Martin Shkreli, the widely condemned hedge fund executive turned pharmaceutical CEO, isn’t the only one engaged in the practice of overcharging for prescription drugs. Drug giant Pfizer has raised prices on over 130 of its medications this year, with over 75% of those drugs seeing an increase of 10% or more.
Drug companies don’t limit their bad behavior to price gouging either, with many also bribing the physicians that prescribe them.
Companies like Merck and Pfizer try to deflect any guilt by stating that insurers are responsible for negotiating the prices on drugs.
For Pfizer, the practice has paid off by adding over $1 billion in quarterly revenue between 2012 and 2015, even as it experienced a decline over that same period of $2 billion.
Bristol-Myers Squibb Co. experienced a contraction over the same three-year period, but by engaging in drug price increases, was able to limit its revenue decline to $280 million.
While the practice is commonplace in the industry the issue gained media traction following Shkreli’s price increase of a medication now decades old, from $13.50 per pill to $750.
In the most recent U.S. jobs report out Friday, healthcare and information were the only two sectors that gained jobs. It should be no surprise though, with banking being the only other industry that compares to pharmaceuticals when it comes to profit margins.
In 2013, Pfizer posted an astonishing 42% profit margin, and many are upset at what could be considered profiteering by these companies.
Oncologist Dr. Brian Druker of Knight Cancer Institute called out the practice, “If you are making $3bn a year on [cancer drug] Gleevec, could you get by with $2bn? When do you cross the line from essential profits to profiteering?"
In light of the fact that companies often spend more than double on marketing their drugs, than they do on development, the criticisms have weight.
Pharmaceutical companies argue that development of a patented drug may take up 10 years of the 20 patent lifespan, leaving the other 10 to make that money back. Sales can fall by up to 90% thereafter, according to Joshua Owide of the research firm GlobalData, “Unlike other sectors, brand loyalty goes out the window when patents expire.”