Big pharma and the drug pricing blame game

There's a Spaghetti Western shoot-out taking place between high-priced medications and patients, and the sheriff in town in getting ready to lock up the villain of this drama.

The only problem is, he's got the wrong villain.

Consumers are upset about escalating health care costs, and the media has been quick to place the blame on pharmaceutical companies. But their anger is misdirected. With a little transparency, Americans would see who's really to blame for rising prices, and with rare exception it's not the industry creating lifesaving medicines.

Most Americans believe that drug manufacturers set drug prices, and then increase them opportunistically. It's easy to understand why. Rising health care costs along with high-profile stories of misguided price-gouging at some small pharmaceutical companies have left consumers feeling cheated.

The truth is that drug companies most often aren't driving the high costs of medications. The prices that patients pay aren't actually set by the drug manufacturers at all; they are decided by pharmacy benefit managers, insurance companies, pharmacies and hospitals.

And these third parties often price gouge. It happened in Minneapolis, where a local CVS was caught in a prescription price shell game where the price of a kidney medication was raised to more than $6 per pill from 87 cents. And in North Carolina at the Levine Cancer Institute, which collected nearly $4,500 for a colon cancer drug that hospitals typically buy for $60..

It's a fact that successful pharmaceuticals are expensive to create. The average cost of developing an FDA-approved prescription medication is $2.6 billion, according to the Tufts Center for the Study of Drug Development. What's more, Americans only see the successful drugs. For every successful new compound, there are hundreds that don't make it to market.

To truly understand the cost of drugs, Americans need a better understanding of our healthcare system and associated spending. This includes the competitive landscape in the United States, where competition from other drug makers often results in discounts of 50 percent or more, so drugs often cost less here than they do in Europe where drugs are price-controlled.

It also requires the understanding that the most expensive on-patent drugs account for just 7 percent of American health care spending from 2013-2014. These are the same drugs that help patients avoid even more expensive surgeries, lengthy hospital stays and other expensive treatments.

If we need a cure for the pricing blame game that's infecting the pharmaceutical industry, a little transparency would help.

Peter J. Pitts is an authority on global regulatory policy issues and an Executive Partner at YourEncore. He is a former FDA Associate Commissioner, the Chief Regulatory Officer for Adherent Health Strategies, and the President of the Center for Medicine in the Public Interest, a policy institute he founded in 2004.

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