Our Drug Pricing Problem

Why are drug prices so high in the United States?

Pyrimethamine (Daraprim), the standard of care for treating a life-threatening opportunistic infection that affects mostly AIDS patients, was acquired by Turing Pharmaceuticals in August. Almost immediately, the company raised the price 5000% from $13.50 to $750 a tablet, bringing the average annual cost of treatment to hundreds of thousands of dollars and sparking public outrage.

This may be the most high-profile drug price hike, but it is not an isolated case. In fact, this has happened hundreds of times annually for years.

Pfizer alone has raised its drug prices 133 times just this year, and the majority of these increases have been greater than 10%.

A noteworthy case is pregabalin (Lyrica). Despite being a best-selling brand-name drug, Lyrica’s price tag was increased 9.4% twice this year.

During times of a dearth of drug innovation, raising prices on existing medications is an age-old tactic. Pharmaceutical companies will defend such actions by pointing out that most profits are directed towards research.

For every 5000 drugs that enter pre-clinical testing, 5 progress to human testing, and only 1 gets approved. Therefore, the odds of a new drug actually making it to the market is just 1 in 5000. In 2014, which was heralded as a great year for drug approvals, just 44 new drugs were approved.

In the name of incentivizing such research, we have become the antithesis of a free market.

Most drug prices are at least twice as high in the United States as anywhere else in the world for 3 reasons:

  • The FDA cannot look at pricing when it approves a drug.
  • The FDA cannot regulate a drug’s price following approval.
  • Third-party drug imports are outlawed.

Not coincidentally, pharmaceutical lobbyists spend more than any other special interest group.

The Infectious Diseases Society of America and HIV Medicine Association sent a joint letter to Turing Pharma this month, calling the pyrimethamine price increase “unjustifiable for the medically vulnerable patient population” and “unsustainable for the health care system.”

Under similar pressure from other medical groups, political candidates, and the public, Turing CEO Martin Shkreli vowed to lower the price of pyrimethmine. But he still has yet to do so.