Drug prices keep defying the law of gravity

cost of HepcPOST SUMMARY: Since 2007, the cost of brand-name medicines has surged, with prices doubling for dozens of established drugs that target everything from multiple sclerosis to cancer, blood pressure and even erections, according to an analysis conducted for Bloomberg News. While the consumer price index rose just 12 percent in the period, one diabetes drug quadrupled in price and another rose by 160 percent, according to the analysis by Los-Angeles based DRX, a provider of comparison software for health plans. Source: Bloomberg.  Why are drug prices rising and what can be done about it?

Starting prices for new drugs are escalating. Today, a cholesterol-lowering treatment for certain rare cases costs $311,000 a year and a cystic fibrosis medicine — developed partly with funding from a charity — costs $300,000 annually. Fifteen cancer drugs introduced in the last five years cost more than $10,000 a month, according to data from Memorial Sloan Kettering Cancer Center.

Desperation is one driver for the increases, with drugmakers raising prices on products that remain under patent to offset sales dropped from blockbusters that have lost patent protection. Opportunity is another, as companies with older drugs boost prices when rivals show up, either to match the price of the newer drug or to make up for lost prescription.


While generic drugs pushed by insurers and the government now make up 86 percent of all medicines used in the U.S., that hasn’t reduced total spending on prescription medicines. In 2012, Americans spent $263 billion, or 11 percent more than the $236 billion spent in 2007, according to U.S. government data.

Last year, increases in prices for existing branded prescription drugs accounted for $20 billion of the industry’s 2013 sales growth, offsetting $19.3 billion in revenue declines due to patent expirations, according to the IMS Institute for Healthcare Informatics. Discounts and rebates counteracted some of the price increases, according to the report.

When generic and brand-name drugs are put together, drug price increases have been slower than the growth of other health-care prices.

Why is this happening and what can be done?

Drug companies are public companies and as such have a responsibility to shareholders to maximize return value.  In the past few years we have seen a lot of drugs come patent leaving a huge revenue gap at the same time that the government is asking for price concessions and the cost to develop new drugs has been increasing.  Even with these price increases prescription drug prices still only account for 10% of every healthcare dollar spent while hospital costs have been increasing and executives of big hospitals earn millions of dollars in compensation.


If we really want to get serious about prescription drug prices here are some ideas:

(1) Give dug makers’ patent protection when drugs are approved by the FDA, not when they start work on molecules.  This would ensure that drug makers take their time conducting clinical trials and would surely lead to lower pricing models.

(2) Focus on prevention of chronic conditions such as Type 2 diabetes.  The costs of this disease are staggering and many patients with type 2 diabetes should be consulted on what they can do to prevent diabetes and how to get this disease into remission.

diabetes drug increases

(3) Last month, Bloomberg News reported that the world’s largest organization of cancer doctors, the American Society of Clinical Oncology, was working on an algorithm for rating the cost effectiveness of expensive oncology drugs, and will urge physicians to use the system to discuss the costs with their patients. This should be the case with all drugs, not just oncology drugs.

(4) Suggest the FDA develop tiers of clinical studies required for new drug approvals based on the class of medications and the disease state.  Why should a new allergy drug be subject to the same clinical trial costs as an oncology or MS drug?  In addition, the FDA needs to get closer to drug companies during the development process.  They can’t sign off on clinical trial protocols only to say “we need you to do more studies” later on when the NDA is submitted.

Yes drug prices are an issue, but rather than just point fingers we need to work together to tackle the root causes of the cost increases.  Stop bitching and address the issues.


1 thought on “Drug prices keep defying the law of gravity

  1. Many diseases which not long ago conveyed a short life expectancy (such as most cancers, CV/CNS and other arteriosclerosis tied diseases, some forms of diabetes,hypertension,lipid-profile linked ailments…etc.), now have a ‘specific drug treatment’. As they say: ‘Health has no price, but has a COST’. Today, many of these diseases, instead of causing premature death, may cause permanent handicapping in a large number of people, with all the consequences, both individual and social ones (workforce loss, for example, and health COST of caring for the handicapped…)So, Labs producing the ‘specific drug treatment’to avoid these consequences, take advantage on the prices, with the Gov’s agreement. Not few severe, even deadly diseases, might be dramatically reduced with a lifestyle change and no drugs (no-smoking, checking overweight, healthier diet, exercise daily, drinking less alcohol, learn stress-diminishing techniques…) And screening population for prevention of common diseases, if preventable ones, before the damages are already installed. But this isn’t an easy task, for lifestyle comes from childhood/family habits, highschool age. Think it’s possible, even desirable, but may take years. Meanwhile, people need to pay for ‘the chemicals’… or else.

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