Medical cartel: how pharmaceuticals dictate drug prices

America's drug pricing system is an exclusive club, with prices skyrocketing and average patients paying the equivalent of a used car for treatment.

A pill for the price of an airplane: how the US drug pricing system turned illness into a luxury

An American pharmacy is not just a place where they sell medicine. This is a real club of influential people, where the quiet but confident voice of the arithmetic of big money sounds. Here on the shelves lie miracle pills that could save your life, if not for one “but” – a price that would make even business sharks clutch their hearts. Everything on display is decorous: beautiful packaging, shiny price tags and polite pharmacists. But go deeper, where huge amounts of money are circulating, and where every tiny bottle costs like a used car – a completely different atmosphere reigns there. This is where the true spectacle of American pricing begins.

Pharmaceutical companies and friends: everyone wants their own piece of the pie

Any pharmaceutical company in the US, say Gilead Sciences with its famous drug Sovaldi, feels like it is on a throne. They dictate their terms, set the price and defend it as the last frontier. Sovaldi is a drug for hepatitis C that in the USA it costs approximately $84,000 per course of treatmentand this is a price that patients in Egypt and India can only guess at, where the cost does not exceed $900 and $300 respectively. In America, apparently, there is a special air, and Sovaldi is impregnated with it right in the production workshop – otherwise it is difficult to explain such a price.

But the manufacturer is not alone here. Sharing the stage are pharmacy benefit managers (PBMs), those invisible puppet masters who negotiate discounts. In the pharmaceutical lexicon they are called rebates or hidden rebates that PBMs receive for including the drug in health plans. It would be naive to think that these discounts will benefit the patient. PBMs carefully keep them for themselves; the share in the form of the so-called “margin” is their goldmine. And after their work the price increases again.

And then comes the hour of the insurers. They come into play as the final chord and raise the price again, adding their own markup and deciding how much of this colossal amount will fall to the average person. It all works like clockwork: everyone here knows their part and doesn’t bother anyone.

Evergreening and Pay-for-Delay: a game of patents and delays

When it comes to patents, pharmaceutical companies are masters of profit-making. They extend their drug patents through manipulation of formulas – just add a drop of a new substance or change the packaging, and the patent is renewed, and generic competition fades into the background. This trick is known as “evergreen“Patents (Evergreening) allow them to maintain the price of miracle pills at a level accessible only to wealthy people.

But this is not the limit of creativity. There is a scheme called “Pay-for-Delay”. This is when a pharmaceutical company pays generic competitors a hefty sum to keep them out of the market. Such deals keep the market for the brand and the price at a level suitable for a select few. It seems to be legal, but in essence it is an agreement on non-interference.

Influential Friends in Congress: The Lobby with the Golden Voice

Pharmaceutical lobby is a powerful voice in Congress, the very voice that does not allow the system to change. The industry spent more than $350 million on lobbying in 2022, money spent not on innovation or helping patients, but on persuading lawmakers to leave things as they are. Even if there is a loud cry for help, the pharmaceutical giants will confidently stand their ground.

Lobbyists work with every member of Congress, making them allies. How? Let's put it this way: dinner, a little influence and a little guile. As a result, no one will flinch when the next price for pills skyrockets.

Heartbreaking stories, or a stomach-churning price

Examples? They are right there in full view. Take insulin. A vital drug for diabetics in the United States costs about $300-500 per bottle, while the cost of its production barely reaches a few dollars. Patients who need this drug save on everything to have enough for medications, and sometimes even insulin, sacrificing their health. In Europe, insulin is sold several times cheaper, but the American market rests on the bursting pockets of patients.

But “EpiPen”necessary for anaphylactic reactions. Its price rose from $57 to $600 in a few years, and this adrenaline capsule became a symbol of the greed of the pharmaceutical system. Mylan tried to justify this with “user training and marketing costs,” but who would believe that fairy tale?

Or “Daraprim”. A life-saving drug for toxoplasmosis patients saw its price rise sharply from $13.50 to $750 per tablet after it was acquired by Turing Pharmaceuticals. Martin Shkreli, the company's famous and hated CEO, justified it as “the need to invest in the future,” but that, of course, sounded like a mockery to those who could not afford the life-saving drug.

Cartel in ties

Can this system be called a cartel? In some ways it is even more complex than an ordinary cartel. Here it is not gangsters in dark alleys who negotiate how to further inflate the price. Certified professionals work here who assure that everything is for the sake of science and progress. This is not a criminal conspiracy – it is an elaborate scheme, in which every step is backed by laws and patent protection.

The American pharmaceutical system is a cartel in ties, if you like, with calculation and impeccable knowledge of the laws. Manufacturers, PBMs and insurance companies, lobbyists and politicians each add their own markup until the price skyrockets. But who is to blame? Everyone and no one.

Who will pay for health

This system may last for a long time, but public patience is not endless. People are beginning to realize that treatment is becoming a luxury, and those who were once able to afford medications are now forced to look at price tags with despair. As long as the system stands, pharmaceutical companies will continue to defend their privileges. Health is a commodity, and life is a commodity to be traded.

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