United States: Are Drug Prices Really Too High?

Those working in the pharmaceutical space are used to hearing complaints about the high costs of drugs, and patents often are blamed for allowing pharmaceutical companies to charge "too much" for their products. But are drug prices really too high when you consider the alternatives? 

Spotlights On High Drug Prices

Concerns over drug prices are not new, but drug pricing has gotten more attention as new drugs seem to come with higher and higher price tags. In September 2015, the Center for American Progress published a report entitled "Enough Is Enough The Time Has Come to Address Sky-High Drug Prices". In January 2016, the Massachusetts Attorney General threatened Gilead Sciences, Inc. with legal action if it did not cut the price of its Hepatitis C drugs, and a group of Congressional representatives sent a letter to the Secretary of the Department of Health and Human Services and the Director of the National Institutes of Health advocating the use of march-in rights to control drug prices. A more recent Congressional letter called for hearings on march-in rights, and activist groups are opposing the TPP trade deal on drug pricing grounds.

Changing The Conversation About Drug Pricing

Typical complaints about drug prices cite the price of a specific drug, declare that the price is "too high," and demand drastic reform. But missing from most of these "conversations" is a satisfying explanation of the benchmarks used to reach their conclusions.

Those who blame patents for high drug prices often compare the price of a patented "brand name" drug with its generic equivalent. But such a comparison ignores the research and development costs and the risks of failure born by the innovator. Another comparator may be an alternative drug useful for treating the same condition. But any such comparison should take into account relative efficacy, tolerability, and safety. For example, a drug that is more effective or that has fewer side effects may be priced higher that an alternative drug, i.e., a price quality effect. For some drugs, surgery may be an alternative treatment, in which case the cost per dose of the drug should be weighed against the total costs of surgery, including the risks of complications and opportunity costs borne by the patient during the surgery and recovery periods. Any comparison should take into account long-terms costs and benefits, including improvements in long-term health and any increased survival.

The following examples illustrate how considering the costs of available alternatives can re-frame the conversation and underscore the value provided by "expensive" drugs.

Psychiatric Drugs

The growth of the psychiatric drug market has raised questions about the costs of psychiatric drugs, but comparisons to alternatives show their benefits. For example, GEODON®–which is approved for the treatment of symptoms of schizophrenia and acute manic or mixed episodes associated with bipolar disorder–was estimated to cost $6500 for a 12 month supply. On the other hand, according to one report, a short-term 11-day hospitalization for schizophrenia may cost $8,500, and hospitalization costs for a mental health crisis average almost $6000. Now that GEODON® is off-patent, costs for that drug therapy may be even lower, but even the original price offered cost savings over in-patient treatment.

In 2003, Nevada sought to determine the costs of switching patients from tricylic antidepressants to newer selective serotonin uptake inhibitors (SSRIs) like Prozac® that revolutionized treatment of depression. At the time, the SSRIs cost nearly 10-fold more, but significantly reduced hospitalization. Thus, when total costs of patient care were considered, the SSRIs could be more cost-effective.

Another comparator for psychiatric drugs could be counseling. For example, the New York Times compared traditional sessions of talk therapy at $200 for 45 minutes with the short, infrequent meetings required to refill prescriptions, and concluded that doctors can treat more patients in a day with drugs than therapy.

Thus, new psychiatric drugs that cost "too much" may actually reduce total costs via reductions in hospitalizations, increased access to treatment, and reductions in long-term costs.

Hepatitis C Drugs

Hepatitis C is a chronic viral infection of the liver which, if unchecked, leads to cirrhosis, liver failure and cancer or other life-threatening diseases. Until the newest drugs that made headlines for their "high" prices, treatments for Hepatitis C often did not eliminate infection and were associated with potentially debilitating side effects. For example, a combination of ribavirin with pegylated interferon showed great promise in clinical trials but only a 3.3% rate of cure in clinical practice in one US study.

Into that market, Gilead Sciences, Inc. launched Sovaldi® as a breakthrough drug that could cure Hepatitis C without serious side effects. Gilead priced this drug at approximately $1000 a pill, reflecting its greater efficacy and fewer side effects. At that price, a full course of treatment is estimated at approximately $80,000.

Despite this price, both patients and prominent health care organizations eagerly anticipated the drug. Indeed, comparing the price of Sovaldi® to the alternative treatments makes it harder to conclude that it is "too expensive," because the alternative therapies also were costly. For example, a triple therapy based on ribavirin, pegylated interferon and talaprevir cost $189,000 per sustained virologic response (i.e., "cure").  If not cured, Hepatitis C infection may eventually require a liver transplant, which costs $575,000, assuming that the patient is a transplant candidate and a donor is available.

Thus, even at $1000 per pill, Sovaldi® may actually reduce total costs of treating a given patient. In addition, if more patients are successfully treated with this drug, there could be a decrease in transmission and new infections, which would represent a long-term public health benefit.

Looking At The Big Picture

Drug pricing can raise significant public health issues, but simplistic assertions that a drug's price is "too high" do not advance sound policy. The examples above show that when evaluating drug pricing, it is important to consider many factors, not just the costs of the ingredients. A drug that may seem expensive in the abstract may be more attractive to patients, safer, more effective, and even less-expensive than alternative treatments when all costs are considered.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.