The Corporate Greed That Keep Drug Prices Sky-High in the US

Pharmaceutical companies are angry with Bernie Sanders. The Vermont senator has vowed to force pharma CEOs to publicly answer for why their drug prices are so much higher in the United States than in other nations.

Brazenly, the CEOs of Johnson & Johnson and Merck initially refused.

An attorney for Johnson & Johnson accused the senator of using Senate committee hearings to “punish the companies who have chosen to engage in constitutionally protected litigation.” The company, along with Merck and Bristol Myers Squibb, is suing the Biden administration for allowing Medicare to regulate certain prescription drug prices.

For the last two decades, it’s been a free-for-all for pharmaceutical companies in the U.S.

In 2003, then-President George W. Bush signed a Medicare reform bill into law, promising help for seniors struggling to pay for medications. But that law stripped the federal government of its power to negotiate drug prices for Medicare’s participants. And that’s driven drug prices up for everyone.

The Inflation Reduction Act (IRA), which Biden signed in 2022, tied Medicare drug prices to inflation and required companies to issue rebates if prices rose too fast. It was the first time since Bush’s 2003 law that drug manufacturers were subject to any U.S. price regulations.

Pharmaceutical companies aren’t having it. And that’s why it’s not enough for Medicare to be able to cut drug prices — there needs to be nationwide regulation on all drug prices for all Americans.

American taxpayers generously subsidize the research and development of most drugs, as a report by Sanders’ staff explained. But “the government asks for nothing in return for its investment,” giving private corporations “the unilateral power to set the price of publicly funded medicines.”

People in other nations, the report adds, pay less for drugs that American taxpayers have paid global pharmaceutical companies to develop. Symtuza, an HIV medication that the U.S. National Institutes of Health helped develop, costs U.S. patients a whopping $56,000 a year. Patients in the UK pay $10,000 a year for the same drug.

The difference is simple: countries like the UK, France, and Germany regulate drug prices. The U.S., for the most part, doesn’t.

There’s a strong public desire for price controls. According to a Kaiser Family Foundation poll in August 2023, bipartisan majorities “say there is not enough regulation over drug pricing.” A whopping 83 percent “see pharmaceutical profits as a major factor contributing to the cost of prescription drugs.”

They’re right. Economists studying the pharmaceutical industry have found that for years, companies have been so flush with cash that they’ve spent hundreds of billions of dollars on stock buybacks and exorbitant executive bonuses and pay packages.

The Center for American Progress’s October 2023 report, “Following the Money: Untangling U.S. Prescription Drug Financing,” delves deep into how prices are determined for medications and suggests interventions at every stage.

Frankly, such complex solutions wouldn’t really be necessary if all Americans could simply join Medicare — and if Medicare’s bargaining power to negotiate drug prices could be applied to all drugs. But in the absence of this commonsense approach, even complex price controls would be better than no price controls.

Instead, pharmaceutical companies launched the new year by announcing price hikes on at least 500 medications — a massive effort to gouge the public. In contrast, the IRA’s drug price controls apply to only 10 medications so far. They’ll be expanded to 15 drugs per year for the next four years, and 20 drugs per year thereafter.

Rather than removing price controls on the paltry numbers of medications the IRA can regulate, an easy fix is to apply those same regulations to most or all drugs. Best of all, pharmaceutical company CEOs wouldn’t even have to drag themselves into committee hearings to explain away their corporate greed.