The COVID-19 pandemic has demonstrated that it is more important than ever to ensure Americans have access to affordable medications. The pandemic has greatly strained families’ ability to access health care and afford basic needs. Among those who take prescription drugs, one in four adults say it’s difficult to afford their prescriptions. Those uninsured are usually stuck paying the full retail price. However, even for the majority of Americans who have access to health insurance, many people struggle to pay for drugs not covered by insurance. As a result, patients are resorting to skipping doses or delaying filling their prescription.

Despite Americans facing widespread unemployment and health insurance losses, pharmaceutical companies continue to operate on profit motives without considering the impacts of drug pricing hikes on access to medication and equity of medical resources. According to GoodRx, more than 800 drugs had a price increase in 2020, averaging 4.6%, the largest increase in years. EpiPen and Daraprim are some of the recent notorious examples of price hikes. Over the years, Mylan Pharmaceutical ruthlessly raised the price of the two-pack EpiPen, an emergency lifesaving allergy treatment, from $100 to $600 and Martin Shkreli of Turing Pharmaceuticals increased the price of Daraprim, a lifesaving medication used treat toxoplasmosis, from $13.50 to $750. The dangerous trend of increasing list prices leads to insurance companies increasing premiums, copays, and placements of certain drugs on higher tiers in insurance plans. Reclassifying medication that was once accessible and lifesaving into higher specialty tiers results in large increases in out-of-pocket costs, disproportionately impacting economically vulnerable patients. This practice excludes patients from accessing medically necessary medication and benefits of new drugs, impacting quality of life and the course of disease.

Unfortunately, simply demanding that drug prices be lowered is not a comprehensive solution. By regulating and lowering drug prices, it reduces drug innovation for new drugs that can potentially improve people’s lives. For U.S. pharmaceutical companies, the median cost for bringing a new drug onto the market is about $1 billion.^[1] This analysis accounts for the cost of the 90% of projects that fail during clinical development. In order for pharmaceutical companies to recoup the cost of these failures, they set high prices to make enough profits to reinvest in the next generation of drugs.

The U.S. pays significantly more for prescription drugs and relies on market competition to set drug prices. Despite this, countries with drug pricing regulation still made significant contributions to pharmaceutical innovation.[2] In order to lower prices for the consumer in the U.S. while simultaneously encouraging innovation, policy makers should look to China, where its innovation-friendly policy environment plays significant role in the nation’s drug innovation capabilities.[3]

Policy solutions should look to improve transparency of the costs pharmaceutical companies incur in drug development to help balance the trade-offs involved in short-term affordability and long-term quality innovation. After the implementation of Medicare Part D, which expanded pharmaceutical insurance coverage for elderly Americans, research showed that there was little change in the amount of research done to develop novel drugs for seniors. Instead, the products were mainly duplicating the performance of existing treatments for various diseases.^[4] Therefore, determining incentives for pharmaceuticals to improve the “quality” of innovation should be a primary focus.

A shift in the paradigm needs to occur such that the price of new drugs is not just reflecting the sunken cost of research and development but that it relates to the novel clinical advantages and benefits over current existing treatments.

References:

^[1] Wouters, Olivier J., et al. “Estimated Research and Development Investment Needed to Bring a New Medicine to Market, 2009-2018.” JAMA, vol. 323, no. 9, 2020, p. 844. Crossref, doi:10.1001/jama.2020.1166.

[2] Keyhani, Salomeh et al. “US pharmaceutical innovation in an international context.” American journal of public health vol. 100,6 (2010): 1075-80. doi:10.2105/AJPH.2009.178491

[3] Ding, Jingxi, et al. “From Imitation to Innovation: A Study of China’s Drug R&D and Relevant National Policies.” Journal of Technology Management & Innovation, vol. 6, no. 2, 2011, pp. 1–13. Crossref, doi:10.4067/s0718-27242011000200001.

^[4] Dranove, David, et al. “Pharmaceutical Profits and the Social Value of Innovation.” National Bureau of Economic Research, 2014. Crossref, doi:10.3386/w20212.

Elise Wang is a Macaulay Honors scholar (’21) majoring in Biology with a Behavioral Neurobiology Concentration and minoring in Public Policy. She was previously a policy intern at the Asian American Federation (AAF) working on issues that affect the pan-Asian community. At AAF, she focused on issues revolving around immigration, language access, and the early impact of COVID-19 in NYC. Elise also has a strong interest in health policy and plans to attend the University of Rochester Medical School next fall. She hopes to continue being involved in health policy work after graduating.