Movers and SHAKERS
Prescription Drug Pricing: How Would Limited Government Intervention Change the Landscape?
Bringing down prescription drug prices has been a campaign promise by many presidents over the years. Making a deal with the pharmaceutical companies is not an easy task, as these companies operate just like any other, with a goal to maximize profit. Big Pharma companies produce drugs that save people’s lives, which comes with a price many who need it cannot afford, even with health insurance. Government deregulation could open the doors for other generic brands to enter the market and potentially drive down the costs of high-demand drugs. Smallcap companies in the sector would then be exposed to fair competition, rather than not standing a chance at all against pharmaceutical giants.
Cheaper for Patients. Reducing government regulation could make the prices of prescription drugs cheaper for patients. With more generic options that would be available, the price per prescription would be driven down by the increased competition, which could open the door for many smallcap pharmaceutical companies to expand in the market.
Reducing Barriers to Entry. With less government intervention, the prices of prescription drugs could come down, rather than continue to increase. Big Pharma companies typically prefer the government stepping in because it discourages generic brands from entering the market. These generic brands are sometimes smallcap companies that get pushed out of the market early on.
Over-the-Counter Options. With less government intervention, more drugs could be available over-the-courter for patients. In most parts of the world, birth control is an over-the-counter drug, but not in the U.S. Making certain drugs over-the-counter would cut out the middle cost for patients, such as paying to see their doctor to get a prescription for a drug they take daily.
Big Pharma Works Harder. With the increased competition that would come with the reduced barriers to entry, the Big Pharma companies would have to find ways to beat out the generic brands that emerge. Having more capital and legal sway, these companies are likely to have legislation work in their favor. Smaller companies lack the power and persuasion that Big Pharma has.
High costs will continue. Obligations for drug and biotech companies include payroll for employees, maintaining promises to investors, and continuous research and development initiatives. The companies price the drugs at what they feel is appropriate for the effort put in and the demand for the drug. Additionally, if they are the only distributor for the drug, they have no reason to lower the cost either.
It all comes back to profit. Cutting costs for prescription drugs sounds like the morally right choice. Unfortunately, these pharmaceutical companies operate like any other company. The financial goal is to maximize profit for the firm and the shareholders. Since the drugs they produce are in high demand and likely do not have comparable alternatives, like the EpiPen, the companies can keep their prices high to make the greatest profit.
Government deregulation would open the doors for other pharmaceutical companies to push generic brands of expensive drugs, leading to an overall decrease in drug prices. The increased competition would drive the prices down. These drugs have been invented to cure diseases and maintain health, but the ticket price is sometimes so high that patients struggle to make ends meet to afford drugs necessary to sustain their health. Pharmaceutical companies operate just like any others, trying to get the largest profit margins possible, even if that means the price tag is outrageous. Pharmaceutics are also politically and financially motivated, from a patient standpoint, which makes decision-making harder. The outlook on prescription drug pricing will continue to be a relevant topic, but hopefully change is on the horizon.
https://www.cnbc.com/2019/03/24/heres-why-drug-prices-are-so-difficult-to-bring-down.html, Karen Firestone March 24, 2019