This is Why We’re Doomed to More EpiPen and Martin Shkreli

Mylan Inc. CEO Heather Bresch holds up a 2-pack of EpiPen as she testifies during a hearing before the House Oversight and Government Reform Committee

Mylan Inc. CEO Heather Bresch holds up a 2-pack of EpiPen before the House Oversight and Government Reform Committee | Alex Wong/Getty Images

The EpiPen controversy stirred up a lot of resentment and anger toward the pharmaceutical industry, and the general state of healthcare in America. That sentiment has been at a boil for a while, with Obamacare raising insurance premiums, but leaving a lot to be desired in terms of helping with overall expenses. EpiPen was just one example of how our system is inherently flawed — you may remember the Martin Shkreli saga from a short time ago, plus other examples of pharmaceutical executives finding themselves the target of public ire following drug price hikes.

That anger is justified, particularly when these price hikes are being made for no reason other than to increase profits and bolster stock prices. But that’s the way it works, unfortunately. Our healthcare system is a bit of a mess, and there doesn’t appear to be an easy way to fix it — or even much of a desire to.

But, how did we get here? How did American consumers end up in a position in which they — particularly those in need of specific medications or prescription drugs — are subject to the whims of pharmaceutical execs who can decide to jack up prices by 10%, 100%, or 1,000% whenever they feel like it? There isn’t a simple answer. You quickly end up in the weeds, discussing things like brand-name versus generic drugs, profit motives, insurance frameworks, FDA trials, and many other things.

The reason for expensive prescription drugs

Martin Shkreli, former CEO of Turing Pharmaceuticals LLC., smiles during a House Oversight and Government Reform Committee hearing

Martin Shkreli, former CEO of Turing Pharmaceuticals LLC., smiles during a House Oversight and Government Reform Committee hearing | Mark Wilson/Getty Images

If you wanted to make it as simple as possible, though, you can look at the results of a recent study published in JAMA, The Journal of the American Medical Association. That study, put together by doctors from Harvard Medical School and Brigham and Women’s Hospital in Boston, includes “peer-reviewed medical and health policy literature from January 2005 to July 2016 for articles addressing the sources of drug prices in the United States, the justifications and consequences of high prices, and possible solutions,” and came to the conclusion that America’s problem lies mostly with the government.

Well, the government working in conjunction with Big Pharma.

“The most important factor that allows manufacturers to set high drug prices is market exclusivity, protected by monopoly rights awarded upon Food and Drug Administration approval and by patents. The availability of generic drugs after this exclusivity period is the main means of reducing prices in the United States, but access to them may be delayed by numerous business and legal strategies,” the study’s findings said.

The solution? To deregulate — to allow the free market to work as it should. And doctors should stop prescribing only name-brand drugs to patients. Instead, though, we end up with drug prices being controlled by a small handful of powerful executives  who, with government protection on their side, can effectively do whatever they want. So, why wouldn’t they raise prices? There’s no motive for them not to — all that happens in response, typically, is a dog-and-pony show where they’re dragged in front of a House Oversight Committee and grilled.

It happened to Shkreli. It happened to Mylan’s CEO, who bumped up the price of the EpiPen. Something similar happened to Wells Fargo CEO John G. Stumpf after his company defrauded customers out of millions. And yet, no laws actually change — these hearings are often just a passing attempt to make everybody feel a bit better.

A rotten framework

Activists rally during a protest against the price of prescription drugs

Activists rally during a protest against the price of prescription drugs | Drew Angerer/Getty Images

The real problem with our healthcare system, and with high drug prices specifically, is that we have a broken framework. We have a quasi-free market set up in which companies can operate, but are granted monopoly powers and government protection. There are some reasons for that — such as high research and development costs — but researchers say even that isn’t justification for the prices customers are paying. “Although prices are often justified by the high cost of drug development, there is no evidence of an association between research and development costs and prices; rather, prescription drugs are priced in the United States primarily on the basis of what the market will bear,” the JAMA study reads.

Many working in or around the pharmaceutical industry will say these types of price spikes aren’t really their fault. They argue, within the current framework, these are the types of results we should expect to see . After all, what they’re doing isn’t technically illegal. It’s all lawful. They’re simply doing their duty to provide investors with the biggest possible return.

That may be the case, but it’s really hurting American consumers, millions of whom depend on these drugs. The question, then, is how do we fix it? There isn’t an easy answer; in fact, it’s something we’ve been debating for decades. But the most obvious answer is to deregulate and let the market work. But there are a lot of parties with their fingers in the pie — doctors, hospitals, insurance companies, etc. — all who have reasons to preserve the status quo.

For that reason, it’s likely you’ll see the next EpiPen or Martin Shkreli sooner rather than later. Both were, and are, working within a broken framework to further their interests; that doesn’t mean they’re free from blame, but it’s that framework that allows them to get away with it. If we want to see real change, it’s going to have to start with our policymakers, rather than hoping pharmaceutical execs will have a heart.

Follow Sam on Twitter @Sliceofginger and Facebook

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