The problem with prescription drugs is simple: The U.S. government bestows long-term monopolies on pharmaceutical companies, immunizing them from the forces of market competition and public regulation. As a result, Americans shoulder the highest drug prices in the world while receiving significantly poorer public health outcomes than most of the developed world.
There are a lot of ways to address that problem, but a new proposal from Sen. Bernie Sanders (I-Vt.) and Rep. Ro Khanna (D-Calif.) would attack prescription drug price-gouging at the source: the government-granted monopoly that gives Big Pharma unchecked pricing power.
“No other country allows pharmaceutical companies to charge any price they want for any reason they want,” said Sanders. “Somebody in America today can walk into a pharmacy and find out that the medicine they have been using for years can double, triple or quadruple literally overnight. That needs to change.”
Every year, the United States spends over $1,200 per person on pharmaceuticals, according to the Organization for Economic Cooperation and Development. That’s more than double the rate in the United Kingdom and nearly double the rate in France ― and yet the typical French citizen can expect to live more than four years longer than the typical American, and those in the United Kingdom enjoy three extra years, on average, relative to their American counterparts, according to the World Health Organization. The disparities are even more dramatic between the U.S. and Scandinavian countries.
In 2015, Bloomberg News compared different countries’ spending on a host of major prescription drugs. A months’ supply of the arthritis treatment Humira cost about $2,500 in the U.S. ― roughly 50 percent more than the same supply of the same drug in Germany, and more than double the price in Canada and the U.K. The asthma medication Advair runs about $150 a month in the U.S. — roughly double the price of the same drug in Canada and triple its cost in Japan. For cutting-edge cancer drugs, prices in the U.S. exceed those in other countries by several thousand dollars per month.
On Tuesday, Sanders and Khanna will unveil a new bill that would direct the secretary of Health and Human Services to authorize generic competition for any name-brand drug whose average domestic cost exceeds the median price in five reference countries: Canada, the U.K., Germany, France and Japan.
“The government is giving an exclusive monopoly to pharmaceuticals,” Khanna told HuffPost. “If a company abuses that grant by fleecing American consumers, then they lose that privilege, that property grant, that subsidy from the government.”
If the bill — dubbed The Prescription Drug Price Relief Act — were to become law, experts anticipate that drug companies would dramatically reduce prices rather than risk ceding market share to a generic competitor. “No company would want to lose its legal monopoly as a consequence of charging U.S. residents prices higher than in the reference countries,” said Jamie Love, director of Knowledge Ecology International, a nonprofit that specializes in intellectual property issues.
The bill from Sanders and Khanna isn’t going to become law anytime soon. It faces fervent opposition from Republicans, who will still control the Senate when Congress reconvenes next year. Even getting a vote in the House will depend on whether the Democrats in charge of key committees decide to greenlight it ― a choice that will likely depend at least in part on the whims of top leadership.
But the legislation nevertheless sends a statement about the priorities of the progressive wing of the Democratic Party and its intent to deliver on the campaign promises Democrats issued around the 2018 midterms, including House Minority Leader Nancy Pelosi’s election night pledge to “take real, very, very strong legislative action to negotiate down the price control of prescription drugs.”
“American consumers pay far too much for drugs, not because it is costly to manufacture them, or even because of the expense of research and development. We pay too much because the U.S. government grants patents and other monopolies to brand-name drug makers.”
Pharmaceutical firms typically argue that long-term monopolies are necessary to justify the money they spend on research and development. And major drug companies do spend billions of dollars a year on R&D ― but not nearly as much as they spend on marketing, meaning that most of the costs recouped by monopoly profits aren’t essential to groundbreaking science. Nearly all research funded by pharmaceutical companies, moreover, piggybacks on government-backed research conducted by the National Institutes of Health. One study published earlier this year concluded that every one of the 210 new drugs approved by the FDA between 2010 and 2016 relied on at least some government-funded research, reflecting over $100 billion of public investment.
“American consumers pay far too much for drugs, not because it is costly to manufacture them, or even because of the expense of research and development,” said Robert Weissman, president of Public Citizen, a public interest nonprofit. “We pay too much because the U.S. government grants patents and other monopolies to brand-name drug makers, and then stands aside as Big Pharma exploits those monopolies to price gouge.”
The United States is in a class by itself on prescription drug costs, but the five reference countries included in the Sanders bill are a relatively generous comparison pool. Three of them ― Germany, Japan and Canada ― are in the top five in per-capita pharmaceutical spending among OECD nations. International reference pricing is common among wealthy nations, with 29 of 31 European Union nations taking foreign drug prices into account when considering domestic price policy, according to the European Commission.
Patents on prescription drugs are a longstanding feature of both American law and international trade agreements, in part due to the outsized influence of the pharmaceutical lobby within the Office of the U.S. Trade Representative. But international law provides various exceptions patent-holders’ privileges when it comes to public health ― which is why so many countries party to the World Trade Organization and other trade treaties can obtain lower drug prices than the U.S. does. Though Khanna and Sanders crafted their bill to crack down on the monopoly, the legislation would not technically violate a drug company’s patent ― just change the legal substance of what that patent secured.
“Drug corporations charge us hundreds of thousands of dollars for a drug that was created with taxpayer dollars because they can,” said Alex Lawson, executive director of Social Security Works, a nonprofit that works extensively with Medicare costs and access. “We don’t have to let them rip us off.”