I personally believe that the drug companies have been running amok of late with their drug pricing policies. Their predatory prices have Invited a regulatory response from various quarters. The state of California has responded with a new law designed to make drug prices more transparent (see: California Governor Signs Law To Make Drug Pricing More Transparent). Below is an excerpt from one of the recent articles discussing this new law:
The new law will require pharmaceutical companies to notify the state and health insurers if they plan to raise the price of a medication by 16 percent or more over two years. Gov. Jerry Brown defied the drug industry Monday, signing the most comprehensive drug price transparency bill in the nation that will force drug makers to publicly justify big price hikes....The drug lobby fiercely opposed the bill, SB 17, hiring 45 firms to try to defeat it and spending $16.8 million on lobbying against the full range of drug legislation. The new law is intended to shine light on how drugs are priced, requiring pharmaceutical companies to notify the state and health insurers anytime they plan to raise the price of a medication by 16 percent or more over two years. And, companies will have to provide justification for the increase. The legislation was supported by a diverse coalition, including labor and consumer groups, hospital groups and even health insurers, who agreed to share some of their own data under the bill....This law is part of a long game toward developing a stronger web of drug laws across the country,... a health policy professor ...."In that respect, it makes sense to start with the source of the drug prices: the drug makers themselves, he says. "The manufacturers get most of the money — probably about three quarters or more of the money that you pay for a drug — and they're the ones that set the price initially,"....
For many years and as part of their justification for enormous drug prices, the drug companies have maintained that their R&D costs can serve to justify the high prices for drugs. This assertion is now being soundly refuted by contrary evidence (see: R&D Costs For Cancer Drugs Are Likely Much Less Than Industry Claims, Study Finds). The drug companies themselves are disproving this notion by raising the price of drugs that have been on the market long enough for the R&D costs to have already been captured (see: Drug Prices Gone Wild: 10 Old Drugs, 10 New Pricetags). The truth of the matter is that they will charge whatever the market will bear for drugs and damn the consequences.
To my way of thinking, this California legislation is the beginning of an important experiment. The drug industry obviously fears the consequences of such legislation based on the amount of money they have spent lobbying against it in California. The experiment is whether greater drug price transparency will have an effect of drug prices. The drug industry is now held in such low esteem across the country that however much money is spent on lobbying, similar legislation in other states will probably be enacted. In fact, many critics of the California law say that it does not go far enough (see: California Has a New Law to Expose Drug Price Hikes. Big Pharma Isn't Happy). Below is a quote from this article:
Some critics say the bill has not gone far enough, arguing that transparency on its own won’t bring down drug prices and the bill lacks a mechanism to enforce price reduction. Drug companies say the law will not only be ineffective, but will also threaten innovation and development. The drug lobby has spent nearly $17 million in just over two and a half years to oppose new regulation in California. The pharmaceutical industry is expected to bring a legal challenge to the new regulation before it takes full effect in 2019