High and rising prescription drug costs have become a preoccupying policy problem in the United States. Notwithstanding broad, bipartisan interest in finding effective policy solutions, several aspects of the drug affordability problem make it an uncommonly difficult one to solve. This article reviews the moral, market, and political factors contributing to the difficulty. Among the moral problems is lack of agreement about how to weigh the fundamental tradeoff involved in regulating drug prices—affordability versus incentives for innovation—and about what constitutes a fair price. Market-related factors include the lack of price transparency and a myriad of perverse incentives in the system through which prescription drugs are supplied to patients. Finally, current policy choices are constrained by past political compromises, and an atmosphere of scandal focusing on egregious instances of price gouging has made rational deliberation about fixes to deeper problems in the system difficult.


Article metrics loading...

Loading full text...

Full text loading...


Literature Cited

  1. 1. 
    Natl. Acad. Sci. Eng. Med 2017. Making medicines affordable: a national imperative Rep., Natl. Acad. Sci. Eng. Med. Washington, DC: http://nationalacademies.org/hmd/Reports/2017/making-medicines-affordable-a-national-imperative.aspx
  2. 2. 
    Pharm. Commer 2017. US drug 2016 sales, at $450 billion, moderate to single-digit growth. Pharm. Commer. May 16. https://pharmaceuticalcommerce.com/latest-news/us-drug-2016-sales-450-billion-moderate-single-digit-growth
    [Google Scholar]
  3. 3. 
    US Dep. Health Hum. Serv 2016. Observations on trends in prescription drug spending ASPE Issue Brief, March 8. https://aspe.hhs.gov/system/files/pdf/187586/Drugspending.pdf
  4. 4. 
    Gallup 2019. The U.S. healthcare cost crisis. Gallup March 26. https://news.gallup.com/poll/248123/westhealth-gallup-us-healthcare-cost-crisis-report.aspx
    [Google Scholar]
  5. 5. 
    Mui Y. 2017. Democrats take aim at big business and drug prices in new economic campaign. CNBC, July 24. https://www.cnbc.com/2017/07/23/democrats-take-aim-at-big-business-drug-prices-in-economic-campaign.html
  6. 6. 
    Levey NN, Haberkorn J. 2019. Drug executives come to Washington as Republicans grapple with how to stop runaway prices. LA Times Febr. 26. https://www.latimes.com/politics/la-na-pol-congress-prescription-drug-prices-executives-20190226-story.html
    [Google Scholar]
  7. 7. 
    Altman D. 2017. Prescription drug costs break through the partisan logjam. Axios May 2. https://www.axios.com/one-health-care-issue-breaks-through-the-partisan-logjam-2387900255.html
    [Google Scholar]
  8. 8. 
    Mello MM. 2018. What makes ensuring access to affordable drugs the hardest problem in health policy?. Minn. Law Rev. 102:2273–305
    [Google Scholar]
  9. 9. 
    Taurel S. 2005. The campaign against innovation. Ethics and the Pharmaceutical Industry MA Santoro, TM Gorrie 326–35 New York: Cambridge Univ. Press
    [Google Scholar]
  10. 10. 
    Conti RM, Rosenthal MB. 2016. Pharmaceutical policy reform—balancing affordability with incentives for innovation. N. Engl. J. Med. 374:703–6
    [Google Scholar]
  11. 11. 
    Maitland I. 2002. Priceless goods: How should life-saving drugs be priced. ? Bus. Ethics Q. 12:451–80
    [Google Scholar]
  12. 12. 
    DiMasi JA, Grabowski HG, Hansen RW 2016. Innovation in the pharmaceutical industry: new estimates of R&D costs. J. Health Econ. 47:20–33
    [Google Scholar]
  13. 13. 
    Van Norman GA. 2016. Drugs, devices, and the FDA: part 1: an overview of approval processes for drugs. JACC Basic Transl. Sci. 1:170–79
    [Google Scholar]
  14. 14. 
    US Gen. Account. Off 2017. Drug industry: profits, research and development spending, and merger and acquisition deals Rep. GAO-18-40 US Gen. Account. Off. Washington, DC: https://www.gao.gov/products/GAO-18-40
  15. 15. 
    Lazonick W, Hopkins M, Jacobson K, Sakinc ME, Tulum O 2017. US pharma's financialized business model Work. Pap. 60 Inst. New Econ. Think https://www.ineteconomics.org/uploads/papers/WP_60-Lazonick-et-al-US-Pharma-Business-Model.pdf
  16. 16. 
    Kirzinger A, Wu B, Brodie M 2016. Kaiser Health tracking poll: September 2016 Rep., Kaiser Fam. Found. San Francisco, CA: https://www.kff.org/health-costs/report/kaiser-health-tracking-poll-september-2016
  17. 17. 
    Pollack A. 2015. Drug goes from $13.50 a tablet to $750, overnight. New York Times Sept. 20. https://www.nytimes.com/2015/09/21/business/a-huge-overnight-increase-in-a-drugs-price-raises-protests.html
    [Google Scholar]
  18. 18. 
    Valdman M. 2009. A theory of wrongful exploitation. Philos. Imprint 9:1–14
    [Google Scholar]
  19. 19. 
    DeGeorge RT. 2005. Intellectual property and pharmaceutical drugs: an ethical analysis. Bus. Ethics Q. 15:549–75
    [Google Scholar]
  20. 20. 
    Pear R. 2018. Trump proposes to lower drug prices by basing them on other countries’ costs. New York Times Oct. 25. https://www.nytimes.com/2018/10/25/us/politics/medicare-prescription-drug-costs-trump.html
    [Google Scholar]
  21. 21. 
    Beitz CR. 2005. Cosmopolitanism and global justice. Current Debates in Global Justice G Brock, D Moellendorf 11–27 New York: Springer
    [Google Scholar]
  22. 22. 
    Nagel T. 2005. The problem of global justice. Phil. Pub. Aff. 33:113–47
    [Google Scholar]
  23. 23. 
    US Dep. Health Hum. Serv 2018. American patients first: the Trump Administration blueprint to lower drug prices and reduce out-of-pocket costs Brief., US Dep. Health Hum. Serv. Washington, DC: https://www.hhs.gov/sites/default/files/AmericanPatientsFirst.pdf
  24. 24. 
    US Dep. Health Hum. Serv 2019. Fraud and abuse; removal of safe harbor protection for rebates involving prescription pharmaceuticals and creation of new safe harbor protection for certain point-of-sale reductions in price on prescription pharmaceuticals and certain pharmacy benefit manager service fees. Fed. Reg 84:2340–63 https://www.federalregister.gov/documents/2019/02/06/2019-01026/fraud-and-abuse-removal-of-safe-harbor-protection-for-rebates-involving-prescription-pharmaceuticals
    [Google Scholar]
  25. [Google Scholar]
  26. 26. 
    Vandervelde A, Blalock E. 2017. The pharmaceutical supply chain: gross drug expenditures realized by stakeholders Rep., Berkeley Res. Group Washington, DC: https://www.thinkbrg.com/media/publication/863_Vandervelde_PhRMA-January-2017_WEB-FINAL.pdf
  27. 27. 
    Dayen D. 2017. The hidden monopolies that raise drug prices: how pharmacy benefit managers morphed from processors to predators. Am. Prospect March 28. http://prospect.org/article/hidden-monopolies-raise-drug-prices
    [Google Scholar]
  28. 28. 
    Hopkins JS, Tracer Z. 2017. Blame game over high drug prices escalates with new ad. Bloomberg April 6. https://www.bloomberg.com/news/articles/2017-04-06/blame-game-over-high-drug-prices-gets-worse-with-lobby-s-new-ad
    [Google Scholar]
  29. 29. 
    Schencker L. 2017. Blue Cross report blames pharma companies for high drug prices. Chicago Tribune May 3. http://www.chicagotribune.com/business/ct-blue-cross-drug-prices-0504-biz-20170503-story.html
    [Google Scholar]
  30. 30. 
    Shrank WH, Joseph GJ, Choudhry NK, Young HN, Ettner SL et al. 2006. Physicians’ perceptions of relevant prescription drug costs: Do costs to the individual patient or to the population matter most. ? Am. J. Manag. Care 12:545–51
    [Google Scholar]
  31. 31. 
    Allan GM, Lexchin J, Wiebe N 2007. Physician awareness of drug cost: a systematic review. PLOS Med 4:e283
    [Google Scholar]
  32. 32. 
    Schutte T, Tichelaar J, Nanayakkara P, Richir M, van Agtmael M et al. 2017. Students and doctors are unaware of the cost of drugs they frequently prescribe. Basic Clin. Pharmacol. Toxicol. 120:278–83
    [Google Scholar]
  33. 33. 
    Sullivan T. 2017. Epic, Cerner, CVS align with Surescripts to make personalized prescription benefit, pricing info available in EHRs. Healthc. IT News Novemb. 7. http://www.healthcareitnews.com/news/epic-cerner-cvs-align-surescripts-make-personalized-prescription-benefit-pricing-info-available
    [Google Scholar]
  34. 34. 
    Dafny L, Ody C, Schmitt M 2017. When discounts raise costs: the effect of copay coupons on generic utilization. Am. Econ. J. Econ. Policy 9:91–123
    [Google Scholar]
  35. 35. 
    Ross JS, Kesselheim AS. 2013. Prescription-drug coupons—no such thing as a free lunch. N. Engl. J. Med. 369:1188–89
    [Google Scholar]
  36. 36. 
    Dafny LS, Ody CJ, Schmitt MA 2016. Undermining value-based purchasing—lessons from the pharmaceutical industry. N. Engl. J. Med. 375:2013–15
    [Google Scholar]
  37. 37. 
    Grande D. 2012. The cost of drug coupons. JAMA 307:2375–76
    [Google Scholar]
  38. 38. 
    Statista 2019. Pharmaceutical industry direct to consumer spending on traditional media in the United States from 2013 to 2017 (in billion U.S. dollars) Rep., Statista New York: https://www.statista.com/statistics/317819/pharmaceutical-industry-dtc-media-spending-usa/
  39. 39. 
    DiJulio B, Firth J, Brodie M 2015. Kaiser Health tracking poll: October 2015 Rep., Kaiser Fam. Found. San Francisco, CA: https://www.kff.org/health-costs/poll-finding/kaiser-health-tracking-poll-october-2015
  40. 40. 
    Kravitz RL, Epstein RM, Feldman MD, Franz CE, Azari R et al. 2005. Influence of patients’ requests for direct-to-consumer advertised antidepressants: a randomized controlled trial. JAMA 293:1995–2002
    [Google Scholar]
  41. 41. 
    Becker SJ, Midoun MM. 2016. Effects of direct-to-consumer advertising on patient prescription requests and physician prescribing: a systematic review of psychiatry-relevant studies. J. Clin. Psychiatry 77:e1293–300
    [Google Scholar]
  42. 42. 
    Powell V, Saloner B, Sabik LM 2015. Cost sharing in Medicaid: assumptions, evidence, and future directions. Med. Care Res. Rev. 73:383–409
    [Google Scholar]
  43. 43. 
    Swartz K. 2010. Cost-sharing: effects on spending and outcomes Rep., Robert Wood Johnson Found. Princeton, NJ: https://www.rwjf.org/en/library/research/2011/12/cost-sharing–effects-on-spending-and-outcomes.html
  44. 44. 
    PhRMA 2017. New data show more than half of patients’ out-of-pocket spending for brand medicines is based on list price Press Release, March 29. https://www.phrma.org/press-release/new-data-show-more-than-half-of-patients-out-of-pocket-spending-for-brand-medicines-is-based-on-list-price
  45. 45. 
    Dusetzina SB, Conti RM, Yu NL, Bach PB 2017. Association of prescription drug price rebates in Medicare Part D with patient out-of-pocket and federal spending. JAMA Intern. Med. 177:1185–88
    [Google Scholar]
  46. 46. 
    Kelly C. 2016. Medicaid may offer best opportunity for Merck's Zepatier. Pink Sheet March 28. https://pink.pharmaintelligence.informa.com/PS057545/Medicaid-May-Offer-Best-Opportunity-For-Mercks-Zepatier
    [Google Scholar]
  47. 47. 
    Newswire 2016. A tale of two new Hepatitis C drugs Press Release, March 10. https://www.newswire.com/news/a-tale-of-two-new-hepatitis-c-drugs-9058111
  48. 48. 
    Philipson TJ, von Eschenbach AC 2014. Medical breakthroughs and credit markets. Forbes July 9. https://www.forbes.com/sites/tomasphilipson/2014/07/09/medical-breakthroughs-and-credit-markets/#5c273b33701c
    [Google Scholar]
  49. 49. 
    Younossi A, Gordon SC, Ahmed A, Dieterich D, Saab S et al. 2017. Treating Medicaid patients with hepatitis C: clinical and economic impact. Am. J. Manag. Care 23:107–12
    [Google Scholar]
  50. 50. 
    Chidi AP, Bryce CL, Donohue JM, Fine MJ, Landsittel DP et al. 2016. Economic and public health impacts of policies restricting access to hepatitis C treatment for Medicaid patients. Value Health 19:326–34
    [Google Scholar]
  51. 51. 
    Cutler D, Ciarametaro M, Long G, Kirson N, Dubois R 2017. Insurance switching and mismatch between the costs and benefits of new technologies. Am. J. Manag. Care 23:750–57
    [Google Scholar]
  52. 52. 
    Polite BN, Ward JC, Cox JV, Morton RF, Hennessy J et al. 2014. Payment for oncolytics in the United States: a history of buy and bill and proposals for reform. J. Oncol. Pract. 10:357–62
    [Google Scholar]
  53. 53. 
    Polite BN, Conti RM, Ward JC 2015. Reform of the buy-and-bill system for outpatient chemotherapy care is inevitable: perspectives from an economist, a realpolitik, and an oncologist. Am. Soc. Clin. Oncol. Educ. Book 2015:e75–80
    [Google Scholar]
  54. 54. 
    Jacobson M, O'Malley AJ, Earle CC, Pakes J, Gaccione P et al. 2006. Does reimbursement influence chemotherapy treatment for cancer patients. ? Health Aff 25:437–43
    [Google Scholar]
  55. 55. 
    Jacobson M, Earle CC, Price M, Newhouse JP 2010. How Medicare's payment cuts for cancer chemotherapy drugs changed patterns of treatment. Health Aff 29:1391–99
    [Google Scholar]
  56. 56. 
    Cent. Medicare Medicaid Serv 2017. Medicare program: hospital outpatient prospective payment and ambulatory surgical center payment systems and quality reporting programs. Fed. Reg. 82:52356–637
    [Google Scholar]
  57. 57. 
    Kesselheim AS, Avorn J, Sarpatwari A 2016. The high cost of prescription drugs in the United States: origins and prospects for reform. JAMA 316:858–71
    [Google Scholar]
  58. 58. 
    Cubanski J, Neuman T. 2017. Searching for savings in Medicare drug price negotiations Issue Brief, Kaiser Fam. Found. San Francisco, CA: http://files.kff.org/attachment/issue-brief-searching-for-savings-in-medicare-drug-price-negotiations
  59. 59. 
    Huskamp HA, Keating NL. 2005. The new Medicare drug benefit: formularies and their potential effects on access to medications. J. Gen. Intern. Med. 20:662–65
    [Google Scholar]
  60. 60. 
    Oliver TR, Lee PR, Lipton HL 2004. A political history of Medicare and prescription drug coverage. Milbank Q 82:283–354
    [Google Scholar]
  61. 61. 
    Neumann PJ, Kamae MS, Palmer JA 2008. Medicare's national coverage decisions for technologies, 1999–2007. Health Aff 27:1620–31
    [Google Scholar]
  62. 62. 
    Cent. Medicare Medicaid Serv 2016. Part D drugs and formulary requirements. Medicare Prescription Drug Benefit Manual Baltimore, MD: Cent. Medicare Medicaid Serv https://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovContra/Downloads/Part-D-Benefits-Manual-Chapter-6.pdf
    [Google Scholar]
  63. 63. 
    Inst. Med 2009. Initial national priorities for comparative effectiveness research Rep., Natl. Acad. Sci. Eng. Med. Washington, DC:
  64. 64. 
    US Senate Comm. Finance 2009. The Patient Protection and Affordable Care Act: fact vs. fiction on health care research Fact Sheet, US Senate Comm. Finance Washington, DC: https://www.finance.senate.gov/download/2009/11/21/fact-vs-fiction-on-health-care-research-1
  65. 65. 
    Thorpe JD. 2010. Comparative effectiveness research and health reform: implications for public health policy and practice. Pub. Health Rep. 125:909–12
    [Google Scholar]
  66. 66. 
    Slaughter LM. 2006. Medicare Part D—the product of a broken process. New Engl. J. Med. 354:2314–15
    [Google Scholar]
  67. 67. 
    Cent. Responsive Politics 2019. Top industries. OpenSecrets.org. https://www.opensecrets.org/lobby/top.php?indexType=i&showYear=a
    [Google Scholar]
  68. 68. 
    Cent. Responsive Politics 2019. Pharmaceuticals/health products. OpenSecrets.org https://www.opensecrets.org/industries/indus.php?ind=H04
    [Google Scholar]
  69. 69. 
    Drutman L. 2015. How corporate lobbyists conquered American democracy. Atlantic April 20. https://www.theatlantic.com/business/archive/2015/04/how-corporate-lobbyists-conquered-american-democracy/390822
    [Google Scholar]
  70. 70. 
    Silverstein S. 2016. Lobbyists, campaign cash help drug industry stymie bid to restrain Medicare prescription costs. OpenSecrets News Oct. 19. https://www.opensecrets.org/news/2016/10/lobbyists-campaign-cash-help-drug-industry-stymie-bid-to-restrain-medicare-prescription-costs
    [Google Scholar]
  71. 71. 
    Oberlander J, Morrison M. 2013. Failure to launch? The Independent Payment Advisory Board's uncertain prospects. New Engl. J. Med. 369:105–7
    [Google Scholar]
  72. 72. 
    Google Trends 2019. Drug pricing Google Trends Database, accessed Febr. 12. https://trends.google.com/trends/
  73. 73. 
    House Comm. Overs 2015. Sanders and Cummings denounce continued prescription drug price gouging Press Release, Oct. 9. https://democrats-oversight.house.gov/news/press-releases/sanders-and-cummings-denounce-continued-prescription-drug-price-gouging
  74. 74. 
    Kingdon JW. 1995. Agendas, Alternatives, and Public Policies New York: HarperCollins
  75. 75. 
    Zirkelbach R. 2015. What makes Valeant different than innovative biopharmaceutical companies. ? PhRMA Oct. 22. http://catalyst.phrma.org/what-makes-valeant-different-than-innovative-biopharmaceutical-companies
    [Google Scholar]
  76. 76. 
    PhRMA. PhRMA board of directors establishes new membership criteria Press Release, May 9. http://www.phrma.org/press-release/phrma-board-of-directors-establishes-new-membership-criteria
  77. 77. 
    Hancock J. 2017. Everyone says we must control exorbitant drug prices. So, why don't we. ? Kaiser Health News Sept. 25. https://khn.org/news/everyone-says-we-must-control-exorbitant-drug-prices-why-dont-we
    [Google Scholar]
  78. 78. 
    Ramsey L. 2017. We asked pharma executives the one question they didn't want to hear about drug pricing. Bus. Insider Jan. 23. http://www.businessinsider.com/what-if-drug-companies-no-longer-took-routine-price-increases-2017-1
    [Google Scholar]
  79. 79. 
    Yu N, Helms Z, Bach PB 2017. R&D costs for pharmaceutical companies do not explain elevated US drug prices. Health Aff. Blog March 7. https://www.healthaffairs.org/do/10.1377/hblog20170307.059036/full
    [Google Scholar]

Data & Media loading...

  • Article Type: Review Article
This is a required field
Please enter a valid email address
Approval was a Success
Invalid data
An Error Occurred
Approval was partially successful, following selected items could not be processed due to error