High Drug Prices Spark War Between Health Insurers And Drug Companies

| by Michael Allen

Americans pay enormous prices for prescription drugs compared to other countries.

PBS reported in 2014 that the "United States spends almost $1,000 per person per year on pharmaceuticals. That’s around 40 percent more than the next highest spender, Canada, and more than twice as much as than countries like France and Germany spend."

The prices for the same drugs are much cheaper in other countries because their governments regulate drug prices. Back in the U.S., insurance companies usually accept whatever price the drug companies choose. This is particularly true if there is no competition for a particular treatment.

However, recently the heath insurance industry has slammed drug companies because the insurers claim the costs for specialty drugs are too high and are raising healthcare costs for everyone, including the health insurance companies, noted The Hill.

Pharmaceutical companies claim that their high prices are needed to cover their research and development money.

The Huffington Post, ScienceDaily and the BBC have reported for years that drug companies spend far more money on advertising than on research and development. Doctors around the world slammed drug companies in 2013 for the high cost of cancer drugs.

The drug companies have always been able to brush off these types of reports, but they may have met their match.

America’s Health Insurance Plans (AHIP), which lobbies for health insurance companies, recently started a PR attack against the drug companies, accusing them of trying to bankrupt Americans and the federal government's budget for health care.

The main issue is Sovaldi, a pill that costs $1,000. People are supposed to take Sovaldi every day for 24 weeks for their Hepatitis C; the total cost is $168,000, reports The Hill.

Sovaldi is manufactured by Gilead Sciences, which is not part of the Pharmaceutical Researchers and Manufacturers of America (PhRMA), a lobbying group for drug companies.

A 12-week treatment of Sovaldi reportedly costs less than $200 to produce, and is sold in India for $300.

However, PhRMA is defending Gilead, likely because the trade organization doesn't want the health insurance industry gaining an upper hand.

John Castellani, CEO of PhRMA, said:

Insurers are increasingly imposing unprecedented cost-sharing on patients that deters them from utilizing the medicines they need to manage — or even cure — their disease while covering the vast majority of costs of more expensive hospitalizations and services these medicines could prevent.

Sources: PBS, The Huffington Post, ScienceDaily, BBC, The Hill
Image Credit: National Cancer Institute