Pharmaceutical companies overcharging

A recent JAMA article, “The High Cost of Prescription Drugs in the United States,” had some interesting points on reform.

While I do believe in a free market and capitalism, as they give major benefits and lead to innovation, and we should not tie the hands of pharma as an industry, there is a problem. BUT that assumes we have a free market, and the pharma industry has become anything but a free market; through its many mergers and buyouts and consolidations, most of pharma is now a collection of monopolies of essential services. In a free market, consumers can choose to buy or not. If overpriced, the market adjusts to make sure the product is affordable to maintain profit and a good return on investment. If we had multiple generic manufacturers, or if the pharma industry was not dominated by third-party payers, then that would be the case.

In the pharma industry now, nearly all medications are monopolies. As with any essential monopoly, there is no mechanism nothing to keep prices in check; thus, we have outrageous prices for most essential medications.  With the mergers, companies of generic medications can raise the price to whatever they want, knowing that most will be paid for by third parties (e.g., taxpayers through Medicare, the big market). That of course puts no brake on this whatsoever. Consumer groups now are threatening lawsuits for coverage from cash-strapped states for coverage (e.g., hepatitis C medications). Just covering this one condition, assuming a low estimate of 60,000 people in MA with hepatitis C, and at current pricing, that means $6 billion. Here is another way to view this: each of the 6.5 million inhabitants in Massachusetts would have to pay $1,000 just to cover this one ailment.

Given the above unsustainable economic reality, and no let up in sight, here are some thoughts at control.

1. Elimination of Medicare Part D prohibition on negotiation of drug pricing.
2. Elimination of tax deduction for direct to consumer advertising. One possibility is to lose tax deduction for every dollar spent above that spent on R&D.
3. Push FDA to speed up licensing approval for generic competition (there is a current backlog of 4 years).
4. Allow importation of essential medication when a monopoly situation exists with FDA inspection of foreign plants. Allow both pharmacy importation and individual purchases.
5. Prohibit pharma from pay for delay, paying generic competitors to stay out of the market.
6. Prohibit pharmacy benefit manager ownership by pharmaceutical companies.
7. Demand transparency and openness of costs of R&D, and manufacturing from pharma. Let them actually show their unproven claims of the necessity of constant drug price increases as needed to fund R&D. A careful review of year-end statements actually shows R&D is only about 14% on average for pharma companies.
8. Use “bully pulpit” to shame pharma to slow incessant drug price rises.
9. Join forces with AG offices in other states for a common purpose, given congressional inaction.