It’s like charging a starving man $10 for a cracker, selling fans in a heat wave for $1,000, or demanding a million dollars for the antidote to a poison.
The price gouging is being carried out by the pharmaceutical industry, and the result has been the transfer of untold billions from taxpayers and the insured to their executives and stockholders.
It’s something every candidate for federal office should be talking about, but only a few, including Hillary Clinton, are.
The worst offenders are the makers of generic drugs, who add no value to their product and spend little or nothing on research to develop new drugs. The vultures and trolls among them, people like Martin Shkreli, the hedge fund founder and CEO of Valeant Pharmaceuticals who raised the price of the HIV drug Daraprim from $13.50 to $750, get the most notice.
But even companies that like to think of themselves as upstanding are seeking monopolies in what is becoming the business model of the generic drug industry. Purchase the right to produce an off-patent drug from the only company with FDA approval then raise the price of the drug to whatever the market can bear.
The latest example involves a product familiar to all, the EpiPen. Even a child can use the pen to quickly inject a potentially lifesaving dose of epinephrine to open a throat swollen by an allergic reaction. The drug has been off-patent for years. A dose costs less than $1, and in 2007, the pens cost $57. Then a company called Mylan purchased the right to produce the pen from the drug maker Merck.
Mylan slowly raised the price to $600 for a pack of two. Families with high deductible insurance plans pay $150 to $400 per pack. Most children require six, two for school, two for home and two for travel. The pens must be replaced every year to guarantee effectiveness.
Heather Bresch, Mylan’s $18 million per year CEO and the daughter of Sen. Joe Manchin, a West Virginia Democrat, has justified the price increase by saying the price reflects the drug’s value to customers or, in other words, “what wouldn’t you pay to keep your kid alive.”
The price-gouging has caused insurance prices to increase, forced some who need a drug to do without and dented the budgets of people with high co-pays. It’s a major drain on the health care system, one every doctor and pharmacist recognizes.
Congress and the FDA could do a lot to solve the problem. When a monopoly or drug shortage exists, the agency should approve the importation of the drug from nations whose inspection standards are equal to our own.
The agency should also be given the power, when a monopoly exists, to move competitors who want to produce the drug to the front of the approval line. That would restore competition and provide a disincentive to gouging.
Congress should ban the practice that allows pharmaceutical companies to pay generic makers to delay production in order to keep prices high, shrink the period that new drugs get patent protection and eliminate the ability to extend a drug’s patent life by making minor changes to the product.
Medicare should be given the power to negotiate drug prices on behalf of all recipients. The system would get a much better deal than individual insurance plans.
Drug prices, generic drugs in particular, can be controlled without harsh measures like price controls by making some or all of the reforms above.
Whether that happens depends on whether we have an independent Congress that acts in the best interest of consumers, taxpayers and patients.