The Price Gouging of the Prescription Medication Costs

Published: 2021-06-17 08:18:27
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Category: Strategy, Industry

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The prices for prescription medications must be regulated and there should be a cap on how high they can be marked up. Americans without health insurance cannot afford the medications they are prescribed; some people do not take their medications as prescribed instead taking them in half doses because they cannot afford to refill them. Americans have resorted to traveling to other countries to get prescriptions, then bringing them back to America illegally because the cost is much lower.
People in America are paying more money per person for prescription medications than any other developed nation, estimated to be around $1000 per person. According to Dr. Curtis E. Haas, Editor and Chief of, drug costs in the United States tripled between 1997 and 2007, then spiked again in 2013 and the number of drugs with $1 billion or more in sales went from 6 in 1997 to 52 by 2006 (Haas). In 2018, there was a slight reprieve from the usual annual price increases on most medications however, it was short-lived with most pharmaceutical manufacturers announcing a new round of price increases to start in 2019 that exceed the inflation rate for goods in the United States. (Haas)The drugs that are usually the ones with the most exorbitant price increases are epinephrine injectors or Epi-Pens, insulin, and cancer medications. When getting a new prescription for insulin, it can sometimes take 3-5 days to receive the medications, if at all. Most doctors do not know what drugs will be accepted by a person’s insurance, so when those doctors write prescriptions that is not considered. If someone has Medicaid or some other state sponsored insurance coverage not all medications are covered. Lantus and Januvia are two high priced diabetes medications that are not covered by Medicaid in Nevada.
Drug manufacturers blame the cost of research and development of newer groundbreaking pharmaceuticals for the high price of current medications already on the market. A process they say is extraordinarily expensive to do. They also blame insurance companies stating that they are placing more costs on patients with higher deductibles and copays. However, according to Holly Rosenkrantz a Washington-based freelance journalist who has written for CSB News, Bloomberg News and is a former White House Correspondent, some critics believe excessive profit-seeking and outrageous marketing budgets are to blame. (Rosenkrantz)
The pricing of prescription drugs in the United States is controlled by a complex system of negotiations, discounts, rebates, cost-sharing schemes, and assistance programs and often the prices are still higher than health care systems and patients can reasonably afford. Another factor that seemed to change the drug pricing in the 1990’s was a move away from a traditional business model for pricing to more of a financial market model (Haas). Drug pricing used to be based on development costs, operating costs, and need to return a reasonable margin over the life of the drug (Haas). Current pricing is based mostly on maximizing returns for the investors of publicly held companies, it feels like pricing is based more on the maximum the industry can get away with, rather than what is fair value for the drug (Haas). It has become an industry that can make its investors millions instead of an industry that is based on saving the lives of sick or dying Americans.
The high costs of medications are making it almost impossible for Americans without health insurance to afford prescriptions. Some cancer medications cost as much as $768,000 a year, and without insurance there is no way for most people to realistically afford these medications, even though they could save someone’s life. Even medications that are for non-life-threatening diseases can have an outrageous annual cost for someone who is uninsured or underinsured.
Some Americans have resorted to not taking their medications as prescribed. In a 2019 Kaiser Family Foundation poll nearly 3 out of 10 respondents said that they do not. In the poll 19% said they did not fill a prescription prescribed, 18% said they took an over-the-counter drug instead, 12% said they cut their pills in half, or skipped a dose entirely, and 29% said they did not take the prescription as recommended because of the cost (Rosenkrantz).
The soaring costs of medications is driving Americans to travel out of the country to get their medicine, as it has become less costly to get some medications in in places such as Canada or Mexico. A former city council member from Baxter Minn. named Quinn Nystrom, who has diabetes, has organized trips called “Insulin Caravans” to Canada for people to get insulin. In Canada diabetics can purchase insulin that costs $300 in America for as little as $30 (Rosenkrantz). Other organizers of Canada medication trips use social media like Twitter and Facebook to form these caravans. These trips violate a U.S. law that forbids U.S. citizens from buying drugs abroad for safety reasons (Rosenkrantz). But these laws have not deterred more and more Americans from travelling to Canada to purchase their medications.
In 2006 Medicare started offering prescription drug coverage, and the U.S. Government became the largest drug purchaser in the country. (Rosenkrantz) President George W. Bush opposed giving Medicare the authority to negotiate drug prices because they felt it was handing the government the power to impose price controls. Instead private insurance companies and pharmacy benefit managers were given the control of negotiating these prices. Most people want Medicare to be able to negotiate drug costs; even President Donald Trump has praised this solution. However, Medicare is legally prohibited from negotiating drug prices, and is also legally required to cover some medications. According to Rachel Sachs Author of Government Reforms Can Address Consumer Concerns “Medicare cannot get up and walk away from the bargaining table if it doesn’t like the price a pharmaceutical company is offering which significantly limits its ability to demand discounts from companies” (Appleby 164). To date there have been no resolutions for this problem in political discussions.
Being a CEO of a large pharmaceutical company is one of the best jobs to have today. Fran Quigley a Clinical Professor and Director of the Health and Human Rights Clinic at Indiana University says in his book Prescription for the People: An Activist’s Guide to Making Medicine Affordable for All, that the business plan can be considered bulletproof. “Consider that Governments conduct the riskiest and most time-consuming research and development in your industry and then you are awarded monopolies on the products of that research. Your customers lives’ may depend on obtaining your product, so they are often forced to pay whatever price you decide to charge. Even better, governments are reliable bulk purchasers of your product, and some government programs are even prohibited by law from negotiating down your asking price” (Quigley 65). This is what people in America should be going to school to do if they want to be rich and do not care about people, because it is one of the most profitable business sectors in modern history, but it is unethical at best. If someone needs a medication to stay alive, and there are no laws in place to help those people afford the lifesaving medications, the companies with monopolies on that medication can charge whatever they want, and the CEO and investors make millions per year. This is the American dream right? But that is not how Americans are supposed to treat other Americans.
Martin Shkreli, former CEO of Turing Pharmaceuticals is probably the most infamous CEO of a drug manufacturer. Shkreli invoked his 5th Amendment right not to testify at a congressional hearing about drug price gouging. Shkreli acquired the rights to manufacture the life saving generic drug Daraprim, which treats a parasite infection called toxoplasmosis, that can cause blindness and brain damage. Turing raised the price of this drug by 5,000 percent from $13.50 per pill to $750 per pill making it unaffordable for every person who was on this drug. Leslie Allen, a journalist who has written articles for The New York Times, and National Geographic and other publications says in her article Prescription Drug Costs, “Turing’s business model represents an extreme example of what many see as excessive profit-seeking and has been widely condemned by other drugmakers, as well as patients and members of Congress” (Allen). The publicity of this case has put a spotlight on the issue if exorbitant costs for both brand name and generic drugs and has finally gotten the government to discuss ways to fix the price gouging for life saving pharmeceuticals.
Some states are currently considering introducing measures that would alleviate some of the high cost for certain medications. While these would only take place within their borders, it may have some effect on neighboring states as well. Colorado recently put a price cap of $100 on insulin co-pays for insured residents regardless of the supply they require. Colorado is the first state to enact legislation that would protect patients from insulin price increases. Some people believe that the cap will provide relief for diabetes patients; that the cost may kick back to the insured population through other medication costs. If more states would follow suit, then drugmakers would be forced to the negotiation table and perhaps drug prices would begin to see a decrease rather than the annual increase that is seen today.
Generic drugs would help alleviate some of the high costs, however drugmakers obtain patent protection after a medicine is approved by the Food and Drug Administration (FDA). These patents are supposed to reward companies for creating a drug, but they instead make it so drugmakers can keep competition at bay for decades. The FDA reports that drug companies get approximately 10 years of exclusive production rights once a drug enters the market. Companies often extend their monopoly on a medication by patenting new applications for drugs or something different in the way the drugs are produced (Rosenkrantz).
Another way to ease the burden of high costs for medications would be to import medicine from other countries. Colorado, Florida, and Vermont have all approved legislation that allows their residents to buy prescription drugs from Canada. However, all three states are awaiting U.S. Department of Health and Human Services approval. Some lawmakers believe that importing medicine from other countries would put Americans at risk of getting counterfeit medications, and there would be no way to assure the safety of American patients. (Rosenkrantz)
Drug pricing in the United States should not be treated like a normal business, it should not be a supply and demand market, when the demand is people who are sick or dying, and the supply could save lives. America is a free market, but the health of the American people should not be treated as a currency with which companies and their investors make billions. There should be price gouging laws in place like the laws that are in place to protect people from price gouging during a natural disaster. When a hurricane or some other disaster happens retailers sometimes try to take advantage of the demand for everyday necessities like water and medical supplies, by charging extremely high markups on these items. Having cancer is a disaster for the patient who has it, making it almost impossible to get treatment at an affordable rate is the same as charging $200 for a flat of bottled water in a place without clean drinking water during a tornado.
American drugmakers patents should be much shorter than the 10 years they are receiving now, and there should not be a way to extend those patents for decades by changing one thing in the production method. There should be more competition for drugmakers by allowing companies that make generic versions of medications at much lower costs to have access to the production of these drugs. States should be able to cap how much pharmaceutical companies can charge their residents for lifesaving medications. Drugs should also be allowed to be imported from other countries to create for competition for the current companies in America. If people were able to get their medications from other sources, the supply would go up to meet the demand, and the price point would be lowered.

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