A call to action to the US Government to fix the drug price issue

Recently there has been an uproar over drug prices in the United States. Many of you must have heard of Martin Shkreli, the infamous American businessman and CEO of Turing Pharmaceuticals who was responsible for a 56-time price hike on the drug Retrophin. In an instant, he became the most hated person in the country.

That, however, wasn’t an exception. Post the financial crisis, our country has had a recurring problem with increasing drug prices. Biotech has been one sector that has rebounded sharp and fast since the GFC. Today, drug prices in the US are the highest in the world. But why is it so? Well, you may be surprised to hear that it is simply just market forces.

Unlike other countries, the US government plays no role in prescription drug prices. This means that after FDA approvals, drugs are rolled to the market without any government oversight. This means that they are simply subject to market forces. And when it comes to pharmaceuticals, demand is always higher than supply, meaning that prices go up.

dru - A call to action to the US Government to fix the drug price issue

There are other nations as well where prices in general are high and unaffordable, such as Switzerland and the United Kingdom. However, due to strict intervention by Governments, prices are controlled and made affordable. The United States, being the ultimate example of pure Capitalism, remains different, undesirably so.

Politicians have come out and called out pharmaceutical companies for their unfair pricing. Even recent politicians such as Donald Trump and Hillary Clinton have slammed the industry. Imagine, cancer drugs in this country cost $10,000 monthly! That is blasphemous! It requires a bottoms-up effort from government and strict laws to control this spiraling hike.

There is an argument from pharmaceutical companies that the high prices are required to conduct further research and innovation. They say that cost of development is quite high. Qualitatively, it is true considering the United States is the world’s largest spender, by an immense distance, on drug innovation and research.

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Quantitatively however, the numbers don’t add up. Profit margins in this industry are excessively high, and cost of development isn’t anywhere close. Even so, pushing the prices higher and making it affordable only to the wealthy doesn’t do these companies any good. What is point of pushing a new drug to the market if now one can afford it!

We are a supporter of capitalism, but we feel like the government needs to do more in this domain. The United States deliberately stays away from most industries to let the market dictate prices. While this is a sound ideology, pharmaceuticals is not your typical industry. It affects lives.