Back before CV-19, one of my biggest peeves was drug pricing. Drugs are covered by the patent laws, which means that the developer of a new drug which obtains patent protection has a lengthy period of time when they are protected from competition. Some special laws give certain categories of drugs even more protection. The patent laws are designed to encourage innovation by giving inventors the financial benefits of their work for some time. For most products and services there are competing ways to fulfill the same need, so pricing abuse is generally limited. The drug companies, however, have perfected the art of using the patent laws to protect their products and they often have little competition for a certain therapy, so we get very high drug prices and constant price increases even though the cost of making the drugs hasn’t gone up. And the drug companies have become marketing machines that persuade consumers that they just have to have this particular medicine.
This study is one in a long line to not only show how abusive drug pricing is, but that consumers pay the price. You pay it in two ways. One is your share of the premiums you pay. Drug costs are one reason insurance premiums keep rising. And you pay it in higher cost-sharing, deductibles, copayments and coinsurance. The study amply demonstrates how significant that increase has been for consumers. (JAMA Study) Drug pricing and drug contracts with PBMs and insurers are complicated, and any rebates and discounts generally don’t benefit consumers, although some regulations are coming into place to require that.
We probably need some form of patent protection. But patent protection screws with the free market and distorts competitive factors. Since the government grant of a patent is the only thing allowing these abusive pricing practices, I think government regulation of prices is fully warranted. Anyone who gets a patent on a therapeutic should have limits on the margin they seek for the initial price and should have strict limits on price increases. Anyone who violates those rules should have some or all of the years of patent protection taken away. Otherwise, we are just needlessly subjecting ourselves to excessive and unnecessary pricing. There is a reason why the drug industry is historically the most profitable in the country and that reason is the patent laws. Those laws can be used to control pricing.