Our new Marketplace Crash Course is here to help. Sign-up for free, learn at your own pace.
The recent travails of the pharmaceutical industry — and the anger over drastic price increases to some medications — has not escaped the attention of some in Congress.
Next week, drug executives will be before the House Committee on Oversight and Government Reform to answer some questions. It is not the first time in the last few months that the pharmaceutical industry has found itself in the spotlight, leading to mounting pressure on companies to control prices.
There are several factors that influence how much companies charge for their products. Competitors’ prices and the effectiveness of the drugs are two of the most important.
But University of Chicago’s Rena Conti said what matters most is the “perception of what payors are willing to pay for these drugs that drive these manufacturers to set a given drug’s price.”
So if drug executives think the public will pay a pretty penny then that’s what they’ll charge. But over the last few months there’s been a lot of talk out there from presidential candidates.
On the stump in New Hampshire, Florida Senator Marco Rubio said drug companies are “raising the prices dramatically, and the reason they’re raising the price dramatically is because they can.”
“It’s just pure profiteering,” he said.
Democrats have zeroed in on the industry, too.
“Nobody in America should have to choose between buying the medicine they need and paying their rent, “declared former Secretary of State Hillary Clinton.
And U.S. Senator Bernie Sanders said, “The pharmaceutical industry itself has become a major health hazard to the American people.”
This bruising rhetoric from both political parties is a taste of the unwelcome attention the drug industry has received since last fall. Former Merck executive and current Princeton Professor Adel Mahmoud said PhRMA executives must be sensitive to the current climate.
“When that kind of political discussion happens, they will have to appear responsive, they cannot just say we are deaf,” he said.
A study has shown historically as pressure heats up, companies respond. And that may be happening right now. One manufacturer has ditched plans to raise prices, and generic drug price increases overall have slowed.
But Mahmoud reminds us, whatever price relief consumers may experience, it’s temporary. A more permanent fix, he said, requires more than lots of talk.
There’s a lot happening in the world. Through it all, Marketplace is here for you.
You rely on Marketplace to break down the world’s events and tell you how it affects you in a fact-based, approachable way. We rely on your financial support to keep making that possible.
Your donation today powers the independent journalism that you rely on. For just $5/month, you can help sustain Marketplace so we can keep reporting on the things that matter to you.