Pharmaceutical Price Gouging

Last week, we all got a refresher on the problems with capitalist markets in pharmaceuticals. Martin Skhreli raised the cost of an HIV drug by 5000 percent, causing an outrage that forced him to backtrack (although as soon as he said that, all the media attention went away and so he’s probably still going to raise the price by a lot, just not as much as he originally said). There’s no good reason for companies not to do this, not when the American government lets them. Drug companies are doing the same thing with cancer drugs:

And now, research reveals the yawning gap between the price of widely used cancer drugs and their actual cost.

The true cost — what drug makers have to spend to get those pills to your local pharmacy — is made up of the active ingredient and other chemicals, their formulation into a pill, packaging, shipping and a profit margin.

British researchers, in a report to be delivered this weekend at a European cancer conference, say the price of five common cancer drugs is more than 600 times higher than they cost to make.

For instance, the analysis figures the true cost of a year’s supply of Gleevec (generic name imatinib), used to treat certain kinds of leukemia, at $159.

But the yearly price tag for Gleevec is $106,322 in the U.S. and $31,867 in the U.K. A generic version costs about $8,000 in Brazil.

“We were quite surprised just how cheap a lot of these cancer drugs really are,” pharmacologist Andrew Hill of the University of Liverpool said in an interview. “There’s a lot of scope for prices to come down.”

…

And the implications stretch way beyond these specific cancer drugs. Overall prices for cancer medications have been going up at a fast clip. Dr. Peter B. Bach of Memorial Sloan Kettering Cancer Center in New York has documented a nearly 100-fold increase in cancer drug prices since 1965 after adjusting for inflation.

“The rate of rise exceeds the rise in benefits from these drugs,” Bach says. “This is a ginned-up pricing structure that isn’t a product of careful analysis. It’s not a bunch of guys in green eye-shades but a bit of dart-throwing and chutzpah. And if there’s a critical Op Ed piece or a Twitter avalanche [in response to a high price] they’ll lower it.”

Bach speaks from experience. Three years ago, he and two other colleagues announced in a New York Times Op Ed piece that Memorial Sloan Kettering would not be prescribing a new colon cancer drug because it didn’t improve outcomes despite its high price tag. The manufacturer responded by halving the price.

I grant that in some of this pricing comes from the cost of research. However, a lot of this price gouging is from capitalists like Skhreli who buy up drugs and never put a dime of research into them. Also, a lot of drug research is federally-funded. So what we are really seeing here is an American medical system that rewards killing people who can’t afford these drugs because just enough can to keep these companies making money. Even with the advances of the ACA, the American medical system is still a hot mess and greed is at the core of the problem. Really, only the government can solve this problem and politicians need to turn away the Big Pharma money and look toward acquiring affordable drugs for Americans that has some connection to the cost of production plus a reasonable profit for the companies, with “reasonable” not defined by venture capitalists or shareholder wishes.