High drug prices
What do pharmaceutical companies cite as the cause for high drug prices?
Drug companies claim that high costs of research are why prices are so high, citing a figure of over $2 billion spent for research for every drug that makes it to the market (adding together the costs of those that fail to make it to those that do). However,
independent researchers see these research cost claims as grossly inflated, claiming them to be exaggerated by several hundred percent.
It is important to remember that the public pays for much of the development of the drugs through initial research supported by the National Institutes of Health. Also, drug companies just about every year spend more on marketing than on research.
What do health care and economic researchers cite as the cause of high drug prices?
Inability to negotiate for lower prices. Unlike other wealthy countries, and even some less developed countries, which have strong governmental or quasi-governmental agencies negotiating for better drug prices, no public or private agencies in the U.S. have as much negotiating power.
The law prevents the federal government from negotiating better prices for Medicare patients. The private “pharmaceutical benefits managers” often have conflicts of interest and take advantage of secrecy to increase their own profits.
The high costs of marketing. The United States is one of only two nations in the world that allow
direct-to-consumer drug advertising to patients. Although some of the marketing to doctors most akin to bribery has been curtailed, drug companies still “donate”
plenty of money to medical professional societies and to patient advocacy groups for diseases their drugs treat. These “donations” buy silence about high prices, and their so-called charity hides the high profits they are making off the most vulnerable and ill.
Drug price secrecy. “Lack of transparency” is the technical term for the fact that the public cannot learn how much money really went to research or
how much it costs to produce drugs. Secret discounts to some purchasers are another barrier blocking fair and visible prices for everyone.
For more information, see Facts and Data: The Expensive Politics of Health Care
Market power and political power. Studies have consistently shown that the
profit margin for drug companies averages about twice the profit margin of other major industries. This happens because patent protection on newer drugs create a lot of their profits. So drug companies constantly push to extend patent protections by
tweaks on drugs that make little to no therapeutic difference. This monopoly-based market power leads to political power through their extensive lobbying and campaign contributions.