By Peter J. Pitts
A majority of Americans believe increased health care transparency should be a top national priority. It’s easy to understand why. Rising health care costs, coupled with high-profile stories of price gouging at some small pharmaceutical companies, have left consumers feeling ripped off, especially when it comes to drug prices.
But most drug companies aren’t whimsically increasing prices. In fact, if the health care industry was really transparent, people could see the truth: drug companies often aren’t the culprits behind high costs. In fact, they’re the best hope for dramatically lowering health care spending.
The transparent truth is that the prices patients actually pay aren’t set by drug manufacturers – they’re determined by pharmacy benefit managers, insurers, hospitals and pharmacies.
And these third parties frequently engage in price gouging.
Consider the “prescription price shell game” uncovered in Minneapolis, where a local pharmacy jacked up the price of a kidney medication to more than $6 per pill from 87 cents. Or a cancer center in North Carolina that collected nearly $4,500 for a colon cancer drug that hospitals typically buy for $60.
Unfortunately, the media largely ignore such abuses, preferring to concentrate just on alleged misbehavior or greed by pharmaceutical companies.
Few stories put America’s health care spending in perspective. Name-brand drugs accounted for just 7 percent of the $100 billion increase in health care spending from 2013 to 2014.
That 7 percent accounts for some of the most promising advances in treatment in decades. By addressing once-untreatable symptoms and complications, these advances help patients avoid expensive surgeries and lengthy hospital stays – which account for a far larger share of health care spending than pharmaceuticals do.
Of course, medicines aren’t cheap to create. The average cost of developing an FDA-approved prescription medication is $2.6 billion, according to the Tufts Center for the Study of Drug Development. That represents a 145 percent increase over the past decade.
For every successful new compound, hundreds of others once deemed promising end up abandoned. Research chemists at pharmaceutical companies may spend an entire career in the lab without working on a single drug that gets to market.
Consumers are justifiably mad about health care costs. But their anger is misdirected. If the health care industry was truly transparent, Americans would see who’s really to blame for rising prices. With rare exceptions, it’s not the companies creating lifesaving medicines.
Peter J. Pitts, a former U.S. Food and Drug Administration associate commissioner, is president and co-founder of the Center for Medicine in the Public Interest.