Pharmaceutical companies are dependent upon the profits generated by the sales of their products to satisfy investors and fund the research and development of new products. 

Pharmaceutical companies are dependent upon the profits generated by the sales of their products to satisfy investors and fund the research and development of new products.   Only one out of every 15,000 substances that are researched will eventually become medicine. This end result may occur after approximately 15 years and $1.5 billion in associated costs.

However, these same pharmaceutical companies are hiking prices to unprecedented levels in some cases.

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“Specialists in infectious disease are protesting a gigantic overnight increase in the price of a 62-year-old drug that is the standard of care for treating a life-threatening parasitic infection. The drug, called Daraprim, was acquired in August by Turing Pharmaceuticals, a start-up run by a former hedge fund manager. Turing immediately raised the price to $750 a tablet from $13.50, bringing the annual cost of treatment for some patients to hundreds of thousands of dollars.” New York Times, Sept. 20, 2015

Some price increases might be attributed to shortages, but others have resulted from strategic purchases of older drugs and converting them into “high-priced ‘specialty drugs.’”  New York Times, Sept. 20, 2015

Contrast the history of penicillin, arguably the most life-saving drug of the last century. The pharmacist Sir Alexander Fleming not only discovered penicillin – the antibiotic that has saved millions of lives – but also ensured that it was freely available to as much of the world’s population as possible. Fleming could have become a very wealthy man if he patented penicillin, but he understood the drug’s potential to overcome diseases such as syphilis, gangrene and tuberculosis meant it had to be released into the world to serve the greater good. On the eve of World War II, he transferred the patents to the US and UK governments, which were able to mass-produce penicillin in time to treat many of the wounded.

Unlike other developed countries, the United States allows pharmaceutical manufacturers to set drug prices. In some cases for rare diseases, there is only one medication available, and competition is thwarted by patent regulation.

In the article, Determining Value and Price in Health Care, Austin Frakt writes: “It’s hard to argue with the notion that how much we pay for a drug should be related to the value it provides. Hard to argue, that is, until you try to pin down whose value counts, what value means, or how much to pay for it.”

When we are dealing with human life and death, should pharmaceutical companies be able to set their own prices?   Should the government step in? Should the government grant patent protection to life-saving medication? Or should such medication be part of the intellectual public domain to help the most people (as in the case of penicillin)? How would ethicists approach this issue from a utilitarian, deontological or ethic of care perspective? How would economist Milton Friedman respond to the issue of outrageous drug prices?