Many drug prices, particularly those used to treat cancer, have risen to astronomic levels. Medicare is prohibited by law from negotiating with drug companies to achieve lower prices (see: Drug Company Emphasis on Marketing an Unfavorable Shift for Consumers; Patient Assistance Programs Keep Drug Prices High and May Actually Be Illegal). This is partly because of the incredible power that drug company lobbyists exert over Congress. The prices being charged by pharmaceutical companies for drugs is "not illegal" but will surely cause upheavals in our healthcare system. This topic was recently discussed in an op-ed piece by Ezekiel Emanuel (see: The Solution to Drug Prices). Below is an excerpt from it:
Some independent estimates suggest that negotiated drug prices could save the federal government $15 billion or more per year. But this approach will not solve the problem of stratospheric drug prices, for several reasons. For many diseases, there exist only a couple of effective drugs, with little price competition. Also, Medicare would have little negotiating leverage since, unlike private insurers, it cannot maintain an approved drug list and exclude overly expensive drugs from coverage. The bigger problem, though, is that Medicare negotiations would do nothing to contain drug prices for the 170 million Americans who have private health insurance, through their employer, the exchanges, or by self-purchase. Having the federal government negotiate lower prices for Medicare would most likely drive up prices on the private side as drug companies tried to recoup their “lost” profits. Almost all developed countries....have an effective solution for drug prices, which is why these countries often pay less than half of what people in the United States pay for drugs. For instance, Australia’s more than 60-year-old Pharmaceutical Benefits Scheme has been the single purchaser of drugs for the country, making drugs available at fixed prices that are now listed online....
While the Australian system of price controls is one approach, another possibility is the Swiss health system, which is frequently applauded by conservative commentators. The Swiss government includes only those drugs that are effective and cost-effective on its approved drug list. It then establishes a maximum allowable price for the drug, but up to that point, companies can decide what to charge. We could cap the price based on objective, quantitative measures of value. Private payers would continue to negotiate with drug companies over prices as they do now, but there would be a ceiling to prevent prices from becoming unsustainable. Everyone, including drug company executives, believes that high prices cannot continue. Indeed, that is one reason that companies are trying to maximize profits while they can. We must come up with a comprehensive solution now.
The competitive market for many drugs is broken and Congress can't, or won't, intervene to fix the problem until the situation becomes desperate. The only feasible solution that I can envision is for the federal government to publish a drug price list of cost-effective drugs with a maximum price for each. Private payers would continue to negotiate with drug companies but with price ceilings in place. In order to move forward with such a solution, I think it's imperative for all of us to communicate with our federal representatives about this problem and potential solution. In so doing, we can partly offset the influence of lobbyists on Congress. As noted in the quote from Emmanuel above, drug company executive understand that the current situation can't persist but they are trying to maximize their company profits in the short term. Let's try to make this the "very short term." One interesting development on the political side is that Senator Bernie Sanders, a presidential candidate, is making drug prices one of the key policy issues in his presidential campaign (see: Bernie Sanders unveils bill to battle rising drug prices)