EXECUTIVE SUMMARY
Pharmaceutical companies are buying rights to drugs and raising the prices dramatically, causing some patients to go without treatment or receive second-line therapy. Some ethical concerns include the following:
- Some drugs are produced by one manufacturer with few or no alternatives.
- Companies are not recouping research and development costs because the drugs are already on the market.
- Some patients are resorting to acquiring drugs overseas or over the internet.
A new business model is emerging in which pharmaceutical companies buy the rights to a drug, then raise the price dramatically. Often, the drugs are produced by one manufacturer, with few or no alternatives.
“It is one thing to charge high prices in order to recoup costs associated with the research and development of a drug,” says Jonathan D. Alpern, MD, co-author of a recent paper on the topic.1 Alpern is an infectious disease fellow at University of Minnesota.
Companies are not recouping research and development costs, however, because the drugs already exist on the market. Craig M. Klugman, PhD, a professor in the Department of Health Sciences at Chicago-based DePaul University, says, “They are very simply trying to maximize the profit on their purchase of these drugs. The motivation is nothing more or less than greed.”
Excessive Profit
Klugman calls charging excessive prices for drugs needed by people who are suffering “unethical and immoral. Certainly, these companies have a right to make a profit on their investment. But they are not entitled to make an excessive profit.”
Alpern notes the activity has been especially prominent in markets dominated by economically disadvantaged patient populations. Thus, access to life-saving drugs is being limited for patients who can’t afford them. “This has now become a common scenario, with outcomes that I think are unacceptable,” Alpern says.
Patients are going without treatment, receiving second-line therapy, or acquiring the drug from overseas or the internet. “This places clinicians in ethically difficult positions,” says Alpern. “Do you allow your patient to go without therapy, or support them in acquiring the drug from an unregulated source?”
Many companies with this business model have promoted their patient assistance programs. These can be very difficult to access for patients that are in the most need, says Alpern.
Alpern doesn’t expect to see this problem solved anytime soon. “Meanwhile, it would be encouraging to see examples in the pharmaceutical industry of a new model — one that shows how fair pricing can occur while still making a reasonable profit,” he says.
Klugman notes that stories of drug companies buying patents of investment firms, then raising the cost dramatically are becoming “more and more frequent.” The following are some recent examples:
- Turing Pharmaceuticals raised the cost of a toxoplasmosis drug by 5,500% after the company bought the patent.
- Company leaders recently appeared before Congress to explain why the price of EpiPen increased 791% after being acquired by Mylan Pharmaceuticals.
- Novum Pharma, after purchasing several drugs from Primus Pharmaceuticals, raised the price of drugs used to treat eczema and skin infections over 4,000%.
Lower-cost alternatives exist for some of the drugs, but not all. “Charging excessive costs, well above and beyond the cost of manufacture, marketing, and selling, is a gross violation of justice,” says Klugman.
Klugman suggests that perhaps the answer is to make all of healthcare nonprofit. “There is something askew with the idea that we profit off the illness of others. Medical care does not follow the free market very well,” he says.
Patients do not choose their drugs and cannot shop around for options and alternatives — they must take the drug that a physician prescribes. “Doctors control prescriptions, and only licensed pharmacies can dispense them,” notes Klugman.
Klugman believes that applying profit motive principles to a controlled market violates equity and fairness. “If I do not buy a widget, then I don’t have a widget. But if I do not buy my medication, then I suffer and may imperil my health further,” he says.
Klugman concludes, “Not only must we understand the ethical problems these charges represent, but we must consider whether legislation needs to be introduced to make such price gouging illegal.”
Klugman says bioethicists should encourage Congress to regulate the drug industry, and require review of all corporate sales of drug licenses and patents to ensure that the new owners will not seek excessive profits and high charges.
“Utilities and insurers already have to submit requests for price increases for government approval,” notes Klugman. Similarly, insurance companies and large corporations need to be reviewed by the FTC to be sure that changes do not cause monopolies or impose a price burden on consumers.
“Drug companies should have to do the same — whether the entire company is being acquired, or merely a few drugs are being sold,” says Klugman.
REFERENCE
- Alpern JD, Song J, Stauffer WM. Essential medicines in the United States — Why access is diminishing. N Engl J Med 2016; 374:1904-1907.
SOURCES
- Jonathan D. Alpern, MD, Division of Infectious Diseases and International Medicine, University of Minnesota, Minneapolis. Phone: (612) 626-9943. Fax: (612) 626-3133. Email: [email protected].
- Craig M. Klugman, PhD, Professor, Department of Health Sciences, DePaul University, Chicago. Phone: (773) 325-4876. Fax: (773) 325-8430. Email: [email protected].
