No one really disputes it, and the real question is, Do we have the political will to do anything about it?
A classic case is the cancer drug Gleevec, which in 2013 cost roughly $6,200 per month in the United States but only $1,100 in Canada. Similarly, Sovaldi, the drug for hepatitis C, listed in the United States for $84,000 for a 12-week course of treatment but only $46,000 in Germany.
There are countless other examples. Last year drug prices in the United States went up almost 14% despite health care inflation falling to historic lows.
If you look for answers from the pharmaceutical industry, the answer you get is simple: Research. As one Pfizer executive put it: "Here's the reality: Most of the medicines we develop in our labs will not make their way to patients ...
To make up for the risk and expense inherent in creating new medicines, the few medicines that are successful must cover the research and development costs of the many clinical failures that will never earn a single cent.
It's easy to forget that profits serve an important purpose: they allow businesses to invest in the innovations of the future."
Makes sense, right? Consumers are paying for the overall cost of developing different therapies for different illnesses.
Except that this rationale doesn't come close to explaining what actually drives drug prices.
When cameras and mics aren't around, pharmaceutical executives acknowledge that research costs don't determine drug prices.
Speaking at the 2014 annual meeting of the American Society for Clinical Oncology, AstraZeneca Vice President Gregory Rossi, Ph.D said: We do not solve for [the] price [of a drug] on 'how do we basically return our investment?'...
We don't solve for price based on how much we have sunk for [research] costs...We solve for price based on a number of factors associated with market and value.
This private rationale is much closer to the truth. Just look at the regular and sizable price increases for drugs that have already been brought to market, where the research is already completed.
Every year like clockwork, Biogen and Teva have increased the prices on their multiple sclerosis drugs not because they are doing more research on the drug but to maintain revenue and profits with shrinking market share.