Drug Manufacturers Raise Prices

Published July 20, 2018

The announced price increases by Pfizer, Inc., Bayer, Novartis, and several other drug makers hike drug prices by an estimated 9.4 percent, with double-digit increases expected for the year as a whole.

Health and Human Services (HHS) Secretary Alex Azar said in testimony before the Senate Finance Committee in June he hoped drug makers would “exercise restraint” in raising prices.

Cites Obamacare Effects

Twila Brase, president and cofounder of the Citizens’ Council for Health Freedom and a policy advisor to The Heartland Institute, which publishes Health Care News, says reducing the price of prescription drugs is a worthwhile goal for the Trump administration because the Affordable Care Act (ACA) championed by President Barack Obama caused premiums, copays, deductibles, and many drug prices to skyrocket.

“The cost of some drugs can be comparable to the price of a house or a round-the-world vacation,” Brase said. “So when people see eye-popping prices, they get concerned because they know their pocketbook can’t afford it. And for some of them, they know they will have a higher percentage of the cost they will have to pay out of pocket, maybe more than what they do for other types of procedures and expenses.

“As a result, people have started to ask the price of services up front, they have started to ask the price of medications, and the only reason this is happening is because they are responsible out of pocket for much more than before, thanks to the ACA,”  Brase said.

EpiPen Example

Brase cites the EpiPen, an epinephrine (adrenaline) autoinjector, as an example of how drug pricing works today and why the average American has begun to pay greater attention to the costs.

“There are a few people in this country who are allergic to bee stings, peanuts, strawberries, or other things, and so they carry an EpiPen with them in case of attack,” Brase said. “The EpiPen used to cost around $60 to $80. But the company that manufactured them was bought by another company who decided to raise the price astronomically and then bundle them. A single EpiPen was no longer available. Patients had to buy at least two, and the price of two was increased to $600.

“This is a product that has a shelf life of a year, and many will never use it,” Brase said. “So that’s two EpiPens, never used, sitting on a shelf, that cost $600.”

Brase says although this particular case got the attention of some politicians, bureaucratic outrage isn’t nearly as effective as simply allowing people to make market choices with their own money.

“Price transparency happens naturally when you have a real market, and a real market is when you have people paying with their own money,” Brase said.

“Government would never need to make prices transparent if they would just give people their money back and let them make their own decisions instead of putting a band-aid on the problem for political benefit,” Brase said.

‘Not a Free Market’

Avik Roy, cofounder and president of the Foundation for Research on Equal Opportunity (FREOPP), says the cost of prescription drugs is skyrocketing not just for consumers but for taxpayers, because of federal, state, and local government subsidies.

“If you’re a taxpayer looking to reduce waste, fraud, and abuse in what we spend on health care, or if you’re a consumer finding your pharmacy bills going up, reducing the cost of prescription drugs is extremely important,” Roy said.  “Additionally, you have a system in which there are legal monopolies for new drugs, combined with blank-check subsidies from federal, state and local governments, to pay for those new drugs regardless of the cost or value. That’s not a free market in any way.”

Roy says there are several ways for the government to facilitate a free market.

“Over 80 percent of all the prescriptions in the United States are for cheap, non-branded generic drugs, and they are very affordable,” Roy said. “In fact, they are more affordable than anywhere [else] in the world. Where we have a problem is in the remaining 16 percent of the market, where the branded drugs are, and for those, we’re paying through the nose.

“The Trump plan in large part tries to do something we at FREOPP have been talking about for several years now: to learn from the 84 percent of the market that’s working well to improve the 16 percent that is not,” Roy said. “In other words, bring competition to the 16 percent wherever possible.”

Less Bureaucracy, More Responsibility

Brase says drug prices would drop if there were less bureaucratic interference and manufacturers were held directly responsible for the safety outcomes of medications.

“It’s very much like a car manufacturer seeking to market and sell a car with a good safety record,” Brase said. “As soon as a lot of people start complaining, the car won’t be purchased and the manufacturer will have to go back to research and development, may have to deal with lawsuits, etc. It should be the same with medications.”



“American Patients First: The Trump Administration Blueprint to Lower Drug Prices and Reduce Out-of-Pocket Costs,” U.S. Department of Health and Human Services, May 2018: https://www.hhs.gov/sites/default/files/AmericanPatientsFirst.pdf

Avik Roy, “A Market-Based Plan for Affordable Prescription Drugs,” The Foundation for Research on Equal Opportunity, May 16, 2017: https://freopp.org/a-market-based-plan-for-affordable-prescription-drugs-931e31024e08

“Major Drugmakers Ignore Plea from HHS To Not Hike Drug Prices,” Washington Examiner, July 3, 2018: https://www.washingtonexaminer.com/policy/healthcare/major-drugmakers-ignore-plea-from-hhs-to-not-hike-drug-prices