Usually, when you buy something, you know the price before you step up to the register. Most of us have a pretty good bead on how much a gallon of milk is and who has the best prices on gas, but when it comes to pharmaceutical drugs, everyone’s standing before the register hoping there’s enough coin in their pockets to buy the necessary life-sustaining medicine.
Unlike most developed nations around the world, the United States does not require drug producers to provide any information about how they set prices, or even what those prices are. This lack of transparency has allowed drug companies to charge as much as they can get away with instead of a reasonable price.
Price gouging has likely killed millions. In 2013, the UK parliament sponsored a study that found millions of people die from HIV and AIDS because they cannot afford the prescription medicine to treat the disease. Can’t imagine these grim numbers were aided by mercenary investor Martin Shkreli, whose company Turing, upon purchasing the rights to manufacture a leading HIV/AIDS medication in 2015, jacked up the price by more than 5,500 percent — from $13.50 to $750 per tablet. The much-reviled “Pharma Bro” has since been indicted on federal charges of security fraud and resigned as Turing CEO. Daraprim is still $750 per tablet.
But Shkreli isn’t the only villain in this story. The makers of a Hepatitis C medication, Sovaldi, charge $1,000 per tablet — $84,000 to cover the full recommended 12-week treatment.
Novartis released a mediation in 2013 that, at the time, was one of the most effective treatments in fighting leukemia. It was $26,000 for a year’s supply. Now, it’s $120,000 for the same level of medication, according to a Washington Post analysis.
And in Massachusetts, spending on pharmaceuticals shot up 13 percent last year, according to the state’s Health Policy Commission.
Fortunately, some politicians waking up to this perversion. In five states, including Massachusetts, legislation has been filed that would force drug makers to provide pricing information to the public on certain important drugs.
Unfortunately, not a single law has been approved yet, and for Massachusetts, the transparency bill filed by State Sen. Mark Montigny (D-Second Bristol and Plymouth District) has been all but knocked out for this session. Earlier this month, the House-controlled Joint Committee on Health Care Financing sent Montigny’s bill to be studied. In Beacon Hill lingo this is synonymous to a death blow; very few bills recover from the sentence.
Advocates of free markets and public transparency agree that giving consumers more information, rather than less, is the right thing to do. But that’s the last thing drug makers — and the politicians to whom they donate heavily — want to do.
The world’s top 10 pharmaceutical companies, which according to the World Health Organization, each earn an average of $3 billion in profits per year. And they don’t want to give up that information.
Thanks to generous patent laws that give them long-lasting monopolies on drugs, and a law banning Medicare from negotiating drug prices, Big Pharma can charge pretty much whatever it likes for medicines that are often a matter of life and death for consumers.
For their part, pharmaceutical industry spokespeople say high prices are necessary to find and develop new medicines. And, they say, explaining pricing would drive costs even higher because of all the additional work transparency regulations would put on businesses. Also, they say, more information about drug pricing is unlikely to reduce how much patients and their public service providers pay for medicine.
With the industry’s estimated 20-30 percent profit margin, finding a few extra dollars — even a few extra million dollars — for pricing transparency shouldn’t be difficult. Maybe trim some bonus money from the nine-figure salaries of pharmaceutical company CEOs. (Seriously, the CEO of the drug company that makes Sovaldi earned $180 million in 2013, the same year the company acquired the drug through a merger.)
Research and development of new medications is certainly important. Drug companies estimate it costs more than $1 billion to test and develop a drug all the way to market, and that only one in 10 proposed medications is approved by the FDA. That still doesn’t explain why the acid reflux drug Nexium costs $23 in the Netherlands, but wholesales for $215 in the U.S.
What does explain this discrepancy is America’s lack of drug pricing transparency. In the U.S., health insurers are allowed to negotiate with drug companies for better prices on medicine, but those companies are often accused of holding onto the savings for themselves rather than passing on the benefits to customers.
Meanwhile, the government, which has to provide transparency to citizens, gave up its right to negotiate prices thanks to a deal the Bush administration approved in 2003 to purchase pharmaceuticals through Medicare, the nation’s largest health care plan.
Our government has the power to empower Americans to press for fairer prescription drug prices, but politicians have to have the backbone to force the issues — even if it costs them donations come election season. In drug pricing, as in all matters of public good, sunshine is the best prescription.
Kristin Palpini can be contacted at editor@valleyadvocate.com.
