The reason behind the astronomically high prescription drug prices is deeply complex but is primarily the result of a government-protected monopoly, proven in the extensive review from 2005-2016 by the Journal of American Medical Association (above link). Although highly nuanced and deeply rooted within policies, the main factors can be still be explained simply.
First, unlike most other countries, drug manufacturers in the U.S. are setting their own prices on prescriptions, thus huge increases in prices are largely unregulated. Whereas, countries with national healthcare systems have built in negotiations into their processes so if a drug is deemed too expensive it is lowered, or else the government themselves, set the prices.
Next, the U.S. system allows monopolies for most drugs, so that generics must wait 20 years+ for the patent to run out. In addition, these companies receive exclusivity for drugs that treat rare illnesses by the Food and Drug Administration (FDA), while the Agency takes an excessively long time to approve generics. Many state and federal laws limit the ability to keep the costs of generic drugs down and may simply promote high prices, albeit unintentionally.
Finally, drug companies claim that the high prices are justified by the extensive research and development costs associated with creating a new drug. However, these studies and research endeavors are primarily funded by federal agencies like the National Institutes of Health or by venture capital. Overall, only 10-20% of the company’s revenue is spent on R & D.
Thus prices are based on what the market will withstand, not on a fair price. Prices for drugs often exceed the average American’s annual income creating extensive burdens to patients, families and employers. Increased pricing has attacked new drugs and even existing drugs, with price increases of up t0 13% in one year. Americans spend more money on prescription drugs than any other country on the planet, allowing Americans to fear of bankruptcy even then get sick, let alone terminally ill.
Affordable and Safe Prescription Drug Importation Act
In February 2017 Sens. Bernie Sanders (I-Vt.), Cory Booker (D-N.J.) and Bob Casey (D-Penn.) introduced legislation to lower the skyrocketing cost of prescription drugs by allowing Americans to import safe, low-cost medicine from Canada. Reps. Elijah E. Cummings (D-Md.) and Lloyd Doggett (D-Texas) introduced a companion bill in the House. Both measures would authorize the secretary of Health and Human Services in two years to allow importation from other advanced countries.
The bill includes detailed provisions outlining safeguards and consumer protections that ensure the safety of imported drugs, including FDA certification of foreign sellers, a clear definition of what drugs may be imported and supply chain security requirements.
Legally imported drugs under the bill must be purchased from an FDA-certified foreign seller and must have the same active ingredient, route of administration and strength as drugs approved in the United States. The new agreement also cracks down on rogue online pharmacies.
In Canada and other major countries, the same medications, manufactured by the same companies, in the same factories are available for a fraction of the price compared to the United States. In 2014, Americans spent $1,112 per person on prescription drugs while Canadians spent $772 and Danes spent $325.
While five major drug manufacturers made more than $50 billion in profits in 2015, nearly 1 in 5 American adults could not afford the medicine they were prescribed.
Read more about the Bill here.