No Wonder Drugs Cost So Much
Pharmaceuticals are expensive in the U.S. There are a couple of reasons why this is:
- the rigorous research requirements for new drugs in the U.S.
- the inadequate staffing of the Food and Drug Administration (FDA)
When a company develops a new drug, the company can’t sell it in the U.S. until it’s approved by the FDA. If the drug is entirely new, then the company must perform extensive research to prove that the drug is safe. This research is time-consuming and expensive.
The US Government knows that it’s time-consuming and expensive to prove to the FDA that a drug is safe. And the U.S. Government wants to encourage companies to invent new drugs. After all, there are still diseases with no cure. One way the U.S. Government balances the goal of safe drugs, with the goal of new drugs, is through monopolies.
A monopoly is where one company has complete control over the entire supply of a product. When a company has a monopoly on a product, consumers will pay a high price for it, because no other company is selling it. Generally, monopolies are illegal in the US, so the US Government stops them when it sees them forming. New drugs are an exception. In order to make it worthwhile for drug companies to spend the time and money to research a new drug, the government gives companies that pass the FDA’s test permission to have a monopoly on their drug. Government permission to have a monopoly on a certain product is called a “patent.” A drug patent generally lasts for 20 years. The patent allows the drug company to cover the costs its research costs, and earn a profit. A patented drug is also known as a “name brand” drug.
Once a company’s patent expires, the company no longer has a monopoly on the drug it developed. At that point, new companies can start making that drug. A drug with the same formula as the name brand drug, but made by a new company is called a “generic” drug. Generic drugs have the same effect on the human body as name brand name drugs. The difference between a name brand and a generic drug is just that the name brand drug was patented. The introduction of generic drugs to the market allows multiple companies to sell the drug and compete for customers. Competition makes medicine cheaper because companies lower their prices to attract customers.
Things that slow down the introduction of generic drugs to the market slow down the process of drugs getting cheaper. Right now, one thing slowing the introduction of drugs to the market is a staffing problem at the FDA. The staffing problem doesn’t have to do with quality; rather, it has to do with quantity. The FDA researches medicine at its Center for Drug Evaluation and Research (CDER). As of September 30, 2017, the FDA had 711 openings out of 5,525 positions. This means that 1 in 8 positions was unfilled. Unsurprisingly, the understaffed FDA can’t keep up with its responsibilities. And the result is a long line of generics waiting for approval to be sold.
Why is the FDA so understaffed?
Pharmaceutical companies are luring FDA researchers away. There are at least two reasons for this. First, the salary of a private sector research job is roughly double that of an FDA research job. And second, the federal hiring process can take up to 4 months. Many interested and qualified candidates can’t afford to wait 4 months and end up turning to the private sector.
The FDA needs more researchers if we want to increase the amount of generic drugs on the market. In order to do that, the FDA needs more funding so that it can pay its researchers more. The FDA also needs a faster hiring process so interested candidates aren’t driven away.