Prescription drug market is broken
Stephen Schondelmeyer, Pharm.D., Ph.D.
At our April forum, Professor Steven Schondelmeyer, a nationally recognized expert on drug pricing, conducted a master class in pharmaceutical economics. In a riveting, data-laden presentation, Schondelmeyer exposed the brokenness of the market for prescription drugs in the U.S. He presented convincing evidence that the market for pharmaceuticals is inefficient and vastly overpriced.
“A drug that one cannot afford is neither safe nor effective,” he said. “We’ve got to do better.”
Schondelmeyer’s basic premise is that prescription drugs are essential to health care and the health of all patients, and that while pharmaceutical companies have done a good job of producing and distributing drugs, they have also engaged in predatory pricing because of their monopolistic control. He asserts there is a lack of regulation and a lack of appropriate market behavior by the U.S. government, which is the largest purchaser of drugs in the world. It does not bargain with the drug companies but simply pays the prices established by them, Schondelmeyer said, because it is not allowed to do so by statute.
Health care is a major market force; it constitutes 18 percent of the U.S. economy. In that massive sector, for every health care premium dollar spent 22.1 cents go to prescription drugs. This is more than any other category including physician services, which gets 22 cents. The amount spent on prescription drugs is the highest single cost driver in the health care market.
Professor Schondelmeyer presented several examples to show that the massive growth in cost for prescription drugs far exceeds the growth in the consumer price index. For example, EpiPen prices increased 623 percent, from $101 to $730, in 11 years, and the price of Humulin, a form of insulin, increased 361 percent, from $187 to $864 per month, in eight years. Schondelmeyer gave several other examples which demonstrate conclusively that the prescription drug market is broken and in need of regulation and reform.
In one of his slides, he compared the excessive cost of various drugs to the cost of a car, a vacation, and a house—his point being that few of us can afford such costs and, eventually, this makes these things unobtainable by the average person.
Schondeleyer is on the faculty in the College of Pharmacy and holds the CMC Endowed Chair in Pharmaceutical Management and Economics. He has testified frequently at both the state and federal level, and was recently appointed by the Minnesota governor and attorney general to a task force that will address lowering and controlling drug prices.
His presentation was both dramatic and illuminating and he was warmly received by the UMRA members attending the forum.
Go to umra.umn.edu/Governance>Document Archives>Past Event Slides>April 2019 Forum – Schondelmeyer to see the colorful and data-rich slides of his presentation.
—Bill Donohue, Program Committee chair and president elect
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