Why Prescription Drug Prices Keep Rising – and 3 Ways to Bring Them Down

Why Prescription Drug Prices Keep Rising – and 3 Ways to Bring Them Down

Consumers are sounding off about the downside of generic drugs
Abid Katib/Getty Images
By Michael Rainey

Prescription drug prices have been rising at a blistering rate over the last few decades. Between 1980 and 2016, overall spending on prescription drugs rose from about $12 billion to roughly $330 billion, while its share of total health care spending doubled, from 5% to 10%.

Although lawmakers have shown renewed interest in addressing the problem, with pharmaceutical CEOs testifying before the Senate Finance Committee in February and pharmacy benefit managers (PBMS) scheduled to do so this week, no comprehensive plan to halt the relentless increase in prices has been proposed, let alone agreed upon.

Robin Feldman, a professor at the University of California Hastings College of Law, takes a look at the drug pricing system in a new book, “Drugs, Money and Secret Handshakes: The Unstoppable Growth of Prescription Drug Prices.” In a recent conversation with Bloomberg’s Joe Nocera, Feldman said that one of the key drivers of rising prices is the ongoing effort of pharmaceutical companies to maintain control of the market.

Fearing competition from lower-cost generics, drugmakers began over the last 10 or 15 years to focus on innovations “outside of the lab,” Feldman said. These innovations include paying PBMs to reduce competition from generics; creating complex systems of rebates to PBMs, hospitals and doctors to maintain high prices; and gaming the patent system to extend monopoly pricing power.

Feldman’s research on the dynamics of the drug market led her to formulate three general solutions for the problem of ever-rising prices:

1) Transparency: The current system thrives on secret deals between drug companies and middlemen. Transparency “lets competitors figure out how to compete and it lets regulators see where the bad behaviors occur,” Feldman says.

2) Patent limitations: Drugmakers have become experts at extending patents on existing drugs, often by making minor modifications in formulation, dosage or delivery. Feldman says that 78% of drugs getting new patents are actually old drugs gaining another round of protection, and thus another round of production and pricing exclusivity. A “one-and-done” patent system would eliminate this increasingly common strategy.

3) Simplification: Feldman says that “complexity breeds opportunity,” and warns that the U.S. “drug price system is so complex that the gaming opportunities are endless.” While “ruthless simplification” of regulatory rules and approval systems could help eliminate some of those opportunities, Feldman says that the U.S. doesn’t seem to be moving in this direction.

Read the full interview at Bloomberg News

Chart of the Day: Long Way to Go on Coronavirus Testing

Healthcare workers with ChristianaCare test people with symptoms of the coronavirus in a drive-thru in the parking lot of Chase
Jennifer Corbett
By The Fiscal Times Staff

The White House on Friday unveiled plans for a new effort to ramp up testing for Covid-19, which experts say is an essential part of limiting the spread of the virus. This chart from Vox gives a sense of just how far the U.S. has to go to catch up to other countries that are dealing with the pandemic, including South Korea, the leading virus screener with 3,692 tests per million people. The U.S., by comparison, has done about 23 tests per million people as of March 12.

After Spending $2 Billion, Air Force Bails Out on Planned Upgrades of B-2 Bombers

The B-2 Spirit stealth bomber flies over the Missouri Sky after taking off from the Whiteman Air For..
© Hyungwon Kang / Reuters
By The Fiscal Times Staff

The Air Force has scrapped a planned upgrade of its B-2 stealth bomber fleet — even after spending $2 billion on the effort — because defense contractor Northrup Grumman didn’t have the necessary software expertise to complete the project on time and on budget, Bloomberg’s Anthony Capaccio reports, citing the Pentagon’s chief weapons buyer.

Ellen Lord, the undersecretary of defense for acquisition and sustainment, told reporters that the nearly $2 billion that had already been spent on the program wasn’t wasted because “we are still going to get upgraded electronic displays.”

Big Hurdle for Sanders’ Plan to Cancel Student Debt

Chip East / REUTERS
By The Fiscal Times Staff

Bernie Sanders wants to eliminate $1.6 trillion in student debt, to be paid for by a tax on financial transactions, but doing so won’t be easy, says Josh Mitchell of The Wall Street Journal.  

The main problem for Sanders is that most Americans don’t support the plan, with 57% of respondents in a poll last fall saying they oppose the idea of canceling all student debt. And the politics are particularly thorny for Sanders as he prepares for a likely general election run, Mitchell says: “Among the strongest opponents are groups Democrats hope to peel away from President Trump: Rust Belt voters, independents, whites, men and voters in rural areas.”

Number of the Day: $7 Million

NY mayor cites climate stance in endorsing Obama
Reuters
By The Fiscal Times Staff

That’s how much Michael Bloomberg is spending per day in his pursuit of the Democratic presidential nomination, according to new monthly filings with the Federal Election Commission. “In January alone, Bloomberg dropped more than $220 million on his free-spending presidential campaign,” The Hill says. “That breaks down to about $7.1 million a day, $300,000 an hour or $5,000 per minute.”