Pharmaceutical Companies Rake in Huge Profits

Pharmaceutical Companies Rake in Huge Profits


Just ask anyone that has had to deal with a painful headache, or suffer with out-of-control allergies, a viral cough or something worse such as the flu and you will get an ear full of how some type of medication brought immediate relief. Fortunately, for most of our every day ailments, a simple over the counter (OTC) drug will settle the issue and we are back to our happier and better selves. Yet for some others the only avenue to relief comes in the form of reoccurring prescription medications, and although the physical aspect is taken care of, we discover today that it does not come without enormous cost.

One of the biggest drivers of the ever increasing healthcare costs are prescription drugs and that’s partly because of the fact that brand-name drug companies use a tactic known as pay for delay. This is a fancy way of saying, “we’ll pay you to keep from producing a cheaper version (generic), since that creates competition and we’d have to reduce our prices.” It is actually a commonplace tactic within the pharmaceutical industry. The FTC in fact estimates that pay for delay is costing consumers and taxpayers over $3 billion a year in higher drug prices. Demonstrating just how much their anti-competition tactics are hurting consumers.

Consumers are however taking notice and speaking out against the high cost of drugs, according to a Kaiser Health Tracking Poll, 73 percent of the respondents said medication costs are too high, and 76% believe it is because the prices are set too high by the pharmaceutical companies, and not likely to blame insurance companies. Another recent Kaiser poll revealed the public is more concerned over the costs of prescription drugs than other health care issues, including the Affordable Healthcare Act (Obamacare). Currently Medicare does not have the ability to negotiate drug prices with manufactures, however 87% of the respondents support giving the government program that ability. The purchasing power of the program would help to alleviate the costs, however just like any other business the concern of the pharmaceutical companies is more about the bottom line, and profit margins.

How much are the pharmaceutical companies’ profit margin? Just in the first quarter of 2015 U.S. biotech company Amgen has reported a profit margin of 79.5%. The profits are derived from the incredibly high mark up of chronic drugs that treat cancer or hepatitis C. In fact when an oncologist (Dr. Leonard Saltz) makes a public plea to place limits on the cost of drugs, someone needs to take notice, many cancer drugs debut with a price tag of an amazing $10,000 a month! The number of patients that with prescription drug costs of over $100,000 has nearly tripled this year!

The resounding question is why what may be considered a basic need for survival has such a huge price tag associated with it. According to pharmaceutical officials the reason lie in the cost of developing and winning approval for new prescription drugs, which is said to not only take 10 years or more, but cost nearly $2.6 billion for each new drug. What is even more amazing about the cost, is that it includes the 88% of the medicines that never even make it clinical trials. So perhaps some of the money spent on the pay for delay program can be better applied to reduce the number of medicines that ultimately turn out to be a complete waste of time and resources.

It is time for the pharmaceutical companies to do away with the pay for delay program, focus on treating the patients health and not take advantage of them. This can be done by increasing the number of options for generics, which opens the market up for competition that may help to keep the government from attempting some form of regulation of the pharmaceutical industry or propose a ‘fix’ that potentially, ends up creating more issues than the original ones it tried to resolve.

Written by Jireh Gibson

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