1. There is no central negotiator willing to walk away.
Other wealthy countries rely on a single negotiating body — usually the government — to decide whether to accept the price a pharmaceutical company wants to charge. In the United States, negotiations with drug makers are split among tens of thousands of health plans, resulting in far less bargaining muscle for the buyers
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2. There are no price controls.
Some countries set limits on how much they will pay for medicines. France, for example, caps the growth of drug companies’ sales: If sales exceed that threshold, the government gets a rebate.
Drug companies in the United States have avoided legal restraints on prices for patients covered by commercial insurance and on introductory sticker prices when drugs first enter the market.
“Drugs are so expensive in the U.S. because we let them be,” said Michelle Mello, a Stanford law and health policy professor. “We designed a system in terms of drug costs that is all engines, no brakes.”
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3. The system creates perverse incentives.
Drug companies are not the only ones making money from high drug costs. Doctors, hospitals and an array of intermediaries also see higher revenue when costs soar.
One case in point: Under Medicare policies for some drugs, doctors pay upfront for drugs that they administer to patients intravenously in their offices, such as chemotherapy. To recoup their costs, they send a bill to Medicare for both the cost of the drug and a percentage of that cost, set by Medicare, to cover their overhead. That billing system creates an incentive for a doctor to choose a higher-priced drug. For example, a Medicare rate of 6 percent on a $10,000 drug would pay $600 — a lot more than the $6 fee paid for infusing a $100 medication.
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4. The system is fragmented and complicated.
Drug industry executives often complain that they are unfairly blamed for high prices while other parties, including P.B.M.s and insurers, are profiting from a growing share of drug spending and saddling patients with high out-of-pocket costs.
“The United States is the only country that allows middlemen, such as P.B.M.s, to profiteer on medicines unchecked,” said Alex Schriver, an official at Pharmaceutical Research and Manufacturers of America, or PhRMA, the drug industry’s main lobbying group.
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5. Patent gaming keeps prices high longer.
Around the world, countries issue patents to drug companies that grant them temporary monopolies during which lower-priced generic competitors can’t enter the market. But in the United States, drug companies have been especially successful in finding ways to prolong that monopoly period, through tactics like piling up patents to protect inventions that are only tangentially related to the drug in question.
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6. Drug prices are what the market will bear.
Drug industry executives often say their prices reflect the value their products provide to society. For example, a one-time $3 million cure may be a bargain if it ends up averting $10 million in hospital bills and lost wages.
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Drug companies also say the prices of medications reflect the huge, rising costs of running clinical trials and the need to recoup expensive investments in failed drugs. But academics have found no relationship between how much drug companies spend on research and how much they charge.
The reality, experts say, is that companies set their prices as high as the market will bear.
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) I just think we need to understand that there are more than "simple" market forces at w*rk here. Drugs (and especially their pricing strategies) are much more complicated than, say, fertilizer or Coca Cola. Oh, and do you have any idea what it costs to produce a bottle of Coke? It's a lot LOT less than the Buck or Four that you pay for a 2-liter bottle. LOTs of gross profit in there. (Oh, and full disclosure, I DO own Coke stock too - in my MFs.)
