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Reducing Drug Prices in America’s Pharmaceutical Industry

Updated: Mar 15

The words “pharmaceutical industry,” strung together, often seem synonymous with “exploitation.” How can we change that?


Big Picture


“The pharmaceutical industry.” Isn’t it odd that something which saves lives can sound so filthy to so many? Soaring drug prices have soiled the industry’s reputation in America.

There has been improvement in drug coverage for those covered by Medicare or Medicaid — as in the prescription drug provision of the 2022 Inflation Reduction Act. But this doesn’t cover everyone. Many are left paying for prescriptions out of pocket, especially because of the high deductibles in many commercial insurance plans. Some recent efforts to regulate drug pricing have been made from the left, but it remains an issue — one lamented across party lines.


Operative Definitions


  1. Generic Drug: Generally, a lower-cost prescription drug that is chemically and medically identical to the brand name. The only difference is that the generic drug no longer has a patent on it.

  2. Copay: The set out-of-pocket price paid for a medical service after insurance. Some plans offer coinsurance, which is when the patient shares the price of a service with the insurer at a specified ratio, such as 80 percent insurance coverage and 20 percent patient contribution. 

  3. Real-Time Prescription Benefit (RTPB): A tool embedded into the Electronic Health Record  (EHR)  software to help physicians and patients make joint and informed decisions regarding up-to-date prescription drug pricing. Currently backed by the American Medical Association (AMA).

  4. Price-Gouging: The price increase of pharmaceutical drugs to a level that is considered unreasonable or unfair. Price-gouging can incur legal consequences. 

Important Statistics and Facts

  1. The average copay for generic drugs is $6.06, while brand-name drugs tend to have a copay of $40.30.

  2. About 78%, or 8 in 10 Americans across political parties, believe that pharmaceutical company profits are the reason for high drug prices, as opposed to the cost of research and development (68%) or marketing and advertising (52%), according to the Kaiser Family Foundation (KFF).

  3. Prescription drug prices in the United States ring at 2.56 times those in 32 other countries that belong to the Organization for Economic Co-operation and Development (OECD).

  4. The majority of Democrats interviewed by the KFF favored Democrats to lower prescription drug costs. Republicans tended to favor Republicans. Among Independents, 47% trusted Democrats, 28% trusted Republicans and 17% said they trusted neither. 

  5. The Congressional Committee’s Oversight and Reform’s investigation of the pharmaceutical industry found that large drug companies spend more on payouts for investors and executives than on research and development. Also, most drug development is funded by taxpayers. The research and development done by drug companies involves minor changes to already existing drugs. 

  6. In the case of Pfizer’s drug Lyrica, the Congressional Committee’s investigation found that the company intentionally targeted the US market for price increases and used patent protections, market exclusivities and other tactics to delay generic competition.  

Four-Point Plan


(1) Congress should tap into its current investigation and perform a smaller follow-up investigation of the pharmaceutical industry to inform prescription drug pricing legislation.

The Congressional review of the pharmaceutical industry has made it clear that drug prices are too high for Americans and that federal intervention is necessary to proceed. The investigation also made it apparent to Americans that Congress is concerned with the pharmaceutical industry. This can help Americans have some confidence in their government and its ability to regulate these exorbitantly high prices. Further attention should be placed on the pharmaceutical industry and its proceedings by Congress. 


(2) President Joe Biden’s Build Back Better (BBB) Act should be expanded to include price regulations and R&D regulations for prescription drug companies, to go along with its negotiation of Medicare insulin and drug prices. 

The BBB Act currently focuses on helping Medicare negotiate and set prices with pharmaceutical companies for drugs like insulin. However, while the Medicare population makes up a large percentage of prescription drug users, this policy action is not sufficient to help the majority of Americans meet drug costs. Prescription drug reform is necessary now more than ever, with of price-gouging and massive out-of-pocket costs. The BBB Act comes at the right time to make necessary changes.


(3) Commercial insurance companies should be further investigated in partnerships with drug companies and be required to increase their coverage of name-brand drugs. 

Part of the cost burden placed on Americans is the limited coverage of brand-name drugs by commercial insurance companies. Price negotiation works for Medicare, so commercial insurance should also work towards having more fairly negotiated prices, by federal regulation. 


(4) EHRs should be required to include an RTPB, and doctors and hospitals should be encouraged or subsidized to prescribe more generics. 

Another aspect of drug pricing that needs to be addressed is how prescription drugs are prescribed. Though this is majorly a problem at the top in the drug industry, it would still be necessary for the government, particularly state governments, to subsidize hospitals and their networks to prescribe more generic drugs. When a generic medication is available it should be prescribed before any name-brand options are tried. Doing so, however, might run into problems with physicians’ views on the government in the practice of medicine. Incentivizing physicians to prescribe less expensive drugs could improve patient trust in the healthcare delivery industry and alleviate the burden of high drug pricing on the ground. Furthermore, requiring hospitals to use EHRs that have RTPB Tools embedded in them can help physicians and patients find the best drug for patients, both medically and financially. 


Why This Initiative is Important


It’s 2023. The United States shouldn’t be dominated by extremely high drug prices. Pharmaceutical companies and the industry as a whole make up a large segment of the healthcare market and overall economy. Though it might be risky for Congress to go against such a giant, it is financially and ethically necessary. More legislative oversight of the industry and its far reaches could help regulate prices and improve health outcomes.   


The opinions expressed in this article are those of the individual author.


Sources



Jennifer Lubell Contributing News Writer. “Enable Real-Time RX Benefit Info to Boost Truth in Drug Pricing.” American Medical Association, 17 Nov. 2021, https://www.ama-assn.org/delivering-care/public-health/enable-real-time-rx-benefit-info-boost-truth-drug-pricing


Mulcahy, Andrew W. “Prescription Drug Prices in the United States Are 2.56 Times Those in Other Countries.” RAND Corporation, 28 Jan. 2021, https://www.rand.org/news/press/2021/01/28.html


NCSL Prescription Drug Policy Resource Center. National Conference of State Legislatures, https://www.ncsl.org/research/health/ncsl-prescription-drug-policy-resources-center.aspx


“Public Opinion on Prescription Drugs and Their Prices.” Kaiser Family Foundation, 5 Apr. 2022, https://www.kff.org/health-costs/poll-finding/public-opinion-on-prescription-drugs-and-their-prices/

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