CALPIRG Blog

There's a revealing quote at the end of today's New York Times article on the high and rising costs of specialty drugs.  Specialty drugs are ones that don't have much competition, often because they treat rare conditions, or benefit from an exclusive marketing agreement.  Because there's little competition, their costs are even more prone to rise than those of ordinary prescription drugs -- the article highlights one whose per-dose price rose from $1,600 to $23,000 in a single increase last year!

That 1,400 percent jump raises some eyebrows: surely there's a reason for that big of a change?  And indeed there is, as the Times reports.  According to a VP at Questcor, the company that produces the drug, they set that price by looking at the prices other manufacturers were charging for similar drugs, and then figuring out how much people would be willing to pay.  They went ahead with the price hike because, again per the VP, their market research "gave [them] comfort that the strategy would work, and physicians would continue to use the drug, and payers would pay."  Which is to say, they jacked the price up by a factor of 14 because they could.

And when those prices go up, there are only two options.  The insurance company could pass along more of the cost by requiring the patient to pay a percentage of the total cost, which would run to multiple thousands of dollars -- this is exactly what they do with so-called "tier 4" medications, placing them out of reach of all but the richest.  Or the insurer can continue to cover them with the same modest co-pays as before, so that a patient can get an expensive drug by paying a flat $20 or $30, with the rest of the cost passed along by the insurer to the rest of its customers.  This approach is certainly better, but it helps push health insurance premiums higher for everybody, making coverage harder and harder to afford.

Neither of these are a good solution to the problem.  Ordinarily competition helps keep prices fair, but the makers of these specialty drugs are effectively monopolies.  And when those pharmaceutical manufacturers misuse that monopoly power to squeeze out the highest price they can, ultimately it's consumers who pay.