Drugmakers Increased Prices Four Times the Inflation Rate: Congressional Investigation

By Jonathan Walker | December 12, 2021
Jonathan loves talking politics, economics and philosophy. He carries unique perspectives on everything making him a rather odd mix of liberal-conservative with a streak of independent Austrian thought.
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Increases in drug prices in America have outpaced inflation rates.
Increases in drug prices in America have outpaced inflation rates. (Image: stevepb via Pixabay)

A three-year congressional probe has found that 10 drugmakers raised the prices for common brand-name drugs by 36 percent, which is almost four times the rate of inflation in the past five years. The probe shows how predatory pricing by the pharmaceutical industry has targeted vulnerable American citizens, sometimes even forcing them to ration life-saving drugs.

The report reveals that the 12 drugs investigated as part of the probe are now priced almost 500 percent higher than when they were introduced into the market. Drug manufacturers were able to nab over 600 patents on these 12 drugs, potentially securing a monopoly over these products for a combined total of around 300 years. Companies raised the prices of these drugs by more than 250 times compared to 2016 prices.

In the five years between 2016 and 2020, 14 leading drug manufacturers were found to have spent 577 billion dollars on dividends and stock buybacks, which is 56 billion dollars more than what was invested in research and development. Most of the money set aside for research and development ended up being spent on stifling competition, extending monopolies, and running marketing campaigns. Meanwhile, chief executives of these drug companies secured around 800 million dollars in paychecks.

Internal documents reviewed during the probe showed that one of the reasons manufacturers specifically targeted Americans with price increases is because Medicare cannot negotiate lower prices.

Between 2016 and 2020, taxpayers could have saved over 25 billion dollars paying for seven drugs if private Medicare Part D plans were granted the same discounts given to federal health programs. 

In an interview with AFP, Mindy Salango from West Virginia, a diabetic who works as a patient advocate, said that 25 percent of American diabetics usually ration their insulin due to high prices. This statistic has risen to half of the patients during the COVID-19 (Coronavirus Disease 2019) pandemic. Salango is now forced to arrange secret meetings to provide patients with otherwise unaffordable insulin. 

“We’re not criminals, and we’re meeting in parking lots like we’re criminals. This isn’t health care. This is survival of the richest… They have made record profits at the expense of the lives of diabetics and other folks who have chronic illnesses that need their life-saving medication to survive,” Salango said.

A June 2021 report by the American Association of Retired Persons (AARP) revealed that insurance-negotiated prices of 260 branded drugs have on average risen faster than inflation every single year since 2006.

The average cost of therapy for a brand-name prescription drug was 6,600 dollars per year in 2020. If drug prices were restricted to the inflation rate between 2006 and 2020, the therapy would have cost around just 2,900 dollars.

“That is really significant to someone who’s on a fixed income… If you multiply that out by the number of drugs people are taking on average, you’re looking at a $17,000 difference in terms of how much the drugs are costing,” Leigh Purvis, the report’s co-author, said to USA Today.

In a speech on Dec. 6, President Joe Biden made a case for lowering the prices of drugs. Insisting that healthcare must be “a right, not a privilege,” Biden proposed giving Medicare the power to negotiate prices on drugs once they have been on the market for several years. If drug prices rise faster than the inflation rate, manufacturers could be subjected to a tax penalty. 

“What I’m proposing is that we negotiate a fair price — one that reflects the cost of research and development… Right now, drug companies will set the price at whatever the market will bear,” Biden said.