Pharma Price Hikes: Too hard a pill to swallow?

Recently, pharmaceutical companies have gained much media attention, due to an epidemic of price hiking. In his recent address to congress, US President Donald Trump stated that Americans must ‘work to bring down the artificially high price of drugs and bring them down immediately’. Are these dramatic cost rises an attempt to remain in business or simply another exercise in corporate greed?

Capitalist Common Sense

Unknown to most, the production of innovative medicines is unquestionably expensive and laden with risk. The going rate for each successful new drug is between $1.5-2.5 billion, through 12 years of research, clinical studies, and FDA ‘hoop jumping’. With only 1 new compound in every 5000 receiving regulatory approval, one can appreciate why investors may think twice about the drug development business. But then this is the problem. How can the creation of, often lifesaving drugs, be sustainable if the time and expense invested is met with considerable losses? Neither big nor small pharmaceutical companies receive special dispensation based on the moral imperative to heal the ill, as such, realistic price points have to be set. If you pick and choose Kantian principles in a capitalist world, then you are destined to fail.

For companies that produce rare Orphan drugs, the reality of business failure is all too real. Treatments for rare illnesses are an incredibly small market, one that could not be serviced unless suitable return on investments can be made. Despite the financial incentives provided by the Orphan Drug Act, the reality is that rare diseases are especially uneconomical. This is why high prices are obligatory. High prices equal higher profits which equal long term, secured investments for better, safer and more effective treatments. This is consequentialism in the flesh; it should not matter the price paid, when the result is lives saved.

Once a drug has entered the market and started to generate profits, it could be considered foolish not to capitalize on the opportunity to increase prices, given that the increased revenue can then be poured back into research and development. This allows the production of innovative new drugs which will ultimately benefit vast quantities of people. From a utilitarianism standpoint, this is without a doubt morally justifiable.

The US government backed patent systems allows a 20-year monopoly on the production of a new drug. By the time it hits the shelves after years of research there is on average only 8 years left for profits to be reaped. Given that price hikes in this period are perfectly legal, the action must be morally correct and so according to duty ethics is justifiable.

From a hedonistic point of view increasing the price of pharmaceuticals allows the top players in a company to enjoy a lavish lifestyle. As they have undoubtedly worked extremely hard to reach the position that they are in, like bankers and businessmen, are they not entitled to enjoy the spoils of their labour? Moreover, there is no incentive to have low prices in such a market. This would result in a loss of competitive advantage and hence lower profits for shareholders.

Culling the poor

While it is easy to consider the act of raising the price of pharmaceuticals in terms of profit, the fact should not be forgotten that this simultaneously raises the price of survival for many vulnerable and potentially terminally ill people. It is too easy to detach the act of drug price hikes from people’s suffering. If there is a potential cure or treatment available that will improve a person’s quality of life, should it not be a basic human right that everyone has access to it? Deontologically speaking, the act of refusing a potentially life changing medicine to a person for the sake of money is morally abhorrent and therefore unjustifiable.

Many price increases are sudden after the drug has been in circulation for a long time. The period in between the drug entering the market and the price inflation is generally long enough to ensure a captive audience of consumers, who are reliant on the drug for their quality of life. It is this captive market that allows the big pharmaceutical companies to exploit the sickest and most vulnerable people for profit. This is particularly true in countries like the US where there is no welfare state. The increasing drug cost leaves people with terminal, genetic or long term conditions with very few options, as they are unlikely to be able to find insurance and are forced into somehow footing the extortionate bill for treatment themselves.

In the same year that Heather Bresch, CEO of Mylan, took home $18.9m, the company hiked the price of their EpiPens by an equally staggering 600%. Whilst Bresch defends the right of her company to make a profit, the freedom principle states that this can’t be morally justified at the expense of others. EpiPens are life saving drugs for those with severe allergies, and harsh price hikes lead to thousands having to go without or needing to find extreme ways to meet the costs. As is often the case with more specific drugs, Mylan has a monopoly over the market leaving consumers no choice but to pay up or play Russian roulette with their health. Does this not leave pharmaceutical companies with a moral obligation to protect their customer’s quality of life?

These hikes don’t just affect the minority either. In 2016 the cost of an anti-epilepsy drug taken by 48,000 in the UK was raised by an eye watering 2600%, at a cost of £48m to the NHS. At a time when there is such scrutiny on the running of the health service in the UK, every extra penny paid into the pockets of pharmaceutical companies is money deprived from other services that would benefit millions. These cuts are detrimental to the vast majority of people who rely on the NHS every day. With the sole purpose of lining the pockets of the select few, they are morally indefensible. This is not utilitarianism, this is extortion.

Group 54: Joshua Sanders, Zhendong Li, Eleanor Smith, Kathleen Sandman 



26 thoughts on “Pharma Price Hikes: Too hard a pill to swallow?

  1. I completely agree, putting up the prices is depriving those most in need of medication with tough decisions to make. Will they be able to pay for the life saving medicine or will it ultimately be their life they have to put on the line purely to line the pockets of the most wealthy?


  2. really interesting blog!
    I get the idea that medicines can be expensive when they first get on the market… but the price hikes dont make much sense to me?
    It is such a selfish idea to hit the people that need the treatments the most with such extortionate bills, its all business and no thinking!


  3. You’ve raised some interesting points here. Whilst I agree that it is only fair that pharmaceutical companies are allowed to make a profit, it shouldn’t be at the expense of people who can’t afford it. If companies like Mylan are allowed to create a monopoly for themselves on even relatively simple life saving drugs such as an EpiPen, this is not necessarily the fault of the company. This hints at a more systemic problem surrounding regulations and governmental legislation, particularly in the USA. This is why in the UK we have organisations such as the MHRA and EMA that attempt to prevent pharmaceutical monopolies. Ultimately, it seems to me that the only real way to ensure that people who are less well-off can always access the latest treatment options is to enrol them in a welfare state. However, that creates are whole load of other issues, some good, some bad. It seems that everything these days end up having to be a compromise…


  4. I see the point that hiking prices so high can have huge impacts on patients and overall healthcare, especially in places like the US where healthcare is not a given and is the responsibility of the individual, but also in the UK where there is such a thing as the NHS, that is under such huge pressures to provide for the general populous
    BUT, you have to be able to see it from the perspective of the pharmaceutical companies. There is such huge amounts of money required for all the research, testing and clinical trials that go into providing treatments, that if they just put them on the market at low prices – it just wouldn’t be feasible. The pharmaceutical industry is, after all, a business, just like any other, and even though our health and our lives are at stake, these services cannot be provided at no cost. Neither can we deny the existence of “me-too” drugs, everyone wants a piece of the Big Pharma profit.
    I feel a compromise must be made. Healthcare treatments cannot be provided at no cost, however where profit comes before value of life, we must really begin to question our ethics.


  5. “Really interesting blog! I get the idea that medicines can be expensive when they first get on the market, but the price hikes dont make much sense to me. It such a selfish idea to hit people that need them with such massive bills, its all business and no thinking!”


  6. Of course we would love pharamaceutical companies to take a deontological approach to business, but the reality is that without having to charge money for their products, there would be no company or progress left. However, allowing a company to have complete free reign on the pricing is also beyond what we can consider as ethically acceptable. I think as mentioned by previous commenters, the ability to raise the price of vital medicine by ridiculous amounts is a failure of the system in potentially two ways: the long term business model of the company, and the regulatory authority.

    In terms of the business model, if the company has to suddenly hike prices in order to develop new treatments, where was the future planning? Many large companies look at their investment strategy over the next 10/20/30 years, so shouldn’t the original retail price have taken this into account?

    Now considering that a deontological approach is unlikely, it is up to the regulatory authority to control to what extent prices are set based on development cost etc.. There should be a set limit companies can increase the price of a drug above inflation over (as an example) 10 years, above which special circumstances would be required. This would help find a good medium in allowing Pharma companies to keep their large profits to further develop new treatments and help a large amount of people, while still giving drug access to those who may not be that well off


  7. I think you make some really interesting points here, a controversial topic that you have discussed really well. Pharmaceutical companies seem to detach themselves from the people they develop the medicines and drugs for, focusing on a need for profit and money for R&D. I think in this blog you explain well the impact of this on the public who actually use the products – “While it is easy to consider the act of raising the price of pharmaceuticals in terms of profit, the fact should not be forgotten that this simultaneously raises the price of survival for many vulnerable and potentially terminally ill people. It is too easy to detach the act of drug price hikes from people’s suffering. If there is a potential cure or treatment available that will improve a person’s quality of life, should it not be a basic human right that everyone has access to it? Deontologically speaking, the act of refusing a potentially life changing medicine to a person for the sake of money is morally abhorrent and therefore unjustifiable.” Really great article to read.


  8. Mention of lavish lifestyles of top executives is a bit of a red herring in this discussion. Excessive executive salaries are found in many organisations and need to be justified to shareholders.
    Patent law does not allow much time for a return on investment, so it is unsurprising that prices are high when innovative drugs first reach the market. Prices start to fall once the first generic equivalent becomes available or a more effective alternative medicine is introduced.
    However, there are many reasons for price hikes for established drugs. In 1998, one of the big pharmaceutical companies sold a number of mature products to a small organisation because the cost of producing and supporting these medicines was greater than they were allowed to charge for them. One of the divested products was an injection used in NHS hospitals. At the time of divestment, the product cost 18p per ampoule. The new owners raised the price to £1.40 per ampoule. There was an outcry in the press at this outrageous price hike, but no mention of the alternative, which was discontinuation of manufacture. A Starbucks Cappuccino cost £2.00 in 1998. I don’t recall seeing any articles proffering constructive suggestions about how a company could manufacture, test, package, transport, sell and fulfil post-marketing medical information and safety monitoring requirements for less than the tenth of the price of a cup of coffee.
    Where there are plenty of suppliers, the price of medicines will remain competitive. However, when a number of generic manufactures have discontinued production (perhaps because prices are artificially low, demand has reduced, manufacturing plants require extensive upgrades or pharmaceutical grade raw ingredients are hard to obtain), a monopoly situation occasionally arises. There may well be justifiable reasons for a significant price hike for the remaining supplier product as their production costs could have increased dramatically. However, these should be quantifiable and it is surely not beyond the abilities of large organisations, such as the UK government (on behalf of the NHS) or US medical insurance companies to negotiate a fair price to allow adequate remuneration of costs while restricting excessive profits.


  9. This raises some interesting, complex and frankly quite disturbing issues that I imagine the majority of the population are only dimly aware of, if aware at all. Clearly there are no simple solutions or quick fixes, otherwise they would have been put in place long ago, so we must seek a compromise. The pharmaceutical companies, are businesses and will only continue to exist if they remain in profit and as you clearly state, a very significant slice of the profit is ploughed back into research and development. Do we want them out of business? No, do we want under funded R&D? again no, so unreasonable capping of profit is not appropriate. Focussing on the UK, and accepting that other countries like the US have very different healthcare funding models, a large proportion of the population owe their healthcare and hence prescribed medicines to the NHS. Surely this makes the NHS by far the prime customer of the pharmaceutical companies in the UK, to far greater extent than a relatively small proportion of those patients who can afford to fund their own medicines. So without getting into the much thornier topic of NHS funding, should the government take a lead and encourage/demand a constructive dialogue between the companies and the NHS that will not make the situation perfect, thats not going to happen, but might improve it for people who do not choose to be ill, but deserve a fair deal


    1. I get the impression (and someone please correct me if I’m wrong) that the entire system in the US is (rightly or wrongly) geared towards maximum profit for the Pharmaceutical Companies, as per the American Dream. On a visit to the US I was shocked by the mass marketing of drugs towards the general public via television and magazine advertisements, something which is banned in the UK. This allows patients to go to their GPs and demand the newest available product, putting pressure on doctors to prescribe newer and more expensive drugs. I’m not sure how much generic prescribing takes place in the US, and it seems to me that the system is broken in this case. You certainly never hear Americans referring to products by anything other than the brand name! Donald Trump (a committed capitalist) should be aware of this and make legal changes rather than pointing his finger at Big Pharma!

      In the UK, each new drug is assessed by bodies such as the National Institute for Clinical Excellence (NICE) and individual area Boards for cost-benefit before being prescribed for use in hospital, and branded products are rarely used if there is a generic alternative available. This can in some cases lead to ‘postcode lotteries’ for certain expensive medicines, so the UK system is not without problems either! Medicine use and clinical effectiveness is regularly reviewed, and if an expensive novel compound is found to have little clinical benefit, use is discontinued.


  10. In 2008, the US RAND Corporation think tank investigated the potential pros and cons of controlling the cost of medicines by examining the impact of such approaches in nineteen Organisation for Economic Cooperation and Development (OECD) member countries around the world. They concluded that whilst savings would be made for the healthcare systems, the resulting decline in innovative pharmaceutical research and the availability of new medicines, caused by falling incomes, would lead to greater overall costs through untreated diseases in the long run. In their view, greater benefit would come from approaches that reduced consumer costs whilst maintaining pharmaceutical revenues.

    A current example of such an approach is the UK Pharmaceutical Price Regulation Scheme (PPRS). This is a voluntary agreement between the Department of Health and the Association of the British Pharmaceutical Industry, the latest version of which became effective at the beginning of 2014. Under this scheme, the parties have agreed the annual rate at which the overall cost of branded medicines to the NHS is allowed to rise over a five year period. Any NHS spend above the agreed level in any one year is repaid by the pharmaceutical industry members of the scheme. Over its five year lifespan the increased cost to the NHS through this agreement is a little over 5%. A parallel option was made available for any companies not wishing to join the voluntary arrangement. It required an initial 15% price reduction.

    Whilst comparatively rarely reported, the pharmaceutical industry invests significant resources in initiatives aimed at making cost effective medicines available to all patients around the world. Examples include a patent pool to allow poorer countries to produce versions of patented medicines for their own use at lower cost and collaborations with organisations such as the World Health Organisation and the Gates Foundation to supply medicines to treat neglected tropical diseases.


  11. Thank you for the opportunity to read this blog. As you point out, to bring an safe and effective medicine to the marketplace is an extremely costly and lengthy process. It is fraught with problems perhaps resulting in withdrawal at a very late stage. There is also a limited protection time under patent law for an innovative product in which costs can be recouped.
    Primarily pharmaceutical companies are profit-making for their shareholders and thus must balance the overall research and development costs of their business with the income from sales to ensure continuing and future success. They are not philanthropists and the salaries of senior executives is purely a matter for their shareholders. Many do however voluntarily participate in schemes to address access in Third World countries for example.
    Nations have different healthcare systems and the relevant bodies must negotiate with pharmaceutical companies to achieve a balance between fair prices and maintaining revenue streams.


  12. Pharmaceutical companies, incur significant expenditure bringing new products to the market place, and one would assume that when the new drug is finally released, the release price will reflect the costs to date and for the whole 20 years of sole licensing, before other companies are permitted to produce generic replica products and take a market share of future sales. Annually you would expect cost of living price increases to take account of increases incurred for raw materials, energy, staffing and premises costs. Assumedly within the original base release price will be an element of cost % to help finance ongoing research and development of other new products until they too are ready to be released to the market. Based upon these assumptions, there is no justification for pharmaceutical companies to massively increase the costs of a particular drug. Such significant increases which far out way genuine inflation would in my view be a case of companies profiteering in a unprofessional and unsustainable manner, which should be investigated by the relevant monopolies commission to cease this practice and to levy appropriate monetary fines to unscrupulous pharmaceutical companies whilst demanding they reduce the costs of a product back down to base costs plus normal inflation only, and for further appropriate disciplinary action to be taken in the event these companies do not comply with the monopolies commission recommendations/findings.


  13. You have presented two sides of a complex argument, possibly in rather emotive terms from the patient’s point of view, but highlighting issues which are of huge concern to many people.
    It is easy to target the pharmaceutical companies as the baddies when it comes to expensive medicines, but the underlying problem is far more wide-ranging. Pharmaceutical companies have huge expenses imposed on them by government legislation, supply of raw materials and other factors, and there is a limit to how much loss these businesses can absorb on essential but low turnover medicines.
    In the UK the NHS can no longer afford the ever increasing number of treatments and procedures available while, rightly, patient expectations have risen.
    As others have already commented, there is a need to address this problem at all levels, and a need for compromise.


  14. I enjoyed reading your Blog, a balanced presentation. Ethics and big business are not natural bedfellows. Whilst I agree that Pharmaceutical firms must be able to recoup the very large costs of developing a new drug, and must also be able to make a profit in order to fund future projects, they must surely have factored those considerations into the initial pricing of the drug once it appears on the market. Some level of price increase can be justified, taking into account inflation and availability of raw materials, but excessive price hikes need close scrutiny by some independent authority. The US health system seems to be lacking such a body, and can be obstructive in discouraging drugs manufactured by companies outside the US from being marketed there. As other commentators have pointed out, this can lead to a lack of competition and a company in a monopoly position.


  15. I am only a lay person but my understanding of the pharmaceutical industry is that it usually takes many years from research, clinical trials and government legislation etc to bring a drug to market, so it is understandable why the cost of some drugs can be so high. Looking at how long is left on the license, once safely available for patient use, I feel it is acceptable that drug companies try to recoup their costs and also make a profit on the investment they have made over many years.

    We need to understand that pharmaceutical companies are businesses needing to make a profit; they have a responsibility to share holders, need to make a profit to remain viable, they need also to recruit and keep talented professionals in a very competitive market therefore salaries need to be in line with their competitors.

    In the UK we are fortunate to have the NHS and most essential medicines are available without question. There are, of course, exceptions to this rule where local authorities reject the spending of large sums of money for treatments for some patients where costs are creating huge holes in budgets, but there are usually alternatives to these. There is also an argument that many drugs are prescribed needlessly in the UK where patients seek repeat prescriptions and stock pile drugs that are never used, wasting money that could be used more effectively, but that’s another story.

    In your debate there is the suggestion that the pharmaceutical industry should have a moral responsibility to the customer/patient and I do feel this is the case certainly in the UK. It is difficult to compare the healthcare system in the USA with the UK as they are run completely differently. However I don’t agree to price hikes where increases cannot be justified.


  16. I think you’ve highlighted some really important points here. It’s sometimes difficult to detach yourself from the emotive side of an issue like pharmaceuticals and view it from a purely logical perspective. Pharmaceutical companies do incredibly innovative work and research that requires millions of pounds of investment, that money has to come from somewhere.
    I think the point made on hedonism is somewhat misplaced. Correct me if I am wrong, but I believe money made from these price hikes is unlikely to go into the pockets of the senior managers and more likely goes back into research and development which ultimately benefits the vast majority of people across the globe. It is unfortunate that some of these hikes must go on products that many rely on, but from a business perspective of making money this does make the most sense.


  17. As mentioned by a few other comments, it’s very difficult to separate our initial reactions of “this isn’t fair” from the ethics of the situation. No, it doesn’t seem fair that well known medicines can suddenly go up in price but, especially in places like the UK, does it actually cause tangible harm to anyone? The 48 million cost to the NHS seems incredible, however the 15/16 budget was around £116 million. You have to wonder how much of an affect did this actually have.
    At the same time, the NHS does not operate across the globe but pharma companies do. Even from an outsiders perspective the US health service is a minefield of ethics and perceived “fairness”, however a price hike there would seem to have a significantly larger effect on someones life.
    At the end of the day I think pharma companies do have a responsibility to their consumers but they are still a business so expensive products are an unfortunate reality.
    This was a good, balanced discussion on a pretty difficult topic though!


  18. A very interesting read with some very insightful comments. While it can be argued that pharmaceutical companies are just running a business like any other, it needs to be accepted that this is simply not the case. When you are pricing those who cannot afford payments out of treatment, or life-saving/life-prolonging drugs, it becomes much less easy to understand individuals who see pharmaceuticals as an opportunity to make huge amounts of money. Understandably there needs to be some associated cost to incentivise research as well as fund the reasearch itself, however I feel that the enormous surpluses are unacceptable. Living in the U.K. much of the cost can be mitigated for an individual as we are lucky enough to have the NHS, although this is obviously a cost to the taxpayer and so we are still funding Big Pharma in this way. More should be done in countries in which a welfare state does not exist i.e. the US; there should be more effective government intervention to prevent huge bills for the sick. In particular, energy should be focussed on patenting compounds. I confess my knowledge of this is limited but if the “business is business” argument is to be made, then it seems fair that competitors should be able to find cheaper ways to produce drugs which treat the same illness, and undercut more expensive providers to offer a cheaper alternative for the consumer.


  19. There needs to be proper communication between pharmaceutical companies and governmental bodies to stop this from happening! If price hikes are to do with patenting and other similar processes then surely this is where change can occur to prevent people being priced out of life altering medicines.
    If, on the other hand this is simply pharmaceutical companies focussing on the business rather than their responsibility to the people who rely on them I cant personally see how this could ever be ethically justified! The idea of someone having to shell out for epilepsy medicine that they rely on every day, just so a CEO can go on a nice holiday should be a wake up call for everybody.


  20. Extortion is definitely the word I’d use! How can it ever be justified to up the price of a product as widely used and relied upon as an epipen? Many people I know rely on such medicine to lead a normal life, and if it fell to them to fund it at such high prices that would have a hugely detrimental effect. Lucky as we are to have things like this on the NHS, the cost to them of 48 billion is taking away from the other services that so many of us need and make use of. This really does affect us all. I understand that the process of bringing a medicine from lab to shelves is expensive but the costs you bring up here just seem ridiculous!


  21. I think there is some confusion here about patenting being the cause of high cost drugs. Research and Development Pharma Companies (‘Big Pharma’) produce and patent multiple promising compounds, some of which will never get to market. This can be done by in-house patent lawyers and is a fairly insignificant cost compared to all of the development work required to get a drug to market – as well as developing a stable dosage form that allows the active compound to be given to a patient, R&D Companies must also undertake (sometimes extensive) pre-clinical and clinical trial work to prove that their compound is safe, works effectively to treat the condition it is to be licensed for and that they have undertaken stability studies throughout the entire proposed shelf life of the drug. This takes years, and by the time a product is brought to market, there can be as few as 3 years patent life left for the company to recoup the costs.

    Enter the generic manufacturers. In order to bring their own, cheaper version of the same drug to market, they merely have to show that it is comparable to the ‘branded’ version. As both the Summary of Product Characteristics and Patient Information Leaflets for individual medicines are public documents, it is easy for them to get hold of basic formulation and stability information for the products that R&D Companies have spent years and hundreds of thousands of pounds developing.

    Compared to a lot of other industries it could be argued that Pharmaceutical Companies are incredibly ethical – whilst clothing and food producers are paying workers in the Third World a pittance for their products/services and subjecting animals to appalling conditions, Big Pharma is sending life saving vaccines and HIV medication to the poorest countries in the World for little or no profit, and getting slammed for undertaking a relatively small amount of testing on animals. A lot of people ‘exploit’ the suffering of others for personal gain if you look on a basic level… although working on the front line of the NHS is a vocation, no-one does it for free!

    However, I do agree that the cases described in the original article smack of profiteering.


  22. An interesting conflict of interests. The drug companies need to make a profit to stay in business, but those in need must be able to afford their products. Without sales there will be no profit. It is tempting to rely on regulation to control these markets but in what is a world wide market this would prove a difficult area to police. Once again the ethics of humanity and the reality of trade are at odds


  23. Some very interesting points raised here. I do believe it is important for life saving drugs to be accessible to all and as such agree that pharmaceutical companies should be prevented from charging prices that are too expensive.
    However, it is vitally important that pharmaceutical companies can turn a profit in order to continue their research and development and as such I think reasonable price increases are a necessary evil.
    Companies such as GSK are attempting to get around this moral dilemma by staging their pricing tiers based on country – those countries where people earn more see higher prices for drugs that are very cheap in poorer countries in an attempt to make healthcare accessible to all.


  24. Very interesting. High medicine price with low cost may become a burden rather than a boon for ordinary citizens.


  25. For this controversial issue, I think there are two things need be discuss before put forward a solution.
    One thing is, we should know whether pharmaceutical companies earn much more profit excess its research and development costs and what extent. Then bring them down into a suitable range. Maybe government can make rule to control the increasing rate of medicine price.
    Another thing is, if a suitable price of medicine, which means the profit from this medicine is not much more than its research and development costs, is still a heavy burden for the poor, then this is a charity issue not a business issue. Under the circumstances, the pharmaceutical companies needn’t bring down the medicine price when it will be at a loss. The government can give subsidy for the poor.


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