America’s Pharmaceutical Dilemma

In the past decade, drug prices in America have risen to exorbitant levels, pushing basic health care out of reach for many citizens. Annual drug hikes have averaged 10.5 percent, and American households have increased their pharmaceutical spending twentyfold since 1980 (adjusted for inflation). This indicates a larger trend: Big Pharma is consolidating its power over the U.S. healthcare industry, and its influence is only growing. The sad reality is that this trend results in Americans not receiving the health care they need and deserve while pharmaceutical corporations continue to rake in profits upwards of $300 billion a year.

The key to lowering drug prices is generic manufacturing, which involves the mass production of the drugs invented by the research divisions of pharmaceutical companies. Unlike big pharmaceutical companies, which must go through the lengthy and complex process of submitting drug patents for approval, these generic manufacturers can produce drugs at a low cost because they do not need to invest in research. Since they can save on research and development, generic manufacturers are able to undermine Big Pharma’s share of the healthcare industry, which is why the latter goes to great lengths to maintain total control over its patents.

Large pharmaceutical companies also abuse loopholes in the U.S. patent system to control drug prices. One such loophole is known as evergreening, in which manufacturers subtly tweak existing drug mixtures and apply for new patents in order to overcome patent expirations. By changing a nonactive component of a drug, corporations are able to completely reinvent the product from a legal standpoint, only to continue to market the drug in the exact same way with its patent-protected, exorbitantly high prices.

Another tactic is far more straightforward: bribery. Drug companies simply pay generic manufacturers to not manufacture their drugs in what are known as “pay-for-delay” agreements. For example, in 1995, the patent of a drug used to treat Parkinson’s disease, Sinemet CR, expired. That same year, however, its manufacturer, Bristol-Myers Squibb, paid generic manufacturers to refrain from producing their drug for another 11 years. This is not an isolated event. In total, these delay agreements cost U.S. consumers $3.5 billion in higher drug prices every year because they restrict the presence of generics in the market.

Higher drug prices are not simply a burden for taxpayers who have to foot the bill for public healthcare programs, however. High drug prices affect people on an individual level, especially those most reliant on prescription medication. This impact cannot be overstated. Forty-five million Americans cannot fill their prescriptions because the costs are too high.

To lower drug costs, many have suggested creating a single-payer healthcare system or enacting national price controls over increasingly expensive yet vital drugs. These measures, which are particularly popular in progressive circles, are not the appropriate solution. A single-payer system would simply shift the burden of financing healthcare to other consumers rather than addressing the underlying cause: the fundamental lack of competitiveness in the pharmaceutical industry.

Revitalized competition in drug markets can only be achieved if generic manufacturers are given a chance to produce drugs in large amounts at moderate costs. To accommodate this, patent expirations need to be better enforced by the government, and pay-for-delay agreements must be strictly banned. One way to do this is to mandate the percent of novel content in drugs. Some experts have suggested that new drugs must be 90 percent different from existing patents in order to qualify for new patent protection. Alternatively, the Department of Justice could apply anti-trust laws to evergreened patents, setting a precedent for low-cost generic drugs. Banning pay-for-delay deals is even easier, as Congress can simply pass legislation outlawing such contracts.

The solutions to the fundamental problems with America’s pharmaceutical industry lay just at our feet. If the people of this nation were to come together and demand that Congress enact these solutions, they would be taking an enormously important step to taking back control of their own drugs, and therefore their own lives.