Drug prices continue to skyrocket with no real solutions in sight.
Forty-one percent of Americans have medical debt, and the surging costs of affording life-saving medicine make that problem worse. It pains me to see healthcare consumers breaking their pocketbooks just to get the prescription drugs they need.
Congress has promised for years to do something about drug costs. They’ve proposed some legislation to target the problem, but none of the bills address the primary culprit for this crisis — drug companies’ greed.
The major drug manufacturers, particularly the drug distributors, are at the heart of the drug affordability problem. Three wholesalers (McKesson, AmerisourceBergen, and Cardinal Health) control 90 percent of the market. These companies are able to dictate prices as they see fit.
Pharmaceutical companies claim that prices are high due to the expense of research and development and other factors outside of their control. However, a 2022 study published in the Journal of the American Medical Association found that Big Pharma’s arguments don’t hold up to scrutiny. The study looked at drugs that had been approved by the U.S. Food and Drug Administration (FDA) between 2009 and 2018 and found there was no correlation between research and development spending and high drug prices.
The pharma companies also claim that pharmacy benefit managers (PBMs), the companies that negotiate drug prices on behalf of insurers, jack up their costs, but that’s not true either. A 2018 study showed that, in 2016, 67 percent of the cost of prescription medications went to drug companies while only 4 percent went to PBMs.
The real reason for high drug prices is not R&D or PBMs; it’s pharmaceutical companies pushing the market to the maximum extent it will bear.
As Antonio Ciaccia, CEO of drug pricing data firm 46brooklyn Research, recently told Bloomberg Law, “You have a [healthcare] system that is completely aligned to favor over-inflated prices for medicines, and so wholesalers are no different.”
The wholesalers’ monopoly over the market allows them to hike up their fees to distribute the drugs with no recourse from the market. This system results in drug prices being inflated to meet wholesalers’ exorbitant fees.
This greed has a dark underbelly. The big three wholesalers made a killing off the opioid epidemic, netting record profits off the suffering of Americans. The wholesalers all but admitted their role in this epidemic in a 2022 legal settlement by agreeing to massive payouts to the victims of their reckless schemes. AmerisourceBergen agreed to pay $6.1 billion, Cardinal Health $6.0 billion, and McKesson $7.4 billion.
Any leader serious about reining in drug costs must look at addressing the marketplace issues created by these wholesalers. But we so far haven’t seen that from elected lawmakers.
Politicians will rail against Big Pharma until their voices are hoarse. But when campaign season comes around, they happily accept hefty contributions from these corporations they demonize. Both the politicians and the drug distributors know the rhetoric isn’t serious. That’s why Big Pharma is so generous to Congress.
One easy thing lawmakers could do to solve this problem would be to demand that wholesalers offer transparent rates so the market can better handle drug prices. Another ambitious idea would be to break up the wholesalers’ monopoly and allow the market to correct the problem of the distributors’ price gouging. But will they ever work up the courage to do anything to address this issue?
We elect our representatives to tackle the problems that face ordinary Americans, not to do the bidding of whatever lobbying interest gives them the most money. Our country needs Congress to step up and do something about out-of-control drug prices. Any solution should start with those most responsible for creating the problem in the first place — the drug companies themselves.
Dan Perrin is the president of the HSA Coalition, a nonprofit dedicated to expanding the use of health savings accounts and creating a more affordable healthcare system for America’s most vulnerable citizens.
