The lack of price regulation on medications is one of the reasons for the high cost of healthcare. Unlike in the rest of the world, the pharmaceutical industry in the U.S. is allowed to charge as much as it wants, leaving the consumer defenseless in front of the soaring expenses.
A few days ago, we reported on the difficulties patients endure when trying to get drugs such as Humira – for rheumatoid arthritis – and Sovaldi – for hepatitis C –. These two medications are an example of the way the industry is managed.
Although it was set to expire soon, Humira’s exclusive rights – which prevent competition – were extended until 2022 thanks to a combination of patents designed to preserve its monopoly. As for Sovaldi, treatment is sold in the U.S. for $84,000, while it costs much less in Europe and is only $1,000 in India.
The industry says that it charges these exorbitant prices to U.S. patients in order to recover the money it invests on research. The reality is that their highest expenses come from marketing and sales. In the case of most drugs, studies begin in universities, research centers and sometimes small laboratories subsidized by public funds. Large pharmaceuticals buy the licenses later, and sell the drugs back to the same taxpayers who funded the research.
The problem is that drug prices are not fixed, but negotiated according to the customer and the specific circumstances. Pharmaceutical companies charge as much as they want, deciding how much the cure for hepatitis C needs to cost in order for them to meet their projected earnings. If the need is widespread, the market accepts it. In many cases, the industry has its own pharmacies to promote their medicines, even if they are more expensive than other drugs.
This happens because of the support politicians lend to one of the industries spending the most on lobbyists and donations. This is the reason why the government – who buys medications in bulk – was banned from negotiating price reductions with pharmaceuticals – as it does for Medicaid – by the 2003 Medicare reform.
As long as there is a lack of political will to regulate the price of medicines, their high cost will continue to hurt the consumer as well as the government’s coffers.