>> Drug Pricing Transparency in the U.S: A Governmental Perspective

Drug Pricing Transparency in the U.S: A Governmental Perspective

On April 18, 2019, Tags Pricing Strategies

The high cost of prescription drugs has been a major issue in the U.S, for decades. This is supportive of the fact the U.S spends twice as much on prescription drugs as other comparable western countries. In support of this an analysis on primary care prescription drugs in the United states versus ten comparable countries presented key findings which support the increased drug prices. This being, Americans spend more because of higher drug prices and expensive treatment choices. Additionally, the analysis found that the US spent 203% more per capita on primary care pharmaceuticals than the other ten comparable countries.

A study claims to find the rising cost of many prescription drugs in the U.S is largely due to price increases, not of expensive new therapies or improvements in existing medications as many drug companies claim. This study found the cost of brand-name oral prescription drugs rose more than 9% a year from 2008 and 2016 while the annual cost of injectable drugs rose more than 15%. In effect this clearly highlights the unclear and hiked prices set by many pharmaceutical companies in the U.S.

For example, the price of Insulin doubled between 2012 and 2016 according to the Health Care Cost Institute. Similarly, the price of Lantus another diabetes drug increased at 49% in 2014 alone.

So what factors are contributing towards increased drug prices? Firstly, referring to the study, innovation is a driving factor behind price increases for certain types of drugs. For instance, from the period of 2008 to 2016, the price of so-called speciality drugs rose from 21% for oral medications and 13% for injectable drugs. These increases were driven by new, innovative drugs such as Sovaldi and Harvoni, both developed by Gilead Sciences, that can cure Hepatitis C. Both drugs were initially priced at, $80,000 for a course of treatment.

Several major drug manufacturers have increased their drug prices, subsequently contributing to the trend of rising pharmaceutical costs. To name a few, drug manufacturers such as Allergan and Eli Lily and many more have hiked up their prices on several drugs, aligning to the growing price hikes in the drug industry.

From a governmental standpoint, Donald Trump’s idea of pausing price hikes criticism led Pfizer Pharmaceuticals to ignore his take and continued with initial drug price increases.

Aside from this many Pharmaceutical companies have created a 10% threshold that the manufacturers have set considered to be as self-imposed upper bound for annual increases. For instance, Allergan has increased the list price of Linzess, a medication which helps relieve symptoms associated with Irritable bowel syndrome and 25 other medicines by 9%. However, Biogen one of the world’s first biotech companies has increased the price of Tecfidera (multiple sclerosis drug) by 6%. In effect many drug makers have emphasized that net prices have either reduced or are growing slowly, despite the increase in list prices.

Given all the reasons behind the hiked drug price increases imposed by drug manufactures in the USA, to what extent is the government in control and if not, should the government act upon such measures.

image 2

The United states leads the world with innovative drug development, benefitting patients and caregivers around the world by ensuring access to new cures and treatments for a wide range of diseases. (Figure 1)

The success of bringing medicines to the market is made possible by a range of different professionals and scientists, business leaders, universities and research institutions. What makes the United states stand out is its commitment to a competitive, free market system for drugs that does not impose any limitations on successful innovations. Although many Americans agree with the idea of government measures to control drug prices given the current situation of the country and the people not affording to purchase their next treatment, a report from the Congressional Budget office (CBO) has noted direct Medicaid negotiations would not save the government in terms of lower drug costs, unless the government is given the power to impose formulary restrictions and reduced benefits. As a result some argue, the government should not be given the power to dictate what drugs should be given to people.

In response to what other countries follow, governments do not negotiate prices, but instead they dictate them, if such price-controls are to be followed government set-prices will lead to less supply, less innovation and less access for the American patients to the drugs they need.

In conclusion, there is large body of evidence that suggest the unclear drug pricing adopted by many drug manufacturer’s in the U.S. Despite all the war between drug manufacturers and third-party insurers, there is a strong need for the government to intervene to solve the skyrocketing drug prices and should be resolved in the near the future.

Rubhaan Malik
Pharmaceutical Analyst


1. Morgan, S. G., Leopold, C., & Wagner, A. K. (2017). Drivers of expenditure on primary care prescription drugs in 10 high-income countries with universal health coverage. CMAJ : Canadian Medical Association journal = journal de l'Association medicale canadienne, 189(23), E794–E799. doi:10.1503/cmaj.161481

2. Papanicolas, I., Woskie, L.R. and Jha, A.K., 2018. Health care spending in the United States and other high-income countries. Jama, 319(10), pp.1024-1039.

3. Golec, J. and Vernon, J.A., 2010. Financial effects of pharmaceutical price regulation on R&D spending by EU versus US firms. Pharmacoeconomics, 28(8), pp.615-628.

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