Big Pharma's Profit Problem Remains

Consumers have been infuriated about the way that pharmaceutical companies have been raising the prices of their products. The outcry has been so strong that the media has covered this issue extensively and done many stories about it. Politicians and health insurance companies have also spoken out unfavorably about the price increases. However, the massive amount of negative attention that these companies have received has not deterred them from continuing to raise their prices whenever they feel like it.

These companies have received some backlash on Wall Street as a result of their continuous price increases. The fact is that many of these companies have experienced a sharp decline in the value of their stock. Wall Street analysts believe that the possibility of price controls on medication being created by Congress is one of the main reasons that these companies are having such a poor showing on the stock market. Another reason for the decrease in stock value has been an investor concern that the pharmaceutical companies will eventually begin to lower their prices because of all the bad publicity they have been receiving. However, there have been no clear indications that Congress has any intentions of making this issue one of their top priorities. In fact, all signs indicate that Congress will not take on the major drugmakers at all. The reason for this is believed to be the fact that these multi-billion dollar companies have hired lobbyists on Capitol Hill to get important politicians on their side.

The decision by drugmakers to raise their prices does not seem to be affected by a downturn in the economy. They have historically shown a willingness to make significant price increases no matter how bad the economy is currently doing. The pharmaceutical industry raises their prices more often than the vast majority of other industries. In fact, these companies have been raising their prices at a much more frequent rate over the past several years than they ever have before. This has made many industry experts and consumers wonder if there is a limit to how high these prices will be raised. There appears to be no end in sight.

The prices of pharmaceutical companies based in the United States were analyzed during the period from May 2015 to May 2016. During this time, these companies raised their prices a staggering 9.8 percent. This number speaks for itself. Only investment services had a higher price increase during the same time period. This is according to the Producer Price Index of the Bureau of Labor Statistics.

Pharmaceutical manufacturers have the luxury of being in one of the few industries that could get away with such outrageous price increases. This is because they have a captive audience who need their products to survive. Even a company as popular as Apple could not survive annual price increases on their products that were equal to that of the major drugmakers.

All evidence indicates that the price increases of drugmakers are making them even wealthier than they were before. Phizer, Biogen Inc. and Gilead Sciences Inc. are examples of companies that reported massive revenue increases that they have directly attributed to raising the price of their drugs. Companies such as these will often defend themselves by pointing out all of the discounts that they give to health insurance companies. However, the financial disclosures of these same companies indicate that the discounts being offered are not slowing down the massive profits they are taking in.

It seems very clear that price increases will continue to be business as usual for the major pharmaceutical companies until Congress steps in and does something about it. When that will happen is anyone’s guess.


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