Drug Makers Raising Prices On Prescription Medicines Because They Can

Imatinib, a cancer drug sold under the name Gleevec by Novartis, is a life-saving and life-prolonging medication. The question for many patients, however, is: how much are they willing to pay to prolong their lives, and how much profit a company can make from one medication before it becomes immoral.

Gleevec is a notable example of this phenomenon for one scary reason: patients who take it stay on the medication for years on end. Bloomberg Businessweek spoke to one patient who has been taking the pill since it was introduced in 2001. He pays $7,676 for a one-month supply, but the drug only cost one-third as much thirteen years ago. Why?

Because Novartis can. When drug companies merge or acquire each other, it’s helpful to their bottom line. When they sell more drugs in a given category, that puts drug companies in a better negotiating position with health insurers. Insurance companies “only” pay about $100 per pill for Gleevec.

The market for prescription drugs is unusual: normally, a product being on the market for a longer period would lead to lower prices, not higher ones. Having more competition would lower the price, not raise it. The business model of using hit products to subsidize the development of others that are less popular or don’t work as expected is effective and profitable, but is it moral?

In the case of Gleevec, this doesn’t matter so much: it loses patent exclusivity this year, and generics will give patients some relief. Novartis is ready: they’ve been encouraging Gleevec patients to switch to a similar drug, Tasigna, that is supposedly more effective.

Big Pharma’s Favorite Prescription: Higher Prices [Bloomberg Businessweek]