Over and over again lifesaving drugs have seen astronomical price markups. These are generic drugs that are available around the world, but when brought to America the drug receives a new name. Along with the new name the drug comes with a price markup. The price markup the drug receives seems to have no correlation with the original cost to manufacture the drug. So why is this practice allowed, and who is allowing it?

The rising drug cost is an increasing concern for any American that needs these lifesaving medicines. This issue has become personal to me because of my friend since we were four years old, Nicole. Nicole has had a severe nut allergy all of her life, so she has had to carry an EpiPen with her. My moral compass tells me that price gouging drugs that can save lives like Nicole’s is a practice that should be outlawed. My major has also related this issue to my career choice. As a pre-pharmacy student, I will conduct business in the future directly related to drugs and their prices. I believe that the inflated cost of lifesaving drugs is a problem that can be resolved in the near future. With the proper support from both those in need of the medicine and those who have the ability to alter the laws regulating the pharmaceutical industry.

For the practice of drug price inflation to become a thing of the past, we must first identify who can make a change. There are many factors that affect price inflation including loop holes in government regulations, physician obligations, issues with insurance, and the pharmaceutical companies themselves. With factors like this it is easy to see how the pharmaceutical market could be manipulated to benefit those in charge. Big pharmaceutical companies are seen in the public eye as those that are reaping the benefits of the pharmaceutical marketplace manipulation. What have these companies done in order to attract so much disdain?

Many pharmaceutical companies have come under scrutiny over the years for price inflation. A name that seems to arise often is Mylan. The drug company Mylan has had a lot of backlash in the media, following their promise to lower the price of the EpiPen. Mylan instead of decreasing the price of the drug relied on health care insurance to cover the cost difference. Once this information was made public, another scandal arose. Medicaid was overcharged by Mylan for 1.27 billion dollars. In order to increase profit margins Mylan mislabeled the EpiPen. When bringing the EpiPen to market, Mylan had it classified as a generic. The misclassification allowed for a much larger profit than that of a name brand drug. This act did not go unseen by the Department of Justice. In order to continue EpiPen sales, it is reported that “The company allegedly reached a $465 million settlement with the Department of Justice (DOJ) last year over the classification issue” (Weixel). After this large settlement, Mylan was still left with a large sum of profits, made by the improper classification. Some executives at Mylan are not blind to the occurring practices. These executives do not approve of the business practices taking place, “Mylan, they said, is an example of a firm that has thrived by learning to absorb, and then ignore, opprobrium. The company has an effective monopoly on a lifesaving product, which has allowed its leaders to see public outrage as a tax they must pay, and then move on” (Duhigg). The executives that have seen the overpricing issue increase over the years stated that they are working toward removing multiple board members. With members of big pharmaceutical companies working to reduce price inflation, a solution could be in the near future. Still the question remains, how will those with high insurance deductibles afford the EpiPen right now? By leaving the cost difference to the government to cover, Mylan has shown disregard for their previous statements. By failing to deliver on their promise to lower the cost of the EpiPen, Mylan has taken the public outcry and thrown it in the trash. 

So far Mylan has been viewed as the antagonist of the overpricing debate; in order to lessen the public scrutiny, they have released multiple statements, on how they have promoted public health and how they are actively trying to reduce current prices. One way Mylan is working toward price reduction is through the EpiPen’s formula. Mylan reported that they, “continue to invest in product improvements, such as a formulation with a longer shelf life that would extend the period between refills” (The Doctor OZ Show). The current shelf life of the EpiPen is around eighteen months; by extending the expiration date, patients will have a longer period to use the product before it expires, and their prescription needs to be refilled. Another act of contrition can be seen in the EpiPen for School program. Due to the high price of the Epipen, “Mylan donates epinephrine auto-injectors to public and private kindergarten, elementary, middle and high schools across the U.S.* The program helps to increase access to epinephrine – the only first-line treatment for anaphylaxis – in the school setting” (Mylan). While this program increases the safety of students in school is has seen little media attention, compared to the allegations of greedy board members and abuse of market policy. Mylan went a step further, they, “tripled the discount patients can receive on the cost of EpiPen to $300, up from the maximum $100 Mylan had previously offered with the use of its special “savings card” (Wieczner). This reduction in price would leave the consumer paying about one half of the normal price. Clearly Mylan has seen the error in their business practices, but others like there are others conducting practices just as shady. 

To understand why generic drugs in America have a different price policy, the regulation and rights of the companies need to be examined. When a generic drug is sold in America, the manufacturers are allowed to set the price point. When one company in the market sets a high price point, most often its competition follows suit. This is rare in a free market, where competition usually lowers prices. Charles Duhigg examined this economic phenomenon in person and remarks, “When I asked my pharmacist for the generic EpiPen, he told me that I would have to wait 90 minutes, until he could get my doctor on the phone to authorize the substitution. Then, he charged me $370 for the generics” (Duhigg). The rise in price allows other companies to increase their market price with no regulatory action from the U.S. government. The lack of regulation is due to the U.S. economic system. Which is based on competition, in that whoever makes the better product at a better price will sell it. By this reasoning, the price of the generic drug should be significantly lower than the price of the EpiPen. The flaw in this reasoning comes from another law set by the government. When filling a prescription, only the drug listed and its generic form are legally allowed to be purchased and distributed. The Federal Trade Commission has seen the legal gap that this law has formed. The Federal Trade commission understands that, “the forces of competition do not work well in a market where the consumer who pays does not choose and the physician who chooses does not pay” (Engelberg). While the market place issue is clear, removal of this law would cause more issues than resolutions in the pharmaceutical market place. 

The general view of physicians is that they are actively trying to promote the health and the well-being of those in their care. So why would a doctor continually prescribe medication that is clearly overpriced? The answer lies in each doctor’s desire to safely prescribe patients. Each drug has multiple variables that can affect the user. The chemical makeup is the most concerning factor when prescribing a drug. Both desirable effects and side effects directly correlate to how each drug was chemically structured. Why would this be an issue if a drug is a generic version of a name brand? Generic drugs are described as, “a copy of a brand name that is required to have the same active ingredient, strength, dosage form, and route of administration as the brand name counterpart. However, generic drugs do not need to contain the same inactive ingredients as the brand name product” (Trusted Senior Specialist). This means that side effects could arise when a generic medicine is taken. These very miniscule differences have allowed for doctors to be preyed on. Big pharmaceutical companies leverage these minute differences, in order to promote their drug. It is reported, “The pharmaceutical industry exploits this market distortion to avoid price competition, spending tens of billions every year on promotions and payments to physicians to convince them that minor differences between drugs are clinically significant” (Engelberg). This exploitation forces physicians to prescribe an overpriced name brand, so that the patients best interest is in mind. 

Large pharmaceutical companies stated that, a majority of the profit does not go to them. The missing profit goes to the middlemen and insurance rebates. Pharmacy Benefit Managers are the middleman that separates pharmacies and insurance companies. The “Large PBMs such as Express Scripts, CVS Caremark and OptumRx, negotiate with pharma companies for lower prices, discounts and rebates on each prescription filled. In return, the drug companies are included on the PBMs' formularies, the list of drugs insurance will cover. PBMs claim they pass these savings onto the health plans they work for, which in turn lowers prices for consumers” (Konrad). In theory PBMs should be acquiring a price reduction for the consumer. This is not the case, PBMs have been exposed in court recently over what is known as a clawback. A claw back is when a consumer pays more than the listed price due to their co-pay. This occurs when a PBM has negotiated and received a lower list price from a company. When the consumer with insurance purchases their prescription using co-pay, there is a set price. If a PBM has purchased a drug for less money than the consumers co-pay, they will receive the remaining balance. Even if a company sells under market value to a PBM, the consumer is still overpaying. Pharmacist are not legally allowed to disclose the actual price of the drug, due to contractual obligations with the PBMs. In order to combat this issue, “Some states, such as Connecticut, have passed laws prohibiting clawbacks. Connecticut’s statute, which goes into effect in January, will allow pharmacists to tell patients it’s cheaper to pay cash for some of their drugs” (Feeley, Hopkins). If this law goes into effect, it has the potential to save consumers millions. For this to happen the federal government must enact a law, so that the nation can reap its benefits. As this topic is dissected, issues in our governments regulations become more apparent. 

The steroid deflazacort can treat children with muscular dystrophy. In Europe, this drug sells for around $1000-$2000 a year. The Food and Drug Administration has approved the sale of deflazacort in America. Matthew Herper stated, “Marathon Pharmaceuticals, is charging a list price of $89,000 – a 6,000% price increase.” (Herper). Deflazacort exhibits striking similarities to that of the EpiPen. The price inflation is allowed due to the laws set in place by the FDA. When an orphan drug is brought to America, the company responsible receives regulatory support from the FDA. Companies receive support if, the FDA “approve a sponsor's marketing application for a designated orphan drug for use in the rare disease or condition for which the drug was designated, or for select indication(s) or use(s) within the rare disease or condition for which the drug was designated” (FDA). If approved, the company receives exclusive approval for that drug. Exclusive approval permits a company the sole right to sell their drug for seven years, with no competition. This monopolistic law has been set in place to allow for genuinely new drugs to be developed, for the safety of the public. The problem is, when a generic drug around the world has been brought to America it receives the same benefits. The requirements of the Orphan Drug Act have allowed companies like Marathon Pharmaceuticals and Mylan to take advantage of a seven-year monopoly. By bringing a drug to America that is used worldwide to treat a specific disease, a company can fast track testing and begin selling. Marathon Pharmaceuticals was unable to fast track this process. Marathon used a lot of their resources, “In order to get the FDA approval, Marathon conducted 17 clinical and pre-clinical trials, and had to go back and find the data from studies conducted by the drug’s original manufacturer. The FDA is making Marathon conduct post-approval studies, including one in children younger than five” (Herper). This road bump reduced delfazacort’s profit margin dramatically. The process of drug approval is meticulous and expensive, it could be simplified however. 

There is an obvious solution to drug approval issues; specify what drugs are new, and what drugs are being relabeled. This could be done, but not by our government alone. With the help of other countries, this issue can be globalized. The National Institutes of health is a leading medical research organization. By globalizing drug research the period of testing could be reduced for drugs that have been tested and used in other nations. Drug research would become more extensive, by increasing the population variation in test subjects. The safety of each drug will increase, due to the increase in subject variables. It is very unlikely that this solution would be attempted by our government. This would eliminate a large portion of the FDAs control, and subsequently our governments control. It would also eliminate pharmaceutical company’s rights to specific drug sales. The amount of leverage big pharmaceuticals has with our government, significantly decreases possibility of global drug regulation. Another road block is the current political climate between nations. At this time, very few steps are being made towards decreasing tension among countries. Perhaps in the future when national grudges have been settled, the world will be able to use one source for drug regulation.
