Drug costs have been increasing more rapidly than inflation for years. Several recent high-profile cases, including the dramatic price increases in pyrimethamine and EpiPen, as well as the introduction of several new high-cost drugs, have increased scrutiny on the genesis of exploding drug costs. A new article in JAMA analyzes such price increases. The authors found that per capita, prescription drug spending in the United States exceeds that of all other countries, driven largely by brand-name drug prices. Although the pharmaceutical companies claim that research and development drives high costs, the most important factor is the ability for manufacturers to set high prices based on market exclusivity protected by monopoly rights awarded by the FDA and patents. Generic drug availability after patents expire is the primary counter to high drug prices, but access to generics may be delayed for years by numerous business and legal strategies. Government policies also undermine the ability of institutions to contract for better prices. The authors concluded that there is “no evidence of an association between research and development costs and prices; rather, prescription drugs are priced in the United States primarily on the basis of what the market will bear.” The authors suggested creating better policies on extending patents, enhancing timely generic availability, improving opportunities for price negotiations by government payers, mining better cost effectiveness data, and providing better education for prescribers, patients, payers, and policymakers. (JAMA 2016;316:858-871)
A recent study concluded there's no connection between research/development costs and prices, suggesting U.S. prescription drugs are priced primarily on the basis of what the market will bear.
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