Skip Navigation

Prescription Drug Prices are Too High and Big Pharma Knows it

In the United States, “one out of every four patients reports not filling a prescription today for themselves or a family member due to cost” says Aaron Kesselheim of Harvard Medical School. Consumers in the United States are forced to spend more on their prescription medicine than in any other developed nation. For example, insulin, a life-saving drug for millions of diabetes patients, has experienced a 64 percent rise in price from 2014 to 2019. This trend has pushed patients to make decisions between paying for their medicine or for food, electricity, and basic services. Some consumers have even dangerously rationed their insulin. ‘Big Pharma’, the largest drug companies in the United States and their powerful political apparatuses, have delayed any solution through arguments that high prices are needed in order to fund innovation for new drugs. However, research shows that this argument is specious, as government-granted monopolies give drug companies free rein over their pricing and, like any profit-driven firm, drug companies seek to overcharge for their goods. 

Healthcare spending accounts for 17.8 percent of US GDP, which includes $460 billion of spending on drugs. Prices are only estimated to rise in the future. The persistent rise in the price of prescription drugs has been a ubiquitous force in US political discourse recently. The issue showcases rare bipartisan cooperation as Congress, the President, and many of the 2020 candidates have taken strong positions on how to combat pharmaceutical price gouging and best provide medicine to all Americans. In theory, prices for prescription drugs should be declining as the manufacturing volume of drugs has increased exponentially and little research is being done on existing drugs in the market. In order to combat the rising price of prescription drugs, regulation must hinge on essential reforms that have bipartisan cooperation as legislators must overcome the power of Big Pharma to make real change and fix this public health crisis.

Big Pharma’s usual argument that high “prices are necessary to fund expensive research projects to generate new drugs” does not hold up statistically. A 2015 study on the 15 companies selling the top 20 drugs in the United States found that the premium earned by US net prices exceeds the list prices in other developed nations by $116 billion. Companies may justify this massive difference by stating that it is used to aid their research and fund the time- and research-intensive FDA approval process, however these companies only used $76 billion in total for their global research and development. Revenues from US premiums were generally 163 per cent of this global research and development. This gap in revenue is not being used to fund research and development. It is being used to fund marketing and advertising. Out of the top 10 pharmaceutical companies, only one of them spent more on research than marketing. As a result, other wealthy nations will spend fractions of what Americans pay for their drugs on average.This trend attests to unscrupulous power of Big Pharma and its influence over the public in keeping its prices high.

In this time of increasing political divisiveness and partisanship, prescription drugs seem to be a rare bipartisan issue. Politicians from both sides of the aisle agree that drug prices are too high and that something needs to be done. There are disagreements over which reforms will be successful, but that hasn’t stopped the creation of numerous bills. Despite apparent cooperation, however, these bills have failed, as the political power of Big Pharma is successful in lobbying against any threat to its immense profit margins. In his 2019 State of the Union Address, President Trump stated that prescription drug prices were “unacceptable,” “unfair,” and he vowed to “stop it fast.” In July of 2019, the administration attempted to take a stand against Big Pharma by requiring drug companies to advertise the cost of their drugs, but this action was blocked in federal court on the grounds of a First Amendment violation. During the same month, Trump stated that the administration was working to cap drug prices based on foreign prices. This action would have led to massive reductions in drug spending but was not enacted due to arguments that this action would discourage research investment for new drugs as well as pushback from conservative groups like Freedom Works and Americans for Tax Reform. July 2019 also featured two major bipartisan bills in the Senate, which have both gone nowhere. The bipartisan Grassley-Wyden Bill in the Senate Finance Committee would have capped price hikes on drugs covered under Medicare and forced drug companies to pay back the government if it increases prices faster than inflation. The Alexander-Murray Bill would have made it more difficult for large drug manufacturers to stop generics from entering the market. It would have also decreased the nation’s deficit over 10 years by increasing revenue by $700 million and saving the government $3.8 billion. Each one of these potential reforms would have had transformative effects on the price of prescription drugs in this country, however, time and time again, “something” impedes the progress of these bills and no action is taken. Drug companies are able to continue price gouging efforts in a market that disincentivizes major competition through FDA marketing exclusivity.

Reform efforts are bipartisan and seek to solve an issue millions of Americans deal with on a daily basis, but the effective advocacy and monetary influence of the pharmaceutical industry has led to major inaction on the federal level. Big Pharma is able to bring in profit margins of up to 40 percent, and the industry wants to protect these margins in the future. As a result, the pharmaceutical companies have given over $400 million to political campaigns over the past 16 election cycles. The industry has 1,419 current reported lobbyists and 924 revolvers who have moved from the industry to government and vice-versa. This has allowed Big Pharma to exert a vice grip on all political reforms of prescription drugs and it would take bipartisan cooperation on industry reforms that would remove this influence to make any demonstrable change. The solutions to the prescription drug problem in this country are widely known, but consistently effective action is stifled at the federal level. 

Reducing drug prices will take cooperation across the aisle in order to bring the United States in line with the rest of the world. The necessary reforms, from reducing rebates for pharmacy benefit managers to allowing imported drugs from Canada, are politically plausible. A complex web of conditions has made prescription drug prices exponentially higher in the US than across the world. Most importantly, the pharmaceutical industry’s consistent lobbying and influence over the narrative that higher prices are necessary has prevented drug prices from decreasing in the United States and it will take major efforts to raise the public discourse on this issue and force changes in the price of prescription drugs. No one should be forced to decide between paying for medicine and putting food on the table for their family. A choice like that is un-American and the government must take action for the sake of the health of this nation.

Photo: Drugs