Prescription Drug Prices

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Prescription Drug Prices

By retired pharmacist Duane C. Hess

The following op-ed was published on September 17, 2002, and is reprinted with permission from West Hawaii Today newspaper.

There is wide-spread belief, judging from the news media, that some prescription products are over priced. We read numerous accounts of people living near Canada or Mexico visiting those countries to purchase their pharmaceutical products at much lower prices.

The patent protection that covers new drugs essentially gives manufacturers a monopoly on the product for the life of the patent. This gives drug companies wider latitude than other types of companies in setting prices for their products. Companies that operate as monopolies are subject to government review. Since pharmaceutical products are marketed more or less as monopolies, should they not be subject to the type of oversight that other monopolies receive?

The argument that we often hear about drug prices is that products must be priced to permit the companies to recover the costs of development. At first glance, this seems reasonable. But this deserves further consideration. Has it ever happened that products have been over priced? Who provides protection for the public in this area? Shouldn’t there be some way to review the prices in the same way that the FDA monitors the quality and safety of the products?

New patent protection for products lasts for 20 years. This often starts before the drug is approved for marketing, and the patent protection then continues for the balance of the 20 years after FDA approval. At some point in the life of the product, it may be changed from “prescription only” to “over the counter” sale. After the patent expires, other companies usually step in and market generic equivalents of the product. These generic products are usually priced well below the price at which the product had been marketed while under patent protection. .

What about the claim that the company must be permitted to recover the development costs? Does anyone ever check to see whether or not this has happened? Do companies sometimes recover more than the cost of developing the product? Maybe much more? If the plan is to “cover the development costs”, what happens after that is accomplished? Should prices then be reduced?

These products are often very heavily advertised. Does this add to the cost of the products? Are the people who use the products also paying for the advertising costs? Shouldn’t there be some limit on this?

For some years, the stocks of pharmaceutical companies have been promoted as “good investments” because these companies are profitable. In fact, in recent times, the companies that manufacture generic products are also being promoted as “good investments”.

Shouldn’t these products, that are so carefully monitored for quality and safety, also be monitored for their pricing and marketing?

I do not wish to imply that all pharmaceutical products are over priced. I don’t believe they are. But, some may be over-priced, and when that happens, there should be a way to determine that, and there should be a remedy for it. Especially when these products are protected from price competition.

Recent bills before Congress have approached this problem by setting up insurance programs to pay part of the cost of medications. These bills have not yet received Congressional approval. Is that the most practical solution?

Programs of this nature tend to be complex, and premiums must be paid. After the premiums are paid, and the uncovered balance of the medication cost is also paid, will there be any saving? Not only that, but under this type of program, what would prevent further increases in prices of prescription products?

Maybe a different approach is needed. The preamble for the Constitution states that one function of government is to “Protect the public welfare.” Don’t the above suggestions fall under this function? Doesn’t the history of the last 50 years show that this is needed? It is very possible that, in the long run, programs to control drug prices would benefit not only the public, but the pharmaceutical companies as well.

January 2003