Drug Prices Rising (and some by 100%)

Expensive drugs are hardly new, but Congress is now investigating rising drug prices that include price hikes of 100% or more for some medications.

Why can drug companies raise prices on some drugs without a huge consumer backlash?

First, some of these drugs are for exceedingly rare conditions. In these cases, the companies may not be able to keep drugs on the market at a lower price because of a small potential market and high manufacturing costs.

For some other drugs, prices can be raised because consumers don’t feel much of the pinch. For example, coverage for inpatient care and infused/intravenous drugs can be so comprehensive that patients never realize the cost of the drug, and the expenses are passed on to insurers and payers, including Medicare.

In cases where a hospital or practice makes more money on a more expensive drug, raising a price might be an incentive for more prescribing or could help a drug grow market share. In a turn that seems to go against economic intuition, a more expensive product can actually lead to a higher demand for a drug because prescribers are both consumers and suppliers (they purchase drugs from the companies, but then supply them to individual patients, acting as an economic middle-man).

Should Congress step in to affect pharmaceutical prices, or are these prices just another symptom of our broken system for compensating physicians and paying for health care?