Editorial: The path to cheaper drug prices

Published: 10/27/2016 3:05:06 AM

Drug lords look with envy on the markups some pharmaceutical companies get away with. Hospitals, clinics and physicians are sick over the relentless and rapid rise in prescription drug costs that can no longer be escaped by substituting generic medications. Premiums under the Affordable Care Act are expected to increase by 25 percent, in part because the law does nothing to reduce the drug costs that are becoming an ever bigger factor in the increasing cost of health care.

Recently, the Monitor’s Ella Nilsen described the plight of Dartmouth-Hitchcock, which was forced to announce the layoff of dozens of employees, in part to make up for losses on the drugs it used. The situation is the same at Concord Hospital, where per-patient drug spending increases by nearly 25 percent per year, and at Franklin and Laconia regional hospitals, where spending on pharmaceuticals has increased by $1 million per month.

Nationally, the situation is just as bad. About one in five Americans with one or more prescriptions can’t afford to fill them on schedule. Americans pay far more than citizens of other nations, not because they use more health care or drugs but because they pay so much for them.

Price gouging by drug companies and a lack of competition plays a big role. Columbia University economist and health policy professor Jeffrey Sachs cited some of the most egregious examples in a recent New York Times essay. Gilead Sciences, Sachs said, bought the patent to a new miracle drug that cures hepatitis C in 2011 for $11 billion. It then raised the price for the drug, which costs about a buck a pill to make, to $1,000 a pill. It was soon making a profit a more than $11 billion per year on the medication. The same sort of thing happened with the EpiPens used by millions of Americans.

The high cost of health care is one of many reasons that the American life expectancy, at 78.8 years, is two years shorter than the average in developed nations. America also has the greatest income disparity of those nations. A male in the top 1 percent has a life expectancy of 87.3 years, 15 years longer than a male in the bottom 1 percent.

There is no instant answer to the escalating drug costs that, despite wonderful medical advances, is making them unaffordable save for switching to a single-payer system like other nations use where governments, after negotiations, set drug prices. But there are a few things Congress should do.

First, it should end the prohibition on permitting the Medicare Part D system to negotiate drug prices like the Veterans Administration has long done. That would save taxpayers and senior citizens a fortune and also put pressure on drug companies to reduce prices for all.

Second, Americans pay far more than residents of other nations to buy the same drugs from the same makers. Again, because most of those nations set the prices they are willing to pay. Congress should allow Americans to fill prescriptions and import medications from licensed pharmacies in Canada and perhaps other nations. That, too, would exert downward pressure on drug prices at home.

Third, patent law should be revised to prevent pharmaceutical companies from making minor or cosmetic changes in medication to extend the life of the patent and the monopoly control it provides. It should also provide tax incentives for makers to manufacture a generic drug that’s in short supply or unfairly priced.

The drug lobby is powerful, but drug spending, $87 billion four years ago, is on track to hit $400 billion by 2020. To prevent that, Congress has to act.

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