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The Government Needs to Act Now on Rising Drug Prices

Source: CNN
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Over the last few years, sharp increases in the prices of many prescription drugs in the United States have sparked outrage among citizens toward pharmaceuticals, the government, and other supposed culprits. Ridiculous hikes in the costs of drugs such as EpiPen and Daraprim have made headlines, while the prices of thousands of other drugs have risen more gradually. These price rises have rendered many people dependent on life-saving drugs at the mercy of pharmaceuticals.

According to the Organization for Economic Co-operation and Development, in 2014, per-capita drug spending in the U.S. was significantly higher than other major countries.

There are a multitude of factors that may be behind the rising drug prices. One primary cause is the government’s granting of temporary monopolies, which arise when only one the company which patented a drug has the right to distribute it. The monopoly allows a company to raise prices excessively without risk of losing customers. Other experts blame pharmacy benefit managers, third-party entities which negotiate drug prices with pharmaceuticals and insurance companies, for raising prices. The pharmacy benefit managers’ negotiations are shielded from the public eye, making sure that people do not know whether drug prices are fair or not. Progressives say that the U.S. government should directly negotiate with drug companies, as do the governments of Canada and other nations with single-payer healthcare. In addition to directly negotiating with drug companies, some governments set maximum drug prices, unlike the United States. Progressives assert that the lack of pricing regulation in the U.S. allows drug prices to rise without bounds. However, conservatives say that government regulations decrease competition.  Decreased competition, and by extension, increased prices, also occurs when brand-name drug manufacturers pay generic drug manufacturers (generic drugs are the chemical equivalents of and usually cheaper than brand-name drugs) to delay the entry of generic drugs to market

Despite the widespread controversy over the rising drug prices, very little action has been taken to solve the issue. In the 2016 U.S. presidential campaign, candidates  outlined their plans to solve this issue. Hillary Clinton said that if elected, she would work to expand access to treatment and penalize drug companies which raise prices excessively. Bernie Sanders pushed for the direct negotiation of prices between the federal government and drug companies, and he described a plan to import low-cost prescription drugs from Canada. Trump proposed increasing competition among pharmaceuticals by helping private entities negotiate better prices on behalf of consumers and eliminating the middlemen which handle price negotiations between insurers and drug manufacturers.

The President has made some progress on his agenda, including causing pharmaceuticals Pfizer and Novartis to back off on their planned price increases in July of 2018. However, since the time of Trump’s inauguration, the prices of more than 2,500 drugs have increased by over 10%. Many analysts believe that in the long run, Trump will not lower drug prices effectively, and instead help pharmaceuticals make profit. Critics of the President point to the fact that Alex Azar, the man Trump hired for Secretary of Health and Human Services, and therefore will heavily influence Trump’s decisions, represents interests of pharmaceuticals. Azar used to be on the Board of Directors of the Biotechnology Innovation Organization, a pharmaceutical lobby, and the former President of the U.S. division of Eli Lilly and Company. In the White House’s blueprint for drug prices, titled “American Patients First”, Azar writes, “The time to act is now: Not only are costs spiraling out of control, but the scientific landscape is changing as well. Securing the next generation of cures for the next generation of American patients will require radical reforms to how our system works. Our blueprint will bring immediate relief to American patients while also delivering long-term reforms”. Although Azar was an Eli Lilly executive, he did nothing to change the “costs spiraling out of control”. He made no effort to achieve “radical reforms”. Instead, he prolonged the status quo—under his leadership, Eli Lilly’s drug prices rose substantially, according to Bloomberg.

In “American Patients First”, most of the planned actions are termed ambiguously, such as the government’s plans to “[develop] proposals to stop Medicaid and Affordable Care Act programs from raising prices in the private market”, “[implement] measures to promote innovation and competition for biologics”, “[make] additional efforts to promote the use of biosimilars”, “[experiment] with value-based purchasing in federal programs”, etc. Furthermore, many of the “Immediate Actions” outlined in the blueprint—published in May 2018—have yet to be accomplished, including “FDA evaluation of requiring manufacturers to include list prices in advertising”. The vagueness of the plan and the government’s inaction to address its goals demonstrate Trump’s incompetence in dealing with the issue.

Trump is now exploring the idea of importing drugs from Canada, where brand name drugs are between 40 and 60 percent cheaper than in the U.S. The Canadian government maintains relatively low drug prices because it directly negotiates with drug companies. Canada’s Patented Medicine Prices Review Board establishes maximum prices for drugs that are under a patent and have no generic counterpart—the pharmaceutical that sells a patented drug with no generic version has a monopoly on it but cannot raise prices because of the regulation. According to the Encyclopedia of Contemporary American Social Issues, the Canadian government purchases drugs similarly to “how the United States purchases medications for military personnel, but Canada implements [price] controls on a much wider scale” (Shally-Jensen 280). These rules drive drug prices in Canada down significantly—according to, Americans spent an average of $1,112 USD per capita annually for prescription drugs, roughly 44% more than what Canadians spent, $772 USD. By considering importing drugs from Canada, the Trump administration has inadvertently recognized the superiority of the progressive Canadian prescription drug system over its own.

When Trump was a candidate, he proposed that the federal government negotiate drug prices for Medicare. According to a poll conducted by the Kaiser Family Foundation, 92% of Americans favored this plan, including 96% of Democrats and 92% of Republicans. However, with the release of the blueprint, “American Patients First”, the Trump administration has dropped that promise. Instead, he has hired a pharmaceutical executive to help him make policies and released an intentionally vague blueprint. If the government wants to respond to the will of its citizens, it must begin making the “radical reforms” that Azar claimed he would accomplish: halting the influence pharmaceutical lobbyists in the government, setting maximum prices for drugs, having the government negotiate the prices of drugs, disclosing details of negotiations for prices of drugs to the public, and preventing pharmaceuticals from exploiting loopholes. These reforms would give the American people the low drug prices they deserve.


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