Unethical Pricing and Corruption in the Pharmaceutical Industry 1

Unethical Pricing and Corruption in the Pharmaceutical Industry

P. Alex Ingman

Jordan High School

Modern advances in medicine are of the most important and influential discoveries to

ever be made. While many years ago almost any disease or condition would lead to severe

disability or even death, because of modern medicine nearly all of the previous medical issues

are resolved. However, in our world today the importance of treating the ill and afflicted has

become a way for many corporations to control entire industries and make ridiculous amounts of

money. Pharmaceutical companies and other corporations who produce drugs and medicines

have become so powerful because of the demand of their products that they are able to overprice

them to fit the needs of their business whose goal isn’t to help the afflicted, but make money for

the company.

Medical expenses are among the most expensive costs someone has to pay. Several times

a year many Americans schedule routine check-ups with their doctors which even those can get

expensive. However the issue to be addressed isn’t with the assessing the healthy, but the

treatment and prevention for the sick and afflicted. Many of the drugs needed for medical

conditions are produced by private companies who are in control of the pricing and distribution

of their products. Like any business they want to minimize costs and maximize profits. What

isn’t like every other industries is that their products aren’t making life better, they are preserving

life. While some products are wanted by the customers, in this industry they are needed.
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There are thousands of Americans who rely on medication of all degrees. Some to help

cope with a small condition, and others are depend on to survive. Even the smallest of

medications are essential to the safety or health of many people. Logically one would have to

assume that those kind of medications of such importance should be easy to obtain, but that is the

issue in America. Although many people may have difficulty in finding the medicines they need,

the real struggle is affording them. The companies where one would go to buy these drugs are

not government owned or even government regulated, they are privately owned corporations.

The prices you see on drugs are whatever they would like it to be, and what they want it to be

doesn’t correlate with what is really affordable for those who need it.

In the business world the products of a company are priced to make a profit and to beat

out competition, but also at what cost customers are actually willing to pay. There are very few

people who would want to buy something ridiculously overpriced especially when compared to

other sources of the same product selling for less. The pharmaceutical and drug industry is a little

different because their products are needed not wanted. The prices of their products are overly

expensive oftentimes far beyond the affordability of those purchasing them, and the reasons for

them aren’t what they should be.

An example of the overpricing of medicine is Daraprim, a drug used to fight a life

threatening parasitic infection called toxoplasmosis. Daraprim became FDA approved in 1953
Unethical Pricing and Corruption in the Pharmaceutical Industry 4

and the rights to it has been moving from one company to another ever since. Several years ago

one pill cost $1 but that changed drastically when the rights to the drug were brought by several

different companies over time. Years later the drug became part of the company Turing

Pharmaceuticals where the largest jump in price occured. $13.50 was the price of one Daraprim

pill at one point in time, however a corporate decision increased that price to $750 for one pill

overnight! When asked about the change in price, CEO Martin Shkreli said it was to go towards

“research to better the drug”. When hearing about this change one has to think, does research to

better a life saving medication to current patients need to cost over 5000% more? When doctors

were asked of their thoughts on this change many disagreed with the need for a better version of

the drug, and on their method of raising the money for the “research". Dr. Judith A. Aberg was

asked her opinion and she said, “This seems to be all profit-driven for somebody...and I just

think its a dangerous process.” This situation Andrew Pollack in the ​New York Times​ article,

“Drug Goes from $13.50 to $750 overnight” describes is one of many situations that has

happened in the past and is happening now.

Imagine a scenario where someone is suffering from toxoplasmosis (the infection

Daraprim attacks) and lives in a low income household. The $750 pill this patient needs for his

condition with insurance is still going to cost ridiculous amounts. If the drug were consumed

once per day for an entire year, the costs of Daraprim would amount to nearly $275,000. Even
Unethical Pricing and Corruption in the Pharmaceutical Industry 5

with help from an insurance company the cost would be substantial, but can you imagine if they

didn’t have medical insurance? This would financially ruin that family having to take out loans,

sell cars, etc. just to pay for drugs to help him fight a life-threatening condition.

Another current product that recently has dramatically increased in price is Epinephrine

shots or “EpiPens” which are used to treat anaphylactic shock in the case of an allergic reaction

or other stimulant. In the article, “Industry Insiders Estimate EpiPen Cost No More Than $30”

Ben Popken explains the real estimated cost of an EpiPen and how much the company Mylan

sells it for. The cost for EpiPens as of 2016 was $600 for two according to the article. However

NBC news asked Kevin Dean, head of medical technologies for the PA consulting group, about

how much it costs to make one Epinephrine shot. Kevin Dean originally had the rights to make

the shots and sold them to Mylan in 2004, he described the plastic, needle, case, etc. as costing

around $2-4. NBC’s contracted Pharmacists estimated the amount of Epinephrine in the shot

costs less than $1. According to both Kevin Dean(former owner) and NBC’s pharmacists it costs

around $5 to produce the physical EpiPen. When taking other business costs, research, etc. the

pen is said to cost no more than $30 for one, and with a price of $600 for two EpiPens, they are

asking 10 times the amount it costs to make. To explain the large gap in between the cost to

make and price on the market Mylan claims that the cost to make the shot isn’t the only cost to

incorporated in the price. Companies claim research toward bettering the drug is what makes it
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more expensive. In theory that would make sense, however to charge nearly 60 times the

production costs is extremely excessive and according to Kevin Dean, “​What they've been doing

is they've been making little updates to it, refinements to make it work better. But it essentially is

the same core technology that was there for many years(Popken).” While there have been few

improvements to EpiPens, company profits have skyrocketed over the last few years and the

CEO Heather Bresch salary increased to $19 million over the recent years.

EpiPens are used by thousands of Americans. Allergies oftentimes can be enough to send

a person into anaphylactic shock and potentially be fatal. This medicine helps people in those

situations. Because it isn’t an illness it isn’t a constant medication, but a sudden and unexpected

moment when you might need it to save someone’s life. For this reason families oftentimes

purchase several to have at home, in the car, at school, etc. to be ready in case of an emergency.

However the cost to get that many is difficult and even impossible for some to afford. Why

would a life saving medicine be so expensive? Senator Bernie Sanders said, “There's no reason

an EpiPen, which costs Mylan no more than $30 to make, should cost families more than

$600...The only explanation for Mylan’s outrageous price increase is that the company values

profits more than the lives of millions of Americans.”

Different from other products on the market medication isn’t wanted, it is needed. That

means that no matter what the cost, if a family member or loved one needs that medication to
Unethical Pricing and Corruption in the Pharmaceutical Industry 7

stay alive they will do absolutely anything to get it. The problem is that the businesses who make

the drugs use that to their advantage. They know that they can put whatever price they think is

“right” and people will pay it, because they have to. When faced with the terrible situation of

someone they care for is dying or in desperate need of medicine they will do absolutely

everything to try and help them no matter the cost. Seeing the unethical actions of these

companies raises the question, how are they able to get away with this pricing? The real answer

is that there are a lot of things that allow for the listing cost of drugs.

One of the most common reasons the companies give for why their prices are so high is

for research and development of a new or better version of their product. They claim huge

change prices to be not for increased profits but for the future of their medicine. The reality is

only a small percentage of what they make actually goes toward bettering their product, the rest

is for the business. In the article, “5 Reasons Why Prescription Drugs Prices Are So High In The

U.S.” Sydney Lupkin explores the idea of the companies profits going towards development.

According to this passage many pharmaceutical and drug companies actually qualify for grants

and donations for research by organizations like the National Institute of Health, which then

doesn’t require the company to use much of their own money. This isn’t to say that these

companies don’t use any of their own money for research, but they only use 10-20% of their

revenue according to the quoted Harvard Medical School team led by Dr. Aaron Kesselheim.
Unethical Pricing and Corruption in the Pharmaceutical Industry 8

The research and development alone isn’t a valid justification to increase prices so dramatically

like what has been done in the past.

This problem one would assume wouldn't be unique to the United States, but it is. The

question is, how can pricing and corruption in the drug industry be reduced or be stopped? There

are several changes that could accomplish this.

The system in America allows for patents to be acquired for specific drugs, many of

which are rare diseases. Having a patent eliminates the ability of other corporations to make a the

same drug, but instead create opportunity for innovation from different companies. However,

many of the larger corporations play with this idea and find ways to maintain their near

monopoly and diminish competition other than simply buying them out. Sydney Lupkin in the

article said, “​The tactics vary, but they include slightly tweaking the nontherapeutic parts of

drugs, such as pill coatings, to game the patent system and paying large ‘pay for delay’

settlements to generics manufacturers who sue them over these patents.(Lupkin)” ​Decreasing

competition allows for the companies to price whatever they want without the worry of other

businesses selling for cheaper and stealing buyers. ​These “government approved monopolies”

are the ones who have the control to price whatever they want because they eliminate their

competition with this patent system or by buying the competition. The solution is to improve the

patent system so that companies can have their own drug, but allow for others to sell similar
Unethical Pricing and Corruption in the Pharmaceutical Industry 9

drugs without risk of being sued. Decisions such as this should have careful consideration of the

actual drug itself so companies can’t get by with little ways to sue small companies to maintain

their power.

With so many Americans being taken advantage of for their need for medicine, couldn't

the government just make it illegal to do so? The government legally can’t regulate the prices of

the medical products millions of Americans depend on. That same article describes the problem

of the lack of control in prices by starting in 2003 when Congress created the Medicare Drug

Benefit which ended a program that allowed for the negotiation of prices of drugs. Medicaid

must cover all approved drugs, even if there may be a better or cheaper version. This system puts

even more stress on the federal programs that help people pay for health care. An increase in

stress indicates a need for more taxes which can be compensated for in the money taxpayers

contribute which leads to another problem. With high prices and federal programs paying for

them, taxes increase. Because the government can’t change prices the businesses set whatever

official cost they want people to pay and insurance companies and government programs have to

deal with it.

One solution to lessen this issue is for government interaction in pricing. Outside of the

U.S. European governments control drug prices in a variety of ways. The Economist explains in

“Why Drug Prices in America are so High” Britain’s system where their welfare programs refuse
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to pay for medication that is ridiculously expensive. This works there because government

spending is a huge revenue for companies selling medicine. According to the Economist $112

Billion were spent on medication by Medicare for the old in America. The companies can put a

price on their drugs and despite the price the government has to pay for it, and they can’t

negotiate prices and legally have to pay them. If we were to do like Britain and not compel the

Medicare system to pay for the drug, but reject ridiculous offers and negotiate for lower ones,

then companies would have to lower prices. Billions would be forfeited in the industry if the

government refused to pay and companies would be forced to lower prices with this change. It

works for other countries and their drugs are a lot more affordable, it will work here too.

Pharmaceutical companies and the drug industry in general has been raising the prices of

their much needed products to the point many are unable to afford them. The motives behind the

prices aren’t unethical, but for the purpose of increasing profit rather than helping those whose

lives depend on it. There are millions of Americans who are struggling with this issue and just

want to be able to have the medication they need to live. There needs to be change in this

industry and that can be accomplished by changing the patent system to allow for more

competition, government negotiation of prices, and the rejection of overly expensive drugs by

the government. There are so many people who are in desperate need of medication just to stay
Unethical Pricing and Corruption in the Pharmaceutical Industry 11

alive or help cope with a difficult condition, it is horribly wrong for companies to take advantage

of those people, but almost just as bad if nothing is done about it.

Annotated Bibliography

Among shelter, food, water and other basic needs, medical drugs in America should be

accessible and affordable. However the drug industry is selling essential medication for an

enormous cost to the point that many people can’t afford them. The greed of powerful

pharmaceutical companies is at the cost of so many people who are gathering everything they

have and more for their needed medical drugs. Even though they have the power to change the

pricing, corporations prioritize profit over the medical need of the patients the drugs are helping.

Andrew Pollack, “Drug Goes from $13.50 a Tablet to $750, Overnight” ​New York Times.

Business. September 20, 2015.

Link.​https://www.nytimes.com/2015/09/21/business/a-huge-overnight-increase-in-a-drug

s-price-raises-protests.html​ Accessed Feb 26. 2018

This article discusses the 5000%+ increase in price of the drug Daraprim by the company

Turing Pharmaceuticals. The CEO, Martin Shkreli, was interviewed and asked about the
Unethical Pricing and Corruption in the Pharmaceutical Industry 12

price change. He argued that they increased the price to help research to better the

product and others. Mr. Shkreli also said that the drug was “relatively” inexpensive, and

that is what their “People” say the right price is. A bottle a few years ago cost $1700, that

same thing is now $75,000.

Ben Popken, “Industry Insiders Estimate EpiPen Costs No More Than $30” Nbcnews. Business.

September 06, 2016

link.www.nbcnews.com/business/consumer/industry-insiders-estimate-epipen-costs-no-m

ore-30-n642091​. Accessed 26 Feb. 2018

Ben Popken explores the cost shifts of EpiPens throughout various owners of the product.

He also breaks down the cost to produce the drug and explains how little it costs to make

yet the company Mylan sells it at such an unreasonable price.

Jonathan D. Alpern, M.D., William M. Stauffer, M.D., M.S.P.H., and Aaron S. Kesselheim,

M.D.,

J.D., M.P.H. “​High-Cost Generic Drugs — Implications for Patients and Policymakers”

The New England Journal of Medicine​. November 13, 2014.

Link.​http://www.nejm.org/doi/full/10.1056/NEJMp1408376​ Accessed Feb 26. 2018

This article was written by several professionals with advanced degrees in medicine. The

authors give examples of overpricing of drugs and analyze the trends in the drug and

pharmaceutical industry. The article gives many of examples that show an overall

increase in pricing of almost all “Generic” drugs by the corporations who produce them.

Sydney Lupkin, “5 Reasons Why Prescription Drugs Are So High In the U.S.”

Time.​Kaiser Health News August 23, 2016.

Link.​http://time.com/money/4462919/prescription-drug-prices-too-high/

Accessed 26 Feb. 2018

This article describes 5 reasons why drugs are priced so high in the United States. Sydney

Lupkin gives facts and evidence behind these reasons and logically explains their

relevance to the topic.

“Why drug prices in America are so high”​ The Economist.​ September 12, 2016.

Link.

https://www.economist.com/blogs/economist-explains/2016/09/economist-explains-2

Accessed 26 Feb. 2018

The economist explains why drugs are so expensive in America compared to other

countries in the world. Our nation is unique in that the government can’t negotiate with

drug companies about pricing. They also have patents that “protect” some companies and
Unethical Pricing and Corruption in the Pharmaceutical Industry 14

by doing so promote monopolies over certain products, which lowers competition which

allows them to price the medication at whatever price the company wants, and that

ultimately leads to outrageously priced products.