Why Drug Prices Are So High (Maybe)


The debate over high drug prices goes on. Reuters analysis found that the U.S. pays as much as seven times more than the United Kingdom for some top-selling drugs.  Why is that?  The Washington tries to explain in this piece. Let’s summarize (my thoughts in parenthesis):

  • High prices are necessary to incentivize pharmaceutical companies to develop new drugs (yeah, they have to make billions)
  • The U.S. underwrites the cost of developing drugs for the rest of the world (that is true to some extent)
  • Lori Reilly, executive vice president of policy and research for the pharmaceutical trade group, PhRMA, contested the premise that the U.S. always pays more for drugs, arguing that rebates and discounts negotiated in secret make the price gap smaller than comparisons suggest (she admits to covert sleaziness?)
  • The drug industry wants to develop new products but also fights to keep their prices and profits high (they love them some high stock prices)
  • The big drug benefits middlemen, who have a lot of negotiating power to keep prices low, but can also trigger patient anger by restricting what drugs they can get (they are lowlifes, plain and simple)
  • Many countries around the world set prices for medicines. They decide a price they’re willing to pay and it’s a take-it-or-leave-it approach (and their people accept it.  Americans want what the want and cry if they don’t get it)
  • The system in the U.S., in which drug prices are higher than in other developed countries, allows for patients to have more choices and access (you get what others pay for)
  • The elephant on the sidelines is the U.S. government itself, which would have significant negotiating power — if it were allowed to negotiate, which it does not.  The Democrats want to negotiate.  The Republicans, except for Trump, do not (this is bizarre)
  • The ability for the government to negotiate itself would have only a limited impact unless Medicare could also exclude some medications by creating a formulary of covered drugs, something that it doesn’t currently do (why does every senior citizen get every medical thing they want?)

So, let me now summarize:

  • Big Pharma makes back room deals all the time and they admit it
  • Other countries have no trouble saying no to drugs which means no to its population
  • We therefore subsidize the rest of the world
  • We do not allow Medicare to negotiate and say no to some drugs or no to some patients

In other words, it’s a mess.  Unless we can develop the backbone to STOP saying yes to all drugs on Medicare and Medicaid (as well as all procedures, by the way) then nothing will get fixed.

Confused?  Yeah, me too.

Douglas Farrago MD

Douglas Farrago MD is a full-time practicing family doc in Forest, Va. He started Forest Direct Primary Care where he takes no insurance and bills patients a monthly fee. He is board certified in the specialty of Family Practice. He is the inventor of a product called the Knee Saver which is currently in the Baseball Hall of Fame. The Knee Saver and its knock-offs are worn by many major league baseball catchers. He is also the inventor of the CryoHelmet used by athletes for head injuries as well as migraine sufferers. Dr. Farrago is the author of four books, two of which are the top two most popular DPC books. From 2001 – 2011, Dr. Farrago was the editor and creator of the Placebo Journal which ran for 10 full years. Described as the Mad Magazine for doctors, he and the Placebo Journal were featured in the Washington Post, US News and World Report, the AP, and the NY Times. Dr. Farrago is also the editor of the blog Authentic Medicine which was born out of concern about where the direction of healthcare is heading and the belief that the wrong people are in charge. This blog has been going daily for more than 15 years Article about Dr. Farrago in Doximity Email Dr. Farrago – [email protected]

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14 Responses

  1. Brian W. Joseph, M.D. says:

    In case you thought 7 times cost was excessive how about 10 times. Xyrem (thanks to the government giving one company a monopoly) costs $7,000 per month in the USA. In the UK the NHS pays $700 per month. Centralizing production & distribution was supposed to prevent it from being used as the date rape drug. Maybe some rapes have been prevented but patients have been screwed.

  2. Elizabeth says:

    My husband is a patient of the VA healthcare system, which does have a formulary. It took years but Crestor (rosuvastatin) is on the formulary now. Before this, the pharmacy would supply it but only a few pills at a time. He pays $8 per drug per month no matter how much, or how little, it costs the VA.

  3. Perry says:

    Too bad when the Moon Shot finds a cure for cancer no one will be able to afford it.

  4. Bill Ameen MD says:

    Don’t forget about the ex-cheerleaders who bring us huge lunches and late afternoon snacks and invite us to dinners at steak houses to hear our peers (who receive >$1,000 a pop) extolling the virtues of another me-too drug ALTHOUGH they can’t say it’s “better than” anymore…I’m just glad I’m retired and out of it and taking a few supplements with so-so cred from my favorite medical publication, the Wall Street Journal…

  5. Pat says:

    More proof of the toxic, terminal effects of Medicare. The voting power of the retirees has turned our economy into a national nursing home.

  6. DrPhil says:

    Why do you guys spend 13% of GPD and the rest of the world less?

    • Steve O' says:

      Does your shotgun have sights? Who are you pointing at? If you don’t know, you are actually part of the problem.

      • DrPhil says:

        So it’s my fault that (okay a couple of years ago now) Nexium (*not Generic) cost US $250 for 3 months yet cost <US $100 in Australia. Look at the other comment, here by a Vet, on Crestor – …
        If you don’t like the message – don’t shoot the messenger. So why did my comment upset you so much? I would happily apologies if I could understand why it would have upset you

        Sorry to upset you by accusing the Emperor of wearing no clothes (well you don’t do you Doug?)

  7. A cancer doc says:

    In the world of oncology, drugs are now being approved based on improvement in PFS (progression free survival). Sometimes, the benefit is a mere weeks compared to the alternative. That would seem OK, if the cost of the drugs wasn’t measured in 10,000/month (or more). As a society, we have decided that this appropriate. I often wonder if it is, especially given some of the toxicities.

    • Bridget Reidy MD says:

      And the worst part of all is that most patients aren’t told that, or they get the idea that for some it may work better. If there’s a bell shaped curve I’d love to know the standard deviation. Even if money weren’t the issue, many are robbed of what they would define as a “good death”, meaning also their families are robbed of good memories.

  8. Thomas Guastavino, MD says:

    Whose backbone are you referring to? You can’t mean physicians given the liability climate. Give us liability protections for saying no and we’ll do whatever you want. That way when the patients accuse us of withholding care we can say “Take it to your Congressperson”

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