Big Pharma Experiencing Extreme Price Hikes

By Rishi Shah,
Money and Investing Writer

In the recent months, we have been bombarded with news about the Epi Pen, a drug used to alleviate extreme allergic reactions.

Specifically, we have heard about price hikes and, of course, the infamous Martin Shkreli, who skyrocketed the price of Daraprim, an anti-parasitic drug, more than fifty times its original value to $750. These huge hikes in prices are not only hurting consumers but affecting the healthcare system as a whole.

Epi Pen’s monopolized system gave them leeway to hike prices without any set back. Now that Mylan, the company owning Epi Pen, has increased its presence in hospitals, ambulances and schools, they have a set consumer base that relies on them. Economically, they have an inelastic demand, meaning the need is there no matter the price. People are being turned away from this life saving medicine due to unexpected prices.

How would it feel to walk into a pharmacy only to be told your prescription will now cost double or even triple what you payed the prior week?

Many attribute these hikes to the monopolized system that medicine providers have, but this simply isn’t the case for all companies.

According to the LA Times, “ursodiol’s wholesale price was as low as 45 cents a capsule. In May 2014, generic drug manufacturer Lannett Company, Inc. (NYSE:LCI) hiked its price to $5.10 per capsule, and one by one its competitors followed suit – with most charging nearly the same price”.

This group of 8 generic drugs all raised prices simply because they can and could make a much higher margin of profit instantly.

According to Fortune magazine, “more than two-thirds of the 20 biggest pharma companies used price hikes to drive revenue growth in the first quarter of 2016”.

This form of yearly price hikes is often attributed to companies’ past and future research and development but the truth is, this practice is becoming more commonplace and more families are suffering.

Our healthcare industry has changed drastically these last few years primarily due to universal health care. The fact is that someone has to pay for treatment and insurers are taking a big hit, raising prices on treatment only adds to this issue. These rising expenditures only make it harder for patients to get the care they need.

Price caps are the only solution to this problem but the Federal Government has trouble finding unlawful activity in their doings.

Let’s go back to the Martin Shkreli case for example: he was prosecuted and charged with crime but it was completely unrelated to the price hikes. CNN Money posted an article about the various charges Shkreli faces but said “Shkreli has not been charged for the move that really made him famous: Hiking the price of Daraprim, a drug for AIDS and cancer patients, by 5,000 percent overnight”.

The fact is, drug companies have little to no regulation when it comes to drug prices. The pharmaceutical sector may be a cash cow for companies, however it is offset by the inflated prices for the average American.

America certainly needs a more regulated pharmaceutical system as these drugs are becoming more of a necessity rather than a commodity.

A version of this article appeared in the Tuesday, September 27th print edition.

Contact Rishi at
rishi.shah@student.shu.edu

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