In order to understand why this debate is so difficult, one must analyze how pharmaceutical acquisition works in the United States.
One of the reasons why the nature of pharmaceutical acquisition is so complicated is because of the overlapping health care systems in the United States. There exist many different health care systems and each one of them are directed and focused towards different populations who have different needs. For example, the Medicaid and Medicare system in the United States usually involves the lower income populations and gives them favorable pricing to compensate for their lower income (Parvat). On the surface, the law seems to only contain benefits for the people that it covers. However, the interaction between Medicaid, Medicare, and the pharmaceutical industry is not clear cut. There lies ambiguity in the different types of treatments that it covers as well as the notion that direct price negotiation for drugs is not consistent in the Medicare Program (Marciarille 46). This is dangerous because individuals participating in the program may be on fixed incomes but their health conditions may not be. And the changing prices may place them in a position in which they may not be able to afford new medication or ones that they had previously. It puts the lower income population at the mercy of the market which can lead way to exploitation. One example of this happening is Daraprim. Turing Pharmaceuticals had jacked up the prices of this decade-old, sole source drug for toxoplasmosis by 5,000% (Marciarille 47). Since this was the “sole source” drug, the pricing could not be competed against and it left many who did not have sufficient insurance to be left without it. This is obviously a step too far. In this case, the so-called “fair competition” side is just taking advantage of the loosely worded laws surrounding drug pricing; they are preying upon patients who have no other options. They were taking a drug whose patent that was about to expire and milking as much as they could have from it. And this is far from being the first time that something like this had happened. A reason why these incidents continue to occur is that some pharmaceutical companies that believe that buying patents from other companies is a better investment than developing their own. These types of situations completely devalue the whole concept of benefiting the public and starts traversing the path of cold-hearted business. This process is further accelerated by the current views of the American people.
The American view on health has been drastically and rapidly changing in the recent, modern world. People place greater importance on personal health and the self-maintenance of that health. There are currently two sides of the argument regarding the cause of health problem. There is the “Freedom Model” that states that an individual’s behavior reflects onto their health and the “Facticity Model” that focuses on environmental and genetic factors outside the person’s control (Dougherty). The “Freedom Model” promotes a victim-blaming mentality that self-justifies the pricing of the medication as a consequence of poor personal decisions. And the “Facticity Model” shifts the blame towards circumstances. The argument between these two opposing sides clouds our ability to properly access the real problems behind the pricing of medication. And one of these issues is the lack of understanding of the options that people have when being prescribed medication.
Prescription drugs fall under two different categories: branded and generic products. The people of the United States have grown to assume that branded medication is the superior and more potent than the generic alternative. Generic medications are drugs that can only appear on the market after the pharmaceutical patent for the branded medication expires. Generic medications are virtually indistinguishable and chemically identical from the branded due to FDA laws (Stoppler). Despite this fact, there are many Americans that still decide to take the pricier option. The most likely reason that many Americans will still choose the branded medicine over generic versions is due to marketing. The pharmaceutical giants are able to afford to advertise to the general population while the generic companies focus less on advertising and more producing the drug. And with their wealth and power, they are able to manipulate prescribing behavior. One of these ways is through advertising.
. One of the strangest differences in the United States compared to other countries is that pharmaceutical companies are allowed to advertise directly to the consumer while mentioning the products claims. In fact, the United States is the only country aside from New Zealand that allows this sort of advertisement (Ventola). This direct to consumer advertising seems strange because pharmaceutical companies are marketing medications that are meant to solve specific problems to a general population that may or may not have these issues. This obviously has a major effect on the prescription drug choices of the consumer. Even if you personally do not have this advertised illness, it will be the first product that you will recommend to others if you find out that they have the illness. The advertisement shows them a way to solve their current medical issues. And unlike other advertised products, the medications in these advertisements usually require a prescription to be able to attain the drugs. This becomes obvious because at the end of most advertisements you often hear some form of the phrase “ask your doctor if this medication is right for you.” The message at the end of each advertisement has a lot more meaning that you may realize. It hints at how pharmaceutical companies may be related to physicians.
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Another one of the ways that drug companies manipulate prescribing behavior is to market and appeal to the doctors. Many drug companies hire drug representatives as a way to lobby doctors to prescribe their medication. Although there is no inherent problem to inform a doctor of the effects and other information regarding the drug that they are representing, there is a problem with the way they try to influence physicians. Drug reps are trained to evaluate physicians’ personalities and preferences and how to manipulate their perception of the drug representative or of the medication (Fugh-Berman 318). The problem with the way that drug reps are trained lies in the fact the whole interaction between the physician and the drug rep becomes more similar to a pyramid scheme than the supposed intended purpose of teaching the doctor the intricate details on how the medication works. Although there exist studies that show doctors believe that these promotions do not affect their prescribing behavior, a review showed that in 15 out of 19 studies shows that there is an increase of prescribing rates, lowered prescribing quality and increased prescribing costs after the interaction of doctors with these drug reps (Fugh-Berman 318). The results of this study are alarming because it means that even when a physician is aware of the ploy that drug reps are playing and consciously object, they are still subconsciously influenced by it. And because of the nature in which these drug reps operate, the information that they do give the physicians may not be accurate.
Drug reps often do not provide the most accurate information of the medication to the physician. They do not inform the physician about the differences of their medication with other competing medication. There have been drug reps that have downplayed or downright ignored the adverse effect that is inherent in their medication. And studies show that oftentimes, physicians cannot distinguish between incorrect and correct information that is being fed to them by drug reps. Drug reps also provide drug samples in which a doctor could offer to patients which almost guarantees that the same drug as the sample is going be prescribed (Fugh-Berman 318.) This sample is sort of like the pharmaceutical companies’ way to train physicians to prescribe their medications. Drug representatives also use alternative methods to influence doctors. They may provide a physician with food, gifts, or money making opportunities to make them feel as though they had an obligation to reciprocate the so-called kindness. And this type of manipulation truly works as a study shows that physicians who received gifts have prescribed more expensive medications than physicians that do not receive gifts (Fugh-Berman 318). Along with manipulating the public opinion on the medication, drug companies also can increase their prices due to the existence of insurance companies.
Pharmaceutical companies have increased prices due to the interactions between the pharmaceutical industry and health insurance companies. These insurance companies can, directly and indirectly. cover the prices of medication for their costumer’s medication. The number of people who are insured had risen to 68 percent by the 2000s (O’Conner). This means that people can afford increasing prices of medication unlike ever before. This would usually be a beneficial thing for the consumers of the medications but health insurance companies are also companies that are designed to make profits. They employ pharmacy benefit managers that secretly negotiate with pharmaceutical companies to lower their cost as well as determining how much patients should pay (How Are Prescriptions). The problem with this system is that because of the lack of transparency the patients are not fully aware of where their money is going and the reasons for the prices. And since insurance companies hire people to calculate the most profitable for their prices, it basically guarantees that the consumers are on the losing end of the deal. But the United States government has been trying to find ways to lower medication cost for its citizen.
One of these methods is passing legislation that helps improve the healthcare system. A well-known piece of legislation that tried to combat the issues of healthcare costs including medicine is the Affordable Care Act; the provided coverage to 32 million uninsured Americans (O’Conner). Because the federal government cannot to directly interfere and regulate drug pricing, they instead to tried to cover for those who cannot afford their own insurance. This plan has some serious flaws because it focuses more on alleviating the problem rather than solving it. The United States legislation has also tried to rely on foreign markets in order to find a way to reduce the amount that patients have to pay for their medicine. Recently in the U.S., legislation has been brought up to allow Americans to purchase prescription drugs from Canada because of a study that showed that 45 million Americans could not afford their prescribed medication (Rawson). This could in theory drastically decrease the cost of medicines in the U.S. for both the health insurance companies and the patients. However, this law also neglects a problem that Canada would experience from this. Canada has been constantly dealing with prescription drug shortages and this law will undoubtedly accelerate this issue (Rawson). This law is only a temporary fix to our problem with prescription drug affordability. With this law, we are basically trying to satisfy our need for prescription drugs due to our pricing problems by taking medication away from other patients who can afford their medicine but it is in short supply. The current methods that the federal government is trying to use have only been trying to minimize the damage done by our healthcare system.
The problem with the solutions that the United States government has provided is that they are all temporary fixes. Instead of using our time and resources trying to mitigate damages by doing things like subsidizing health insurance and importing cheaper medications, we should focus on making legislation that targets the root of the issue. We should pass legislation that forces pharmaceutical and health insurance companies to be more transparent in their reason for pricing. We should also amend laws around drug pricing to eliminate loopholes that corporations. This way we can shift the focus of healthcare away from profits and back to the well-being of patients.
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- DiMasi, Joseph A., et al. “Innovation in the Pharmaceutical Industry: New Estimates of R&D Costs.” Journal of Health Economics, vol. 47, 2016, pp. 20–33., doi:10.1016/j.jhealeco.2016.01.012.
- Dougherty, C.J. “Bad faith and victimblaming: The limits of health promotion” Health Care Anal (1993) 1: 111. https://doi.org/10.1007/BF02197104
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- Harris, Richard. “Federal Survey Finds 119 Million Americans Use Prescription Drugs.” NPR, National Public Radio, 8 Sept. 2016, www.npr.org/2016/09/08/493157917/federal-survey-finds-119-million-americans-use-prescription-drugs.
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