Big Pharma’s Defense Doesn’t Add Up

Some people in the United States ask, with skepticism, why the prices of prescription drugs keep climbing at steady rates. The amount of money that goes into the pharmaceutical industry from revenue seems disproportionate when compared to the income of the people who use prescription drugs. There is more than one instance where the price of a year-long prescription totals several thousands of dollars. In some cases, this amount can reach hundreds of thousands of dollars. How do companies that manufacture drugs justify this cost and where is the evidence to support it?

On the surface, the answer is as simple as making sure that research and development departments have the resources they need to produce medicine for the masses. After all, businesses operate on a profit-margin model, and people are willing to do what it takes to get relief. However, a closer look into what really goes into the supplying of citizens with their Rx needs shows that this industry has plenty of need for growth and change. Of course, ensuring fair and transparent practice would be a good place to start this change.

Information and easy access to said data are the most important components in a transparent and functioning system. When major pharmaceutical companies say that the high prices of their products are needed to cover the cost of research, the numbers need to be clear. The only cut-and-dry numbers on the issue of health care costs come from the amount of prescription drug sales. This money accounts for a substantial amount of total healthcare costs every year. And although it may seem like these facts simply point to fair business, a comparative look at other countries begs to differ. In other nations with lifestyles, governments, and economies similar to the US, the amount of money spent on pharmaceutical needs only totals to nearly half as much as in the United States.

It could be that people in the United States are simply not living as healthy as they do in other countries. There are diabetes and obesity statistics that clearly support such a theory. However, other factors that have something to do with the rate, methods, and reasons for such mass consumption. Pricing practices, on the part of major pharmaceutical companies, are a major reason why US citizens spend so much for their prescription drugs. The evidence to support this fact can be seen by comparing hospital and pharmacy prices. In some cases, it costs a patient more money to take medicine than it does to see a doctor and receive treatment. Of course, if the reason why drug prescriptions cost so much only came down to supply and demand, then the answer would be as simple open enterprise and competitive pricing. Things aren’t that simple.

Politics have something to do with the way drug companies do business. The long and short story boils down to bipartisan lawmakers and lobbyists advocate for “special interests” groups. The politicians want to regulate the way drugs are priced and make them more affordable to the public. On the other hand, they can’t agree as to how this should be done, and drug companies simple play one side against the other in all the commotion. Naturally, most people wonder how these companies are allowed to get away with this and why nobody has the courage to call them out for it or at least slap them with fines to get their attention.

Major pharmaceutical companies are protected by very specific laws that allow them to all but circumvent monopoly laws. Loopholes in the law cultivate a very particular set of circumstances, which yield big profits. The information is somewhat confusing and a little staggering at the same time. Studies which compare the United States and Canada shows that profits from the sale of the top selling drugs in the US can cover the cost of research and development for the entire industry. This is nothing to be concerned about in itself. However, the cause for concern comes from the fact that big pharmaceutical companies spend a sizable amount of their profits on advertisement. Turn on the television set and you’ll see commercial for some kind of pill to treat any number of conditions. This advertisement is even more present in magazines and other forms of media. Wouldn’t this money be better used to find cheaper more effective ways to produce prescription drugs?

Even worse than the disparity between the costs of pharmaceutical drugs and the research that goes into it is the source of funding for the research in progress. The simple fact is that drug companies don’t always fill the bill, so to speak, when it comes the costs of research and development. As a matter fact, a significant amount of funding comes from outside and third party sources who really don’t have to disclose who they are, the amount given, or the motivations behind the funds. From the outside looking in, it almost looks like drug companies are willing to make their facilities indirectly available to open sources of cash for the right price. There are two major problems with this operating model. For one, it’s really dangerous to let something like this happen on such a major scale without any kind of regulation in play. And secondly, it is absolutely reasonable to assume that investors want to see returns for what they spend. That’s fine when it comes to things like smartphones, cosmetics, and the latest fashion trends. But when a product affects the quality of life for the general public at large, there needs to be some kind of checks and balances in place to make sure that things don’t get out of control.

As it stands, there are no clear systems in place to keep the major pharmaceutical companies in other than the FDA (Food and Drug Administration). As far as these companies say, the FDA actually contributes to the problem of high pricing of prescription drugs through their approval process. However, most drugs that don’t reach approval wash out in the earlier stages, which doesn’t actually cost them that much.