Drugmakers continue to raise drug prices thanks to company "innovation"

Written by Alyssa Clark It has been apparent for decades that big pharmas and drug companies can justify raising prices with just about anything&mdash...

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|Jan 17|magazine8 min read

Written by Alyssa Clark

 

It has been apparent for decades that big pharmas and drug companies can justify raising prices with just about anything— and consumers have no choice but to eat the increase for medications they need. The favorite reason as of late seems to be because pharmaceutical companies claim their products lower surplus healthcare costs, thus the difference should be paid to the company anyways; which clearly is based only off speculative evidence.

An example of this poor attempt at justifying price jumps came from the Swiss company Roche Holding AG, when the company described its high growth rate as a result of its “high-quality” products. The company argues that their products are inherently better for consumers due to the fact that they already come with “better prices and fewer price cuts”, when speaking at the JP Morgan Healthcare Conference. One of the speakers at the event Alan Hippe, basically reinforced the pharma companies outlandish claims stating that as long as Roche can prove its drugs like Herceptin (a leading breast cancer drug) really are better than existing medicines, they can justify price as they please.

Whether this market trend is true or not isn’t the question; the most poignant problem in all of this is the ability for the pharma companies to dictate their own pricing, without some sort of regulation? It’s no wonder why these companies are charging the small consumer an arm and a leg for medicines they desperately need— it’s simply because they can.

Roche’s other leading drug, Gazyva is priced at around $41,000 for a single course of therapy and was labeled as a “breakthrough” therapy last year—which was music to the company’s ears. With this industry-wide understanding of this drug being a ‘breakthrough” drug, Roche saw the sky as the limit in terms of pricing, as the drug showed even more promising signs of success during follow-up testing. The FDA also got behind the drug, allowing the company even further justification for its pricing climb, stating that there therapies can work for those people with certain genetic mutations as well.

"A lot more people in pharma are asking the question of not just approval, but reimbursement," said Todd Davis, managing director at HealthCare Royalty Partners, which structures financing deals for biotech companies tied to drug royalty payments. "If you have another me-too product, or even worse, a product not as good as other market alternatives, it's a tough road." But there has been sticker shock. A consortium of influential leukemia specialists appealed last year in the journal of the American Society of Hematology for drugmakers to reign in "unsustainably high" costs that many patients cannot afford.

Between 2008 and 2012, the costs for prescription medications rose 14 percent totaling $326 billion, even when powerhouse drugmakers like Pfizer and Aetna came out with low cost generic medicines during the same time. A negative of the newly-implemented ACA will now be that the health insurance plans offered by employers will ask consumers to pay a bigger share of drug costs, in the form of higher co-payments and deductibles. Thus another reason as to why, more now than ever before, it is of the upmost importance for companies to justify that their medications not only work, but that they are worth the money that the public is having to invest in them.