Maggie's Farm

Your pills may cost $10.00 each, but if you got pills from Big Government instead of Big Pharma, the pills you are taking might not be available. And without new pharmaceutical products, medical care in general costs much more.

Some additional reasons for high-cost pharmaceuticals:

1. You may be subsidizing drug development for the entire world.

I once worked for not-so-big Pharma, and learned that the amount of government regulation almost made it impossible for a small company to survive without being bought out by Big Pharma. The cost of getting a new chemical entity developed and approved for use in humans is now approaching half a billion dollars, and there are additional regulatory costs associated with manufacture.

In most other countries, drug prices are tightly controlled. Drugs are almost always registered first in the U.S. even if developed elsewhere, so that the company can make some profit. If there were not profits to be made, the corporations would start easing out of the business for something less controversial, like entertainment. People don't label companies are evil for making profits off things that aren't really necessary.

The big downside of controlled prices for drugs is less drug development. And many "enlightened" European governments will sometimes even refuse to register a new drug approved in other countries if it has only marginal benefits over an older drug in the same class, because it will cost the government more to supply to the population.

You will notice the same tendency by some insurance companies which have limited formularies of drugs for which your co-payment is reduced. This is partly to encourage you to choose older drugs even when newer ones may be better suited to you personally. You may pay a premium for the newest, best drugs.

But it seems odd to me that your drug would still be available only from the originating company if it is 30 years old. It should be off patent and available generically, unless it is in a special formulation which warranted a new patent, or has side effects which make generic companies hesitant to pick it up. Maybe it costs more to make than you think, if it comes from a generic company. The only way generic companies can legally compete in the marketplace is by shaving pennies off the price of their products. They cannot compete on the basis of quality, etc.

2. Liability costs for the company are built into the cost of your pills, even if the particular pills you are taking are low-risk.

Pharmaceutical companies are held liable for adverse effects of drugs even when there was no way for them to have known that the problem could occur. The company which developed the drug continues to face the lion's share of liability even if the drug has gone off patent and the actual pills were supplied by a generic company. Juries may award outrageous amounts of money in lawsuits even when there is no scientific evidence of liability, out of sympathy for the plaintiff. Often they decide to "send a message", sometimes bankrupting a company as a result.

Sometimes the message sent has unintended consequences. After the first big awards from silicone breast implant lawsuits, companies stopped making all sorts of implants and plastic medical devices, such as artificial joints, medical tubing, etc. This reduced the quality of life for a lot of people until some remedial action was taken to allow companies to start supplying essential devices again without too great a risk of bankruptcy.

And the government has had to go to extraordinary lengths to get companies to produce routine vaccines, because of high liability costs.

I'm sure that Big Pharma could shave costs somewhat. But the imperfect existing system fosters development of better drugs for the future. I don't know if there is any way to get the rest of the world to pay their fair share of development costs.

Yes, tort reform would reduce drug costs considerably. Other laws regulating drug marketing also distort drug pricing, as companies try to recoup their costs quickly when they introduce a successful drug. And these costs must be recouped largely at the expense of the American consumer, even when the drug is available worldwide.

Attorneys who make the really big bucks suing pharmaceutical companies are currently portrayed as selfless heroes of the "little guy", while the pharmaceutical companies which have saved the lives of some of your friends and relatives are the current symbols of greed in the world. I've watched the "Big Pharma is Evil" theme appear and disappear several times over the past two decades.

Pharmaceutical development is a high-risk business, especially where new "block-buster" drugs are concerned. This is why it is mostly giant companies who dominate the business. They can more easily survive the failure of one or two drugs in development, or a round of high-stakes lawsuits.