Cogito Ergo Non Serviam

US Drugs Cost Too Much for Many Reasons

The latest story to emerge about the greed of the pharmaceutical firms is that of the EpiPen. This injector is used as an emergency tool to treat severe allergic reactions. Mylan, NV, makes it, and Mylan raised the price from about $57 in 2007 to over $600 for two auto-injectors. In December, Turing Pharmaceutical raised the price of a drug called Daraprim from $13 a pill to $750 per dose. Americans are paying far too much for legal drugs, and there are many reasons for it.

First and foremost, the US has a for-profit healthcare system. That means nobody gets anything at cost. Markups abound through the distribution chain. The argument in favor of this is that a for-profit system encourages competition that makes the entire system more efficient, thereby reducing costs overall. It's a good theoretical argument. Sadly, the data disprove it. The US spends more than any other nation per capita on healthcare and gets far from the best outcomes. The reason is simple --the conditions for a truly efficient market simply don't exist in healthcare. Who shops around for the best priced treatment during a heart attack or stroke?

Another reason is that Medicare, the socialized insurance system for the elderly, is not allowed to negotiate prices for drugs with the manufacturers. In any business, a customer who buys large quantities of a product can expect some sort of discount, but that doesn't happen in America's drug markets. The price Medicare pays for pills is the price the manufacturer asks. Given how much the system spends on medicine for old people, it's clear that this is an area of huge potential savings. The law will have to change, however, before those savings can be realized.

That is not all, however. Despite believing in free markets and shopping around, a pill that is cheaper in a foreign country cannot easily be imported for use in the US. There is a very legitimate argument that US quality control means that US manufactured medicines tend to be safer and more effecting than those produced in less regulated areas.

Yet often when importing a pill from Canada where it is cheaper, one finds that the medicine in question was manufactured in the US, and then exported to the Great White North in the first place. That is, the pill that left the factory for Ontario, Canada costs less than the pill next to it that went to Ontario, California -- the provincial medical system in Ontario, Canada, can negotiate prices. Some nations should be allowed to sell their drugs on an equal footing with the US -- just as the citizens of some nations don't need a visa to visit the US. Does anyone really believe a Swiss-made pill would be measurably worse than one made in the US?

The biggest problem, though, is the ridiculous gaming of the patent system. A patent on a drug can run from 8.5 to 15 years. As a result, drugs that are patent protected make up just 10% of prescriptions and 72% of drug spending. Since 2008, prices for patent protected drugs have gone up 164%. When one considers that the price of a drug falls by 50-85% when it goes off-patent, it's clear that the length of the patent matters to drug prices.

One can argue over what the correct duration of a patent should be, but what one cannot argue is that drug companies are gaming the system to extend the life of their patents. A new coating on a pill is currently sufficient grounds to extend patent protection -- a non-therapeutical change. Moreover, the Federal Trade Commission in 2010 wrote a report detailing how patent-holders pay to keep generic manufacturers so that their drugs don't get any competition when they do come off-patent.

With all of these factors working against affordable drug prices, the need for reform is huge, but the current political climate will prevent anything from happening. There is too much to be taken on but too few legislators have the courage to move on all fronts at once. Piecemeal reform can't get the job done.

© Copyright 2016 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Ubuntu Linux.



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