Medical Monopoly: Intellectual Property Rights and the Origins of the Modern Pharmaceutical Industry
Getting to the Root of High Prescription Drug Prices: Drivers and Potential Solutions
Available online at www.commonwealthfund.org
The prominence of high drug prices among current American grievances derives from three recent episodes. In 2014 Gilead Sciences brought out Sovaldi, a drug that cures hepatitis C within twelve weeks but costs $1,000 a pill, making the price of a full course of treatment $84,000. In 2015 Turing Pharmaceuticals, a new company headed by Martin Shkreli, a hedge-fund manager, acquired Daraprim, the sole treatment available in the United States for a life-threatening parasitic infection, and raised the price per tablet from $13.50 to $750. (Shkreli is now serving a prison sentence for fraud unrelated to drug prices.) And in 2016 Mylan Pharmaceuticals, which had a stranglehold on the market for EpiPens (used to counter allergic shock), began selling them wholesale for $284 apiece, a 600 percent increase over the wholesale price in 2007, and offering them only in packages of two.1
The three companies appeared to be emblematic of the entire pharmaceutical industry. Between 2008 and 2016, the price of new prescription drugs doubled, and the cost of some older drugs rose many times faster than the annual inflation rate.2 A significant number of Americans, especially seniors, reportedly could not afford their medications.
Mounting public anger forced prescription drug prices onto the nation’s political agenda. During the 2016 presidential campaign, Hillary Clinton proclaimed that the prices for some drugs were “outrageous,” and Donald Trump attacked drug companies for “getting away with murder.” During his first year in office, Trump’s condemnations of the drug industry subsided, no doubt in response to the influence of his secretary of health and human services, Alex Azar, the former president of the American division of the Eli Lilly Corporation. But in his State of the Union Address in January 2018, Trump pledged that he would bring the costs of prescription drugs down “substantially.”3 On May 11, 2018, Trump proposed an overall policy for “Putting American Patients First,” which he supplemented with a more specific “blueprint” posted on the White House website. Though the document proposed a few regulatory measures, its overall thrust was that drug prices could be curbed by free-market forces. At the end of May, Trump claimed that some of the largest pharmaceutical firms would enact “voluntary massive drops in prices” within two weeks. That was news to the drug companies, whose leaders had planned no such action. Pressured by the Trump administration, a number of major companies, among them Pfizer, Novartis, and Merck, promised to keep their prices steady for the rest of the year.4
In late October, however, just before the congressional elections, Azar declared to reporters that high prices constituted “the greatest possible barrier to patient access.” Democratic strategists gave prescription drug prices high priority in…
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