President Donald Trump and his Democratic detractors unite against drugmakers
the cost of your drug will scare people from buying your drugs, then lower your prices.” That blunt warning was issued recently by Alex Azar, America’s health secretary, to global pharmaceutical giants. A new report by, an investment bank, finds that Americans spent nearly two-thirds of all money spent globally on new drugs from 2012 to 2017. On June 14th Bluebird Bio unveiled a gene therapy to treat an inherited blood disorder that will cost nearly $1.8m per treatment.
Outrage over such headlines is a rare thing to unite President Donald Trump and his Democratic detractors. Many cheered the administration’s latest effort to force drugmakers to disclose the list price of drugs in television advertisements.On June 14th Big Pharma struck back. Amgen, Merck and Eli Lilly sued Mr Azar and his department in order to block the rule. They argue that buyers seldom pay the full list price, since insurers and other middlemen wrest hefty discounts.
Working out how profitable drug firms are is not a simple matter. Their net margins of 11%, less than restaurants and one-fifth those of railways, do not exactly scream price gouging. But a fairer picture can be reached by adding back interest costs, adjusting for leases and, crucially, by also treating research and development expenses as an investment that is depreciated gradually over time.
Whatever the true level of pharmaceutical firms’ financial returns, they could become juicier again. Although in the past four years spending on drugs by patients and private insurers has barely budged, an annual report published on June 20th by, a consultancy, forecasts that it is about to rise again. Most of the increase will be the result of higher prices.
Peter Bach of Memorial Sloan Kettering, a leading cancer hospital in New York, thinks the million-dollar price tags are unjustified. Novartis, he argues, cherry-picked health-economic studies that supported its pricing. In 2012, his hospital refused to offer patients a new cancer drug from Sanofi after his analysis showed its high price was not justified by better outcomes. The French firm reduced it—just as Mr Azar would counsel.
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