When hedge fund trader Martin Shkreli purchased a pharmaceutical company and raised the price of an HIV medication that treats potentially fatal infections from $13.50 to $750 per pill, he threatened the well-being of all Americans. The 5,000 percent price increase fuels the fire of industry critics who seek to impose drug price controls, which would stifle the development of new treatments and cures for serious medical conditions.
Shkreli gives credence to the likes of Democrat presidential candidate and U.S. Senator Bernie Sanders (I-Vt.), who recently introduced legislation to impose federal controls on drug prices. The Prescription Drug Affordability Act of 2015 would allow the Department of Health and Human Services (HHS) to dictate to pharmaceutical manufacturers the prices HHS will pay for Medicare Part D drugs. Yet, government price controls undermine the likelihood that manufacturers can continue to invest in the research and development that is yielding cures for conditions previously thought to be incurable, such as hepatitis C.
The bill also would allow the importation of drugs from Canada that are not approved by the U.S. Food and Drug Administration (FDA). Medications supposedly imported from Canada often originate from countries like India, Russia, China, and Brazil, and lack quality controls to ensure that they are safe and effective. Their active ingredients may be replaced with road paint, cement, or rat poison.
While undermining medical innovation and consumer safety, the Sanders bill would shore up the steep profits that insurers rake in by imposing barriers to quality health care. On a whole, today’s insurance plans are unethical, inefficient, and lack transparency.
Policy makers concerned truly about price gouging in health care must consider that 2016 health insurance premiums are set to rise as much as 26 percent, meaning that 31 million Americans are likely to skip a medication because they cannot afford their co-pays. For people with cancer, HIV, arthritis, and multiple sclerosis, for example, insurance companies impose a co-insurance rate of up to 50 percent, making medication unaffordable despite having insurance. Insurers require these and other patients to “fail first” on older, often less effective, treatments before they can access the medication their provider prescribed. These practices put patients’ health at risk and must be stopped.
The House sponsor of the Sanders bill noted “American families are fed up with trying to afford their medications as they watch drug companies rake in record profits,” yet UnitedHealth Group, one of the nation’s largest health insurers, reported a profit of $10.3 billion on $130.5 billion in revenues in 2014, growing seven percent from 2013. Unlike pharmaceutical manufacturers, those profits are not invested into developing life-saving treatments.
Democratic presidential candidate Hillary Clinton is also on the price-control bandwagon, but at least her plan, released last Tuesday, recognizes the need for greater fairness in the insurance industry. She proposed an important first step toward improving the accessibility and quality of health care by requiring health insurers to place a monthly limit of $250 on individuals’ covered, out-of-pocket prescription drug costs.
Shkreli’s price gouging is unacceptable, and existing state and federal consumer protection laws should be enforced to put an end to it. Otherwise, instead of imposing more restrictions on the industry that is reinvesting profits to make American lives healthier and more productive, reforms should address the insurance industry’s pocketing of profits at the expense of patients. States have made great strides in passing legislation to improve fairness in consumer co-pays and cost-sharing, prevent discriminatory fail first polices, and require transparency of insurance plans. A federal version of these bills is a solution that Americans deserve.
Stacy Worthy is the Director of Public Policy at the Alliance for the Adoption of Innovations in Medicine (Aimed Alliance).