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Why Are Drug Prices Rising So Much? Pharma Exec Admits ‘No Other Rationale’ But Profit-Making

“The industry executive said the quiet part out loud,” said one outside expert in response. “Price-gouging is central to the industry business model.”

Corporations’ quest for profits is what “is driving up drug prices and nothing more.”

That’s according to Dennis Bourdette, M.D., chair of neurology in the Oregon Health and Science University (OHSU) School of Medicine, who co-authored a study published Monday that sought to find out companies’ rationale for the escalating prices on medications for patients with multiple sclerosis.

Prices for those drugs, an accompanying press release notes, have jumped up by 10% to 15% every year for the past decade.

The study by a team of researchers at OHSU and the OHSU/Oregon State University College of Pharmacy, which appears in the journal Neurology this month, was based on interviews with four current and former pharmaceutical industry executives who had direct involvement in the pricing or marketing of MS drugs.

The executives, who were not named, laid bare the motivating factor for the surges.

“I would say the rationales for the price increases are purely what can maximize profit,” sad one executive. “There’s no other rationale for it, because costs [of producing the drug] have not gone up by 10% or 15%; you know, the costs have probably gone down.”

Such statements, said the researchers, counter the industry’s narrative that the high drug prices are an effort to recoup their research and development costs.

“The industry executive said the quiet part out loud,” said Zain Rizvi, law and policy researcher with Public Citizen’s Access to Medicines project, in a statement to Common Dreams. “Price-gouging is central to the industry business model.”

One executive inteviewed for the study pointed out that the U.S. is a global outlier when it comes to the price hikes. They said that “it is only in the United States, really, that you can take price increases. You can’t do it in the rest of the world. In the rest of the world, prices decline with duration in the marketplace.”

Maintaining or lowering the prices would give a negative impression about the medication, said one executive. “We can’t come in at less,” they said. “That would mean we’re less effective, we think less of our product, so we have to go more.”

The responses, said Bourdette, who also directs the OHSU Multiple Sclerosis Center, speak volumes.

“The frank information provided by these executives pulls back the curtain of secrecy on how drug price decisions are made,” he said.

While the new study focused on MS medications, the issue of skyrocketing prices is more widespread. As economist Dean Baker of the Center for Economic and Policy Research noted last year: “The government gives drug companies patent monopolies that make it illegal for competitors to sell the same drug. These patent monopolies allow companies to charge prices that are a hundred or even a thousand times the free market price.”

And other recent research backs up the case that drugmakers are relying on price hikes to drive their growth.

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3 Comments

  1. Quentin L. Ledford Quentin L. Ledford November 28, 2019

    In addition, ‘reforms’ under the so-called Patient Protection Affordable Care Act (aka PPACA), has contributed greatly to such cost increases by removing whatever competitive forces existed which essentially monopolized drug markets. The creators of PPACA deemed that it was ‘too difficult’ a task for the FDA to inspect and monitor multiple manufacture and distribution channels for the same medications. So it was deemed ‘prudent’ to require that each drug have a unique manufacturer and distribution channel.

    Almost immediately after the passage of PPACA KV Pharmaceuticals raised the price of Makena, a drug used to prevent premature birth by 5,000% (from about $20 a dose to $1,500), and in other cases the well publicized CEO Martin Shkreli outrageously raised prices on a number of crucial medication manufactured by Turin Pharmaceuticals which they acquired proprietary rights to.

    This though, comes with the FULL backing of the American Medical Association, which uses the FDA as its strong arm to protect its pharmaceutical constituents.

  2. Jeff Martin Jeff Martin November 28, 2019

    Well, gouging American consumers with outrageous drug prices won’t last too much longer. They won’t be able to afford them and with single-payer healthcare, they won’t be allowed to have them either.

  3. Jack Jack November 29, 2019

    Actually there are several other things contributing to rising drug prices, middlemen, sales reps, everyone who gets a cut is responsible. It isn’t a simple as the article supposes.

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