Drugs and pharmaceuticals are big business in the U.S., and they are big spenders. According to OpenSecrets, the pharmaceutical industry has spent $2.3 billion on lobbying efforts over the past decade. For 2016, the number is up $129 million and counting.
Lobbying produces huge ROI for drug industry
For the industry, it’s money well spent. The New York Times ran a piece that outlined the outstanding return that the prescription drug industry gets for its lobbying efforts.
According to statistics United Republic assembled, the prescription drug industry spent $116 million lobbying for legislation to prevent Medicare from bargaining down drug prices — legislation that enabled drug companies to make an additional $90 billion annually. That amounts to an extraordinary 77,500 percent return on investment. — The New York Times
Only two countries allow direct-to-consumer drug ads
There are only two countries in the world that allow direct-to-consumer advertising of prescription drugs – New Zealand and the United States. The American Medical Association has called for a ban on direct advertising of prescription drug and medical devices, but it has gained little traction.
Direct-to-consumer advertising also inflates demand for new and more expensive drugs, even when those drugs may not be appropriate. — American Medical Association
Prescription drug spending will reach $535 billion in 2018
In 2015, the pharmaceutical industry spent $5.17 billion on direct-to-consumer advertising. In 2014 prescription drug expenditures in the U.S. was $374 billion and is expected to reach $535 billion by 2018. Clearly, the money spent on advertising produces a healthy return for the drug companies.
American consumers charged more
Consumers in the U.S. pay a lot more for the same drug than do consumers in other countries. For example, Science.Mic revealed that the price of the multiple sclerosis drug Copaxone costs $3,903 in the U.S., but only $862 in England.
As people in other countries pay significantly less for prescription drugs, which in many cases are made by U.S. companies, some argue U.S. consumers are essentially subsidizing drug prices in the rest of the world by paying a hefty premium at home. The companies also say the profits enable them to make new, more effective drugs that are expensive to develop. — Science.Mic
Law prevents Medicare from negotiating price
In most countries, government entities are the largest purchasers of drugs. This creates negotiating power and results in lower prices. In the U.S. the largest single buyer of medications is Medicare, which by law is prohibited from negotiating price.
This may be changing in the wake of an increasing number of negative stories and congressional probes into the pricing practices of the drug companies. Pharmaceutical companies are also coming under increasing criticism for the practice of “inversion,” which holds the money offshore to avoid paying U.S. taxes. A Reuters news story stated that Pfizer is holding $74 billion in 151 offshore tax haven subsidiaries to avoid paying U.S. taxes. And, according to the group Americans for Tax Fairness, Gilead Sciences was able to avoid paying $9.7 billion in U.S. taxes last year by transferring certain assets to Ireland.
Predatory pricing causing increasing outrage
As health care costs continue to increase for most Americans, drug companies are coming under increased fire for what many consider predatory pricing. Public outrage over the way pharmaceutical companies operated may eventually outweigh the lobbying money that the industry pours into the political process, but it’s a change that will take time.