Scattering of Negotiating Power Across Private Health Insurers

The US federal government does not pay for most healthcare costs, as only 34% of healthcare spending was sponsored by the federal government in 2021 (Centers for Medicare and Medicaid Services, n.d.). Therefore, private insurers and smaller government programs are in charge of negotiating drug prices with pharmaceutical corporations individually. Independent insurance companies and government programs do not hold the same level of bargaining power as a federal government would; since thousands of such entities exist throughout the country, negotiating power is thus scattered across these entities rather than consolidated as it would be in a centralized authority such as the federal government. Consequently,  pharmaceutical corporations are continuously able to get away with levying high prices on customers (Smith, 2022).

Drug Patents

Pharmaceutical corporations often place patents on their brand-name drugs, thus preventing other companies from creating cheaper generic alternatives (Smith, 2022). Additionally, the Food and Drug Administration (FDA) also grants up to 12 years of market exclusivity for patented drugs, allowing pharmaceutical corporations to overcharge on their products for extended periods of time (Hughes et al., 2023). Although patents are important in recouping the investments in developing brand-name drugs, this comes at the expense of the health of Americans who are unable to afford such medications.

Lack of Comparative Research Across Drugs

Drug providers are often hesitant to prescribe cheaper versions of drugs due to the absence of research comparing these cheaper versions to the brand-name drug that prominent pharmaceutical corporations create. Cheaper alternatives usually consist of generic medications produced by less powerful companies; due to these companies’ lack of prominence as well as the drug patenting conducted by pharmaceutical conglomerates, generic alternatives often exert little to no influence over the market (sometimes not entering the market at all), causing them to be left relatively unknown to many consumers and medical/research professionals. Consequently, providers will often opt to prescribe the brand-name, more well-known drug despite its high price (Smith, 2022).

An important detail to note is that drug prices are not simply increasing due to inflation; according to AARP, the cost of 260 common brand-name drugs increased by 2.9% while the inflation rate was only 1.3% (Schondelmeyer et al., 2021). Therefore, it is evident that the greed of private pharmaceutical corporations serves as the primary driving force behind the overpricing of prescription drugs.

The issue of being unable to afford these drugs becomes life-threatening for Americans who require a continuous supply of medication throughout their lifetime, such as adults with chronic disabilities. These individuals, who likely bear higher drug costs than the average American due to their heightened need for drugs, are especially prone to avoid purchasing their prescriptions due to the financial burden associated with doing so. In 2021, 20.0% of adults with disabilities did not take their medication as prescribed due to financial reasons, while only 7.1% of those without disabilities did not take their medication (Mykyta et al., 2023). Thus, this “financial toxicity” that they experience not only diminishes their ability to combat the specific condition(s) that they are diagnosed with, but also damages their health-related quality of life as a whole, as the burden of medical expenses can often cause “side effects” such as mental health issues to develop in these patients as well; for example, in the 2010 National Health Interview Survey, 8.6% of cancer patients who struggled to pay for cancer treatment reported declines in mental health, while only 1.8% of patients without financial burdens experienced such complications (National Cancer Institute, 2016). Also, avoiding purchasing medications does not necessarily relieve the financial burden that healthcare imposes upon disabled Americans. Not taking these drugs can cause the conditions of these disabled individuals to worsen, leading to even more serious health issues that require more intensive, prolonged, and thus expensive care to treat. Ultimately, the mortality rates for these individuals continue to increase with the price of medical goods and services. According to a 2021 study, just a $10 increase in out-of-pocket contribution produced a 33% increase in mortality rate among Medicare beneficiaries (Chandra et al., 2021). With drug prices becoming ever more expensive in the US, it seems inevitable that the number of disabled Americans dying as a result of drug unaffordability will only continue to surge.

Fortunately, there have been recent efforts carried out by the US government to mitigate the financial burden of prescription drugs and reduce pharmaceutical corporations’ control over drug prices. In 2022, President Biden signed into law the Inflation Reduction Act, which includes a variety of provisions that lower medication costs for Medicare beneficiaries as well as policies that punish pharmaceutical companies for inflating prices without reasonable justification. For example, from 2019-2020, “price increases outpaced inflation for half of all drugs covered by Medicare”; some of these medications included Keytruda, a cancer drug utilized by 59,000 beneficiaries that increased in price by 3.3%, and Prolia, an osteoporosis treatment taken by 600,000 beneficiaries that rose by 4.7% (Cubanski et al., 2022). Under the Inflation Reduction Act, as of 2023, pharmaceutical corporations (such as Merck and Amgen that own patents for Keytruda and Prolia, respectively) are required to pay rebates if drug prices rise at a higher rate than inflation. Furthermore, from 2023, cost sharing for adult vaccines covered under Medicare Part D has been eliminated, meaning that beneficiaries will not have to pay any money out-of-pocket for these vaccines (Cubanski et al., 2023). More benefits will continue to be implemented throughout the decade, as 60 Medicare Part B and D drugs will become eligible for price negotiation by 2030. Although pharmaceutical companies have argued that such policies will diminish drug innovation, studies by the Congressional Budget Office predict that in the next 30 years, only “15 out of 1,300 drugs, or 1%” would be deterred by price negotiations and be prevented from coming to market (Cubanski et al., 2023). However, even with the introduction of these laws, more legislation to further protect disabled individuals and other vulnerable populations in America is nonetheless required.

Drug patenting abuse by pharmaceutical corporations is a giant issue. As the FDA often grants up to 12 years of market exclusivity for patented drugs, corporations are enabled to overcharge for their products in the absence of generic competitors (Hughes et al., 2023). Additionally, these companies often find loopholes in the FDA’s policies. For example, a common practice is “product hopping,” where a drug whose patent is about to expire will be discontinued and replaced by a nearly identical alternative. This new patent then prolongs the exclusivity period even further, leading to price hikes (Hughes et al., 2023). Consequently, revisions to patenting processes, such as reducing the period of market exclusivity granted by patents and implementing checks to prevent product hopping, are required to grant generic manufacturers bringing cheaper drug alternatives quicker access to consumer markets. However, legislation such as the Ensuring Timely Access to Generics Act faces issues with getting passed as pharmaceutical corporations pressure lawmakers with substantial campaign aids so that legislators may reject broad reforms. For example, the pharmaceutical industry spent over $62 million in lobbying for the 2016 congressional elections (Meller et al. 2019). As a result, lobbied politicians may become prone to corruption, advocating for policies that benefit donors and harm the general population.

Ultimately, although there are many proposals to curb drug price inflation, it is evident that fervent resistance to these strategies will remain, making the fight for drug affordability a strenuous, lethargic process that will continue to pose an issue of importance in American politics.