New Bipartisan Deal Allows Drug Companies to Reap Huge Benefits

Jordan Hackworth 04/19/2017

What could possibly bring a deeply divided congress together? How about protecting the ability of drug companies to gouge Americans who buy prescription drugs? You got it! And they just did exactly that! Last Friday, House and Senate leaders announced a bipartisan agreement to extend the FDA’s ability to collect sky-high user fees from drug companies and medical device manufacturers.  The drug and device companies are strongly in favor of the program and have lobbied heavily for its extension and expansion.

Why on earth would companies lobby the government to pay higher fees? It’s sneaky and simple: with high fees, small companies can’t afford to enter or stay in the market. Since enacted, the fee program has lead to dramatic industry consolidation and record profits.

With fewer companies in the market, big conglomerates are free to charge more and more.  And they have been!! While a handful of particularly egregious examples, like insulin and the Epipen, have attracted big headlines, prices have been rising at incredible rates across the board. A recent report by Elsevier found that 222 drug groups increased in price by 100% or more between Nov’13 and Nov’14. Seventeen drug groups had hikes of over 1000% during the same period. Tetracycline tablets, a commonly used antibiotic, had its price rise 67-fold in just one year!

As a result of intense industry lobbying, the fees the FDA charges for a license to manufacture drugs are now in the millions of dollars annually, per drug. Drug companies are very happy to pay a fee to the FDA in exchange for the ability to force Americans into paying billions more than they would in a free-market system. Congress, meanwhile, loves the big piles of cash the drug companies keep sending – $27,500,000 during the last election cycle alone!

When the drug companies fund the FDA, politicians can claim they are creating efficiencies in government that save the taxpayers money because they spend less tax dollars. In many areas within the FDA, industry now provides the bulk of the funding. Industry currently funds 70% of the branded-drug review budget and 75% of the generic-drug review budget. In other words, the regulators are paid by, and essentially work for, the companies they are regulating!
References/Further Reading

  1. Pharmaceuticals donate record amount to Congress during 2015-2016 election cycle https://www.opensecrets.org/industries/summary.php?ind=H04++
  2. NYtimes: Defiant, Generic Drug Maker Continues to Raise Prices https://www.nytimes.com/2017/04/14/business/lannett-drug-price-hike-bedrosian.html?_r=0
  3. FDA.gov Information on the Prescription Drug User Fee Act (PDUFA) https://www.fda.gov/forindustry/userfees/prescriptiondruguserfee/
  4. FDA user fee extension poised to benefit healthcare companies http://www.modernhealthcare.com/article/20170417/NEWS/170419886
  5. Lawmakers reach bipartisan deal to extend FDA user fees http://www.modernhealthcare.com/article/20170414/NEWS/170419907/lawmakers-reach-bipartisan-deal-to-extend-fda-user-fees

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