What Is Maddening about Pharmaceutical Prices?

Imagine that you are gasping for breath, literally on the verge of death. Then someone injects you with a medicine and – miracle! – you are perfectly healthy again.

Would you pay $300 for that injection?

The treatment is epinephrine; your illness was a life-threatening allergy. And that $300 price? That reflects a six-fold increase from a couple years ago. It’s one thing for medications to be expensive. But why does the same medication become more expensive over time?!?

Americans are justifiably angry about rising prices for drugs that have been on the market for years.

Many medications come to market at high prices, in part because it is expensive to identify, develop, and test new drugs. First, there’s the basic research. Admittedly, much of this work is funded by the federal government, but sometimes pharmaceutical companies pour significant money into such efforts too. Then there’s the cost of clinical trials – often hundreds of millions of dollars to test one drug, with no guarantee that the molecule being tested will work. When the trials go well, companies spend money and time (and remember: time is money!) jumping through regulatory hurdles, marketing their drugs, ramping up production facilities – this all adds up. It shouldn’t be surprising that pharmaceutical companies want to charge high prices for their products.

But what explains the frequent price increases that occur after drugs are already on the market, increases that far exceed the rate of inflation?

(To read the rest of this article, please visit Forbes.)

 

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