Marketing expensive drugs
April 17, 2023
KFF Health News published an article explaining how drug prices can rapidly increase. Featured in the article is a drug company that does not actually develop its own drugs. Instead, the company buys drugs developed elsewhere and markets them and raises their prices.
The article opens with the example of a different company that developed a promising drug, which might have had a negative side effect. Investors found the company unattractive, and the company was sold. The featured company eventually bought the company, raising the price roughly tenfold (after subsequent studies seemed to rule out the side effect). Obviously, not every acquirer can raise prices as much, and it appears that part of the featured company's strategy is to streamline the process for the patient, whether by negotiating with insurance carriers for coverage or by employing nurses to talk with each patient.
Ultimately, a major issue in drug development is the cost to develop and test a drug. If, for example, the original company could weather the initial negative news of the side effect by not having to spend as much on drug testing, perhaps it would have been able to sell the drug for longer at the original price. Hence, while people want to know that the drugs they take are safe (requiring expensive and extensive testing), that cost might hinder competition and eventually allow companies to charge more for their products.