The price of brand-name drugs has skyrocketed over the past several years, leading increasing numbers of Americans to switch over to cheaper generic drugs. But even those generic drugs are also increasingly costing Americans more money, as chain pharmacies across the country hike their prices to charge up to 18 times the drugs’ original cost. There’s one clear winner in this equation: the giant pharmaceutical companies that are raking in the profits.
Over the past decade, the 11 largest global drug companies reaped about $711 billion in profits, according to a new analysis from the Health Care for America Now (HCAN) advocacy group. In 2012 alone, the drug companies’ annual profits totaled nearly $84 billion. The organization’s analysis credits much of these profits to the federal policy that prevents Medicare from negotiating directly with drug companies — which allows Big Pharma to price gouge the government program’s prescription drug benefit, known as Medicare Part D:
Medicare’s prescription drug coverage is essential for seniors — and since Obamacare has helped ensure that more prescription drugs are now covered under Medicare Part D, millions of seniors have saved $6 billion on the medication they need. But, since Medicare is unable to negotiate bulk purchasing discounts, Big Pharma continues to overcharge the federal program for those drugs. HCAN points out that pharmaceutical profits soared around 2006, when Medicare Part D was first put in place.
Pharmaceutical companies often claim their huge profits are necessary because that money goes toward innovative drug research and development. But one recent study found that drug companies actually spend 19 times more on advertising their products than they do on investing resources to develop new ones. And some areas of scientific research, like the development of new vaccines to replace some old antibiotics that have become increasingly less effective over time, have largely stalled because Big Pharma isn’t as willing to invest money in less-profitable ventures.
While companies should obviously make some kind of profit from their products, HCAN points out that Big Pharma’s prices far exceed what people in other countries are paying for the exact same drugs. The United States’ per capita drug spending is about 40 percent higher than in Canada’s, 75 percent higher than Japan’s, and nearly three times higher than Denmark’s.