issues

4 Ways to Shoot Down Drug Prices

Potential solutions from policy wonks across the ideological spectrum

When politicians decried the drug company Mylan’s decision to increase the price of an EpiPen by 500% in less than six years, their indignation rang familiar. After all, Congress had just wrapped up a series of hearings examining Valeant Pharmaceuticals’ decision to raise the price of a single vial of its heart medication Isuprel from $180 to $1,472. A few months earlier, Turing Pharmaceuticals CEO Martin Shkreli had been deemed the “most hated man in America” after increasing the price of the anti­parasitic drug Daraprim by 5,000% in one month, from $13.50 per pill to $750. Shkreli showed little remorse for the hike and smirked his way through congressional testimony in February. No wonder 3 in 4 Americans believe that drug companies put profit before people, according to a recent Kaiser Family Foundation poll.

The cycle of outrage turns reliably: a drug company jacks up the price of medication, the public rebels, politicians line up to excoriate the drug­makers’ CEOs, and pharma executives, in turn, promise it will never happen again.

Until it does. In 2015 drugmakers increased brand-name drug prices in the U.S. by an average of 16.2%, nearly 10 times the average inflation rate, according to Express Scripts’ Prescription Price Index. Spending on prescriptions rose by 12.6% in 2014, (the latest year for which data are available), according to federal health officials, and it is expected to rise by an additional 7.3% every year through 2018. The drug industry, meanwhile, remains among the most lucrative, with annual profit margins of nearly 20%.

An end to this cycle remains elusive. The pharma­ceutical industry does not operate according to normal market rules: consumers neither shop for nor pay for a cancer drug in the same way they purchase a sweater or a smartphone. Changing that will likely require fundamentally rethinking the economics of the pharmaceutical market, either by limiting how drug­makers turn a profit or by changing how patients access drugs. Here’s a look at four potential solutions that policy wonks across the ideological spectrum have put forward.

Create a federal watchdog committee
Hillary Clinton rolled out a plan in early September that would create a team of federal officials tasked with monitoring drug-price hikes. If the group determined that a certain hike was excessive, it would have the power to intervene directly by imposing penalties on the offending drug company or funding competitors’ efforts to create rival products at lower prices. The plan borrows from a slew of state-based bills, many of which require drug­makers to justify price increases by providing hard data about research-and-­development costs or a drug’s performance in human trials. “Consumers need to know what they’re paying for—why a drug costs what it does,” says John Rother, who leads the National Coalition on Health Care, a nonprofit group aimed at lowering drug prices that has endorsed national drug-pricing-­transparency legislation.

Allow Americans to import drugs
Both Clinton and Donald Trump, as well as a growing number of state and federal lawmakers, have backed the idea of allowing Americans to import drugs from abroad, so long as they meet Food and Drug Administration standards. “In a lot of these cases, you have the same drug available at a Canadian pharmacy for a fraction of the cost,” Republican Senator Susan Collins of Maine told TIME. The pharmaceutical industry opposes the idea on the grounds that it could increase the risk of Americans’ taking counterfeit medications and undercut drugmakers’ ability to spend on developing new cures.

Reform the patent process
Pharmaceutical patents are supposed to reward drug companies for doing something good—namely, for investing tens of millions of dollars in potentially risky R&D to come up with new medications. Patents allow companies to recoup their investment by selling new drugs competition-free—and therefore at higher prices—for a number of years. But this model is increasingly under scrutiny, in part because many people believe drug companies are gaming the system. Instead of focusing on developing new cures, they are spending millions tweaking the way existing drugs are administered or changing their inactive ingredients. Those moves have the effect of extending a drug’s patent and upping the amount of time it can be sold at monopoly prices, but they don’t necessarily help consumers. Many major drug companies also spend more on marketing, advertising and executive pay than on R&D.
One potential fix: changing how patents are administered so that the government rewards companies with patent protections only when they can demonstrate that they’ve invested in developing or improving a drug with high therapeutic value.

Help regulators fast-track generics
When there is no alternative for a drug, patients and insurance companies have no choice but to pay whatever price a drug­maker sets. That dynamic, says Democratic Senator Elizabeth Warren of Massachusetts, creates “market failures and a recipe for disaster.” To fix the problem, law­makers in 2012 allowed the FDA to collect fees from generic-­drug manufacturers to expedite the approval of new drugs. FDA officials say that effort is beginning to pay off. Earlier this year the agency reported that it had collected $1.5 billion in fees, hired 1,000 additional employees and was making headway on the backlog of roughly 4,000 generic medications. But with thousands of new applications pouring in every year, the process is much slower than many advocates would like. In the meantime, any company selling a drug with no competitor can, and does, charge pretty much whatever it wants. •

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