The Solution to High-Cost Drug Pricing in the U.S.: Having the Right Conversations

Prescription drugs cost 256% (now at 322%) more in the United States than the rest of the world (RAND Corporation). While shocking, this probably comes as no surprise since the U.S. has held the top spot in prescription drug spend per capita for over a decade. Consumers and employers continue to struggle to keep up with the increasing cost and little has been done to address this ongoing problem until recently.

On February 8, 2024, the CEOs of Johnson & Johnson, Bristol Myers Squibb, and Merck were challenged by the U.S. Senate HELP (Health, Education, Labor, & Pensions) Committee to disclose their reasonings for the outrageous drug pricing in the U.S. They discussed the role of PBMs, patents, free market apprehensions, advertising budgets, and concerns regarding how Medicaid and Medicare can cover these expensive drugs. Amidst the heated conversations, Sen. Bernie Sanders confronted the Big Pharma CEOs with a powerful, and resonating, statement: “Your lifesaving drugs mean nothing to millions of Americans who cannot afford them.”

Naturally, Big Pharma’s response was the recurring narrative that their commitment and investment is focused on “Research & Development”. While R&D is necessary to advance the potential for upcoming and currently listed medications, the term is also often used as a scapegoat for where profits are being allocated while little to no proof is required for that spending.

The Senate countered this claim by highlighting the exorbitant amount of money that they are also spending on advertising costs, patent extension and lawsuits, and shareholder profits. As an example, Sen. Chris Murphy pointed out that Johnson & Johnson allocated $17 billion toward stock buybacks and dividends while only dedicating $14 billion to R&D efforts.

Backpedaling, Big Pharma then points the blame on the traditional PBMs, stating that the actual cost of medications have not increased substantially, rather it’s the PBMs that are hiking up the prices and taking more than the lion’s share. While some fault might lie with the PBMs, both parties are complicit in the action. These conversations are ineffective and do not lead to any tangible solutions. So, in a situation where everyone is complacent, everyone is making money, and no one’s bottom line is being impacted, why are they even involved in this conversation? The problem is that the user of the service and the payer of the service have been taken out of the dialogue.

If you want to solve this, talk to the people who are in the middle of all of it. As an advocate for affordable healthcare solutions, particularly in the prescription drug space, I would start with significant fundamental changes to the unchecked spending of pharmaceutical advertising and the corrupt relationship between PBMs, the manufacturers, and rebate programs.

Reducing Advertising Costs

The United States is one of only two countries in the entire world that allows for pharmaceutical drug advertising. The amount of exposure that Americans get to these advertisements is overwhelming. Nielsen estimates that, on average, 80 pharmaceutical ads air each hour on television. And not only are audiences inundated with clever and hopeful marketing messages, they are being guided to medications that can charge significant amounts of money despite having insurance coverage.

This doesn’t even begin to touch the surface of how Big Pharma’s ad spend can manipulate the media companies, influence consumer behavior, and more. Big Pharma has surpassed $8 billion spent on advertising annually and their primary goal is not to help the consumer, but to sell the product. Think of the medical advancements that could be made if that money was redirected into actual R&D.

Eliminating Rebate Programs

PBMs negotiate formulary placement and in doing so extract bribery from Big Pharma with rebates. Express Scripts, CVS, and Optum control 80% of the entire population’s access to drugs so if the manufacturer’s drug is not on one of their formularies, a third of the U.S. population does not have access to available medications. Formularies should be based upon clinical effectiveness and value, not bribery. If a drug works better than another drug, then it should be on the better version of the formulary because of its efficacy. They are not negotiating drug prices; they are negotiating rebates.

In my opinion, Congress should stop allowing rebates to exist at all and make them just as illegal in the healthcare industry as they are in many others. You cannot pay for performance in any other industry but somehow healthcare, specifically the PBM world, has found a loophole. Traditional PBMs would lose their minds if they had to give up rebates because everything they do is dependent on them as they add significant value to both customers and shareholders.

Moving Forward

In short, there is a lot that needs to be done to reign in the unprecedented spending of Big Pharma, but the fact that our government is beginning to take note of public outcry is promising. We’re here to convince leaders to bring the right voices to the table.

We have to get the government and the media out of Big Pharma’s pocket. I would love it if SHARx didn’t have to exist and that Americans had affordable access to life-saving medications no matter their income but until that becomes a reality, we’ll keep fighting the fight and continue advocating for those who need us.