The U.S. Drug Pricing Problem: How Did We Get Here?

by Dhiksha Balaji

In the United States, we spend more on prescription medications than any other country – even though we don’t use more than others. And medications are only becoming more expensive. Between the years 2000 to 2017, drug spending in the United States grew by 76%. Spending is expected to increase faster than any other area of healthcare spending over the next decade as more expensive specialty drugs are approved – and meanwhile, our patients are struggling.

How did we become a country in which high drug costs now prevent some patients from accessing life-changing or life-saving medications?

The origins of the current healthcare landscape in the United States comes from the laws and regulations around our pharmaceutical industry, or lack thereof. Unlike other countries, the United States does not regulate or negotiate prices of new prescription drugs when they come to the market. Instead, drug makers can choose their own prices. Even Medicare, which covers about 55 million Americans over 65, can’t negotiate drug prices and must cover nearly any drug the FDA approves. For drugmakers, this ensures a major buyer of drugs at any price.

This law was enacted as part of the Medicare Modernization Act of 2003. However, other government entities such as the Veterans Health Administration, Department of Defense, and Medicaid are still able to negotiate drug pricing.

Another major reason is the high price of brand name drugs, which are the direct result of exclusivity provisions granted by the US Patent and Trademark Office and the FDA. For example, there have been a growing number of high-cost biologic medications such as Soliris, Folotyn, and Vimizim, which cost over $250,000 per patient per year. It’s not just drugs for rare conditions that cost this incredible amount, but drugs that huge numbers of Americans depend upon to live, such as insulin. The cost of insulin has increased 300% from 2002 to 2013.

What’s the debate around lowering drug prices, then?

Pharmaceutical companies defend high prices by claiming they fund expensive research that produces new drugs that greatly improves and even saves lives. Looking further into this claim brings up some questions, though. Even after the cost of all research into new drugs- $80 billion a year- drug companies still make more than $40 billion in profits from only the top 20 drugs. There are hundreds more drugs that bring in profit. A large portion of profits also goes into sales and advertising.

Lowering drug prices would reduce profits for drugmakers, which in turn would possibly turn off investors. The argument is that this would decrease funding available for research and development for innovative new drugs. Because the United States pays so much for drugs, we end up subsidizing research that benefits the entire world, so there could be less innovative drugs for everyone.

It’s time to put people over profits when it comes to access to medicines in our country. That’s why DFA believes in advocating for policy changes, including the healthcare provisions in the Build Back Better Plan, based on the Elijah E Cummings Lower Drug Costs Now Act (HR3). Provisions in the bill would allow the government to establish prices for Medicare and private insurances for certain drugs with little competition that cost the most. This would decrease the power of pharmaceutical companies to create effective monopolies and demand high prices. The bill would base the price Americans pay on the average price paid in Australia, Canada, France, Germany, Japan, and the UK.

Most Americans are tired of the prices we pay for our medicines – both monetarily and socially. This shift in attitude is starting to be reflected in our laws. While the issue is complicated, it’s clear that there needs to be a change now so patients can access the medicines they deserve.

As the Build Back Better legislation moves through Congress, it’s more important than ever that physicians use our voices and expertise to advocate for legislative change. Join Doctors for America and write a Prescription for a Healthier America. Take action now!

Prescription Drugs