The Steep Incline of Drug Prices in America

Drug pricing in America is a problem. It’s a serious problem that has burrowed into the lives of approximately 58 million adults who report that they cannot afford the drugs which they are prescribed. Unlike other developed countries, the prices of pharmaceutical drugs in America are determined by the pharmaceutical companies who make the drug. That means the same companies who have the incentive to maximize their profits are allowed to price their drug products with impunity. Conversely, the United States government has virtually no role in controlling the pricing range that big pharmaceutical companies charge. In fact, the legal freedom that drug companies have in America has resulted in an economic free-for-all in drug pricing, inflating the cost of various essential medicines in the pharmaceutical market. Since 2015, drug manufacturers have increased the price of 900 brand name drugs an average of 4.2 percent, with some drug increases being as large as 19.7 percent (Engelberg, 2015). If the American drug pricing process were to run smoothly, insurance companies with heavier pockets than the American public would foot the bill of prescription payments, but that is not the case. The lack of insurer responsibility and federal regulation in the pharmaceutical market has caused pharmaceutical companies to increase their drug prices without restraint, which has cheated vulnerable, uninsured Americans out of reliable access to a crucial part of their healthcare.

At the end of the day, high drug prices affect the “little guy”. It affects the millions of Americans that lack quality insurance or insurance altogether leading them to struggle to pay for their prescriptions out of pocket. According to a Chuck Grassley statistic, around 34 million Americans report knowing of at least one friend or family member who has died over the past 5 years from an inability to pay for their prescriptions (Grassley, 2019) . Thus, it is safe to say that an incremental increase in drug prices results in deaths for those that cannot afford to pay for their drugs out of pocket. For lower-income Americans, Medicaid is available as federal health insurance that covers drug costs. However, as a federal entity, the coverage that Medicaid is able to offer can only go so far. The increase in drug prices has strained the meager services that Medicaid offers to the public, and resources are already scarce to those in higher need. Even basic, free Medicaid services such as the Medicare Part A, B, and C plans do not cover prescription drugs. Patients looking to receive coverage on their prescription costs are forced to pay an outside premium in the Medicare Part D plan. Enrollees in the Part D plan typically pay twenty extra dollars a month and still pay copayments and coinsurance outside (AARP). Therefore, low-income Americans still run short of proper insurance in the face of rising costs.

But what is this system that the American government uses to regulate the price of prescription drugs? The answer is that the American government is virtually functioning without one. The United States government largely leaves the pharmaceutical companies in America unregulated and relies primarily on market prices to drive the costs of prescription drugs. In 2016, the United States FDA approved the 21st Century Cures Act, which is a law designed to encourage the supposed innovation and advances of pharmaceutical and biotech companies (FDA, 2016). This law, among others like it, are a set of government policies that encourage big pharmaceutical

companies to carry on with their price-gouging practices without a proper form of intervention. Under the guise of innovation, drug companies are allowed to price drugs however they like, to maximize their profits. And the United States government eggs them on. Due to unrestricted laws like the Cures Act, pharmaceutical companies run with impunity, using slow drug turnover and high prices to justify their increasing costs.

Currently, the American government allows drug companies to use the patent system, a 20-year ownership right of their drug invention that allows them to monopolize and set the price of their drug product. In theory, the patent system is justified because it encourages innovation and benefits the companies that are creating life-saving drugs, but the American patent system does more harm than good. Too often, the “new” drugs that these pharmaceutical companies are producing with their parents are just repackaged and recycled innovations from the past. Take for example the Hepatitis C drug, sofosbuvir. It is designed to cure Hepatitis C, but the technology it uses to do so is based on science that has already been established. There is nothing “new” about the drug, sofosbuvir, but the company that designed the drug is allowed to profit off of it anyway with high price marks (Momenghalibaf, 2015). The American patent system allows drug companies to take advantage of the innovative system that America greatly values and exploit it for their own gain.

And in the face of these drug companies that abuse the patent system, the American government seems not to care. Based on the total number of profits that pharmaceutical companies generate for the American market every year, it seems like the federal government is more concerned with their bottomline. Pharmaceutical companies like Pfizer and Merck hold over 50 billion in profits, and the American taxpayer is spending 30 billion a year on biomedical research that goes straight to these billion-dollar companies (Martin, 2019). So, without even taking into consideration the money that the American public invests by paying for these prescription drugs , pharmaceutical companies provide almost one hundred percent profits to the American market, incentivizing the federal government to promote their “innovation” even more.

A big problem remains in terms of the millions of Americans who cannot afford to live under the frenzy of predatory drug companies. So the problem begs that the American government lays its foot down when it comes to regulation and supervision. As of now, Medicaid has an established rebate-based administered price program that incentivizes manufacturers to dispense drugs to low-income patients through reimbursements (Kristi, 2019). The rebate process is meant to alleviate the burden of Medicaid in ensuring millions of dollars worth of prescription drugs without the costs coming from their own pockets. But, the process does not directly lower drug prices, it just provides an incentive to their regulation. And based on the lower-income Americans who cannot afford the drugs, it is not nearly enough in keeping drug prices low enough to be affordable.

Judging from the policies of the American government, there is more to be done in shielding the American public away from higher drug pricing. The federal government needs to pass heavier legislation that restricts pharmaceutical companies from fluctuating their prices at a whim and limits the market monopoly the pharmaceutical companies have on the stability of the American market. In response to this reality, I propose that the federal government should pass reform of the patent system to prevent patent abuse and anticompetitive prices that block competition.

This plan would include legislation that would require companies to provide proof for new inventive formulation of drugs that require patents. To ensure that companies are actually practicing innovation when requesting these patents, the federal government should provide a more in depth review board for company patents than just the preliminary review of the FDA. Currently, the FDA is in charge of issuing patents to companies and can issue a patent of 20 years without needing to comprehensively review the makeup or design of the drug (Brennan, 2016). Oftentimes, the patent process can be loopholed. Companies can pile on patents of the drugs that they are producing by only making minor changes to the recipe. Under this clause, 78% of drugs associated with “new” patents are not new drugs, but existing ones (Nawrat, 2019). Therefore, the government should restrict the number of patents a company can receive using the same general recipe, and tighten the review process used by the FDA to issue these patents. This can be done by passing legislation to redact the current patent policy law that allows companies to stack patents, or instead, the federal government can outsource the patent review process to an external governing body that focuses solely on the patent review process. Both options will limit the amount of freedom that drug companies have in terms of controlling the market and their drug prices. With a more regulated patent process, drug companies can focus on actually creating innovation and lowering their drug prices for the general public.

Although pharmaceutical companies claim to need the freedom to produce medical innovation, the burden of their “creativity costs” should not be completely on the head of the American public. At the end of the day, the American public deserves affordable drug prices and the American government is obligated to provide it.