There is a distinct and terrifying lack of any consistent and justifiable formula for prescription drug pricing. Of course, there are considerations that factor into how a manufacture determines a price point for a drug, such as patent protection, availability of generics or similar drugs, and treatment objective, but there doesn’t seem to be any relation to actual research and development expenses, which is what the industry touts as their biggest explanation for sky-high prices. i. Pharmaceutical companies have priced their products at a profit percentage higher than any other industry. The United States’ healthcare system has complicated pricing because there are three masters: payer, provider, & patient. Managed Care Payers do not infer things; they want data demonstrating better outcomes or lower costs to justify prices. No outcomes will often mean no reimbursement. Because employers are the primary sponsors in the US, revenue is mainly generated through premiums paid by each worker. This premium is …show more content…
From 2000-2004, that number declined to around $5 billion. But between 2005 and 2009, that number didn’t even reach $3 billion. Although an average of $3 billion of sales might still sound fairly strong, one must bear in mind that research costs are rising for the pharmaceutical industry. Furthermore, the number of new drugs is not rising in parallel to these surging R&D costs. Despite rising R&D spending, the number of drugs receiving approval from the FDA is, at best, flat. An alternative lens is to consider how many drugs receive FDA approval per billion dollars spent on research. Even under this alternative perspective, the broader picture does not look any better. With rising R&D costs and declining sales figures, pharmaceutical profits are plummeting. According to various estimates, pharmaceutical products released between 2005 and 2009 barely broke