Here's Why Drug Prices in the U.S. Are So High
Summary
TLDRThe video script discusses the controversial practice of drug price gouging, exemplified by Martin Shkreli's 5,000% price increase of the HIV drug Daraprim. It highlights that such price hikes are common in the industry, with examples like Merck's Januvia and Novartis's Gleevec showing significant price increases over time. The pharmaceutical industry justifies these increases due to the high costs and risks of research and development (R&D), and the limited time of market dominance before generic competition. Shkreli's Turing Pharmaceuticals faced backlash, eventually reducing the drug's price for some hospitals, but the video emphasizes that this behavior is widespread and unlikely to change without regulation.
Takeaways
- 💊 A drug company, Turing Pharmaceuticals, infamously raised the price of its drug Daraprim by 5,000%, causing public outrage.
- 📰 Martin Shkreli, the former CEO of Turing, justified the price hike by claiming the need to turn a profit on the drug.
- 🤬 The price increase of Daraprim from $13.50 to $750 per pill drew widespread criticism, including from political figures like Hillary Clinton.
- 💉 Daraprim is a drug used to treat life-threatening diseases in HIV patients, making its price increase particularly sensitive.
- 💔 The industry and even the lobby group in Washington distanced themselves from Turing's actions, indicating the controversial nature of such price hikes.
- 💊 Price increases are common in the pharmaceutical industry, with examples given for drugs like Januvia and Gleevec showing significant hikes over the years.
- 💰 The high costs of research and development (R&D) in the pharmaceutical industry, which can exceed $50 billion annually, are cited as a reason for high drug prices.
- 🔬 Most drugs fail during the development process, with only a few making it through the rigorous FDA approval process, which justifies the high prices to recoup R&D costs.
- 🏆 Once a drug is approved, it often has a 12-year period of market dominance before cheaper generics enter the market, during which time companies aim to maximize profits.
- 📈 Turing Pharmaceuticals was an extreme example, but the practice of increasing drug prices is widespread and unlikely to change without regulation.
- 🛑 After public backlash, Turing announced a reduction in the drug's price for some hospitals, but affordability issues persist for many patients.
Q & A
What was the controversy surrounding Turing Pharmaceuticals and Martin Shkreli?
-Martin Shkreli, the former CEO of Turing Pharmaceuticals, faced criticism for raising the price of the drug Daraprim by 5,000% overnight, from $13.50 a pill to $750, which caused public outrage and was widely covered in the media.
What is Daraprim used for, and why was its price increase so controversial?
-Daraprim is used to treat life-threatening diseases in HIV patients. The controversy arose because the overnight price increase made the drug unaffordable for many who needed it, leading to ethical concerns about price gouging.
How did Hillary Clinton respond to the price increase of Daraprim?
-Hillary Clinton tweeted about the issue, highlighting the problem of price gouging in the pharmaceutical industry.
What was the reaction of the industry's lobby group in Washington to Turing's actions?
-Pharma, the industry's lobby group in Washington, distanced itself from Turing Pharmaceuticals' actions, indicating that such extreme price increases are not representative of the industry as a whole.
Can you provide an example of another drug with a significant price increase?
-An example is Januvia, a drug used by millions of Americans to treat diabetes. Its price increased from about $146 a month when it was first sold in 2006 to at least $370 a month in 2015, more than twice its initial cost.
What was the price increase timeline for Novartis' cancer drug Gleevec?
-Novartis raised the price of Gleevec from $30,193 per year in 2001 to about $118,000 per year in 2015.
How many drugs did Pfizer raise prices on in a single year, and what was the year?
-Pfizer raised prices on at least 133 of its drugs in a single year, which was 2015.
What is one of the reasons drug makers give for increasing drug prices?
-Drug makers argue that research and development (R&D) is risky and expensive, with the industry spending over $50 billion on R&D in 2014 alone, and most drugs failing before reaching the market.
How long do drug companies typically have before generic versions of their drugs enter the market?
-On average, drug companies have about 12 years of dominance before cheap generics come on the market and create competition.
What happened to Turing Pharmaceuticals after the controversy with the Daraprim price increase?
-Martin Shkreli was kicked out of Turing Pharmaceuticals, and in November, the company announced it would cut the price of the drug by as much as 50% for some hospitals.
What was revealed about the accessibility of the drug at a congressional hearing in March?
-At a congressional hearing in March, a doctor treating patients needing the drug stated that they were still having difficulty obtaining it at an affordable price.
What does the Turing Pharmaceuticals case illustrate about the pharmaceutical industry?
-The Turing Pharmaceuticals case is an extreme example that highlights a broader issue within the pharmaceutical industry, where companies have been raising drug prices for years and are unlikely to change this practice.
Outlines
💊 Soaring Drug Prices: The Shkreli Controversy
This paragraph discusses the public outcry following the 5,000% price increase of a life-saving drug by Turing Pharmaceuticals under the leadership of Martin Shkreli. Shkreli's rationale for the price hike was to turn a profit on the drug, daraprim, which treats serious illnesses in HIV patients. The price surge from $13.50 to $750 per pill incited widespread anger, prompting political responses and affecting the biotech market. The paragraph also highlights similar price increases by other pharmaceutical companies, suggesting that while Shkreli's case was extreme, high drug pricing is a common industry practice.
📈 Understanding Pharmaceutical Price Hikes
This section delves into the reasons behind the continuous increase in drug prices. It explains that drug makers argue the necessity of high prices due to the high costs and risks associated with research and development (R&D). The industry spent over $50 billion on R&D in 2014, with most drugs failing to pass the rigorous FDA approval process. For the few that succeed, they typically have a 12-year period of market dominance before cheaper generic alternatives enter the market. Pharmaceutical companies aim to maximize profits during this period. The example of Turing Pharmaceuticals is used to illustrate the issue, noting that despite Shkreli's removal and a promised price reduction, accessibility and affordability of the drug remain a challenge.
Mindmap
Keywords
💡Drug Price Increase
💡Martin Shkreli
💡Daraprim
💡Price Gouging
💡R&D (Research and Development)
💡FDA (Food and Drug Administration)
💡Generic Drugs
💡Merck
💡Novartis
💡Pfizer
💡Congressional Hearing
Highlights
A drug company raised the price of its drug by 5,000%, causing public outrage.
Martin Shkreli, former CEO of Turing Pharmaceuticals, defended the price hike to turn a profit.
Daraprim, an old drug for treating life-threatening HIV diseases, saw its price raised from $13.50 to $750 per pill.
Hillary Clinton tweeted about the issue of price gouging in the pharmaceutical industry.
The industry lobby group in Washington distanced itself from Turing's actions.
Drug price increases are common in the industry, with examples like Januvia for diabetes treatment.
The cost of Januvia has more than doubled since its introduction in 2006.
Novartis raised the price of its cancer drug Gleevec significantly from 2001 to 2015.
Pfizer raised prices on at least 133 of its drugs in one year.
Drug makers justify high prices due to the high cost and risk of R&D.
The pharmaceutical industry spent over $50 billion on R&D in 2014.
Most drugs fail to pass the FDA's clinical trials before being approved for sale.
Drugs that are approved have about 12 years of market dominance before generics enter.
US does not regulate drug prices, allowing companies to maximize profits before generic competition.
Turing Pharmaceuticals made about a billion dollars more due to price increases from mid-2012 to mid-2014.
Martin Shkreli was removed from Turing Pharmaceuticals and the company reduced drug prices for some hospitals.
Despite reductions, some doctors still struggle to get the drug at an affordable price.
Drug companies have been raising prices for years and are unlikely to change their practices.
Transcripts
so you might remember last year when a
drug company raised the price of its
drug by 5,000% the reaction particularly
when you read the papers today has been
quite critical of this move so why well
you know we needed to turn a profit on
the drug that's Martin shkreli the
former CEO of turing pharmaceuticals he
bought an old drug called daraprim which
treats life-threatening diseases in HIV
patients an overnight raised the price
from $13.50 a pill to 750 dollars that
caused outrage Hillary Clinton tweeted
about price gouging biotech stops
dropped into a bear market an even
Pharma the industry's lobby group in
Washington distanced itself from turing
but raising prices is actually pretty
common in the industry tick marks
januvia millions of Americans use it to
treat diabetes when Merck started
selling the pill in 2006 it cost about a
hundred and forty six dollars a month by
2011 it was two hundred and thirteen
dollars a month now 30 days worth of
januvia costs at least 370 dollars more
than twice what it did when Merck
started selling it adjust for inflation
and were still seeing a massive increase
Novartis raised the price of its cancer
drug Gleevec from 30 1930 dollars a year
in 2001 to about one hundred and
eighteen thousand dollars a year in 2015
and Pfizer raised prices on at least a
hundred and thirty three of its drugs
last year so why did drug prices keep
going up for one drug makers say R&D is
risky and expensive the industry spent
more than 50 billion dollars on R&D in
2014 and most drugs fail somewhere
between the test tube and the many
clinical trials the FDA requires before
a medicines okayed for sale to the
public for the drugs that do get
approved on average they have about 12
years of dominance before cheap generics
come on the market and create
competition since the US doesn't
regulate drug prices pharmaceutical
companies try to make as much profit as
they can before those generics come to
market in fact fives were made about a
billion dollars more from mid 2012 to
mid 2014 just because of price increases
on their drugs in the case of turing
shkreli was kicked out and in november
the company said it would cut the price
of the drug by as much 50% for some
hospitals but at a congressional hearing
in March one doctor who treats the
patients needing the drug said she was
still having too
getting it at an affordable price Turing
is an extreme example but the reality is
drug companies have been doing it for
years and aren't likely to change
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