The only companies that can do this sort of thing are those that have a product that is life-or-death for some customers, and whose prices are unregulated. The press and members of Congress are starting to notice.
To start with the most extreme example:
Among the examples: Questcor Pharmaceuticals last August raised the wholesale price on Acthar, which treats spasms in babies, from about $1,650 a vial to more than $23,000. Ovation raised the cost of Cosmegen, which treats a type of tumor, from $16.79 to $593.75 in January 2006.
Overall, drug prices rose 7.4%, which is above the inflation rate but not in the stratosphere. Then why the extreme rise in the price of certain products?
“There’s no simple explanation,” says Stephen Schondelmeyer, director of the PRIME Institute at the University of Minnesota, which studies drug industry economics. “Some companies seem to figure no one is watching so they can get away with it.”
Even in cases where drug companies pay multimillion dollar fines for egregious cases of price gouging, the price doesn’t necessarily change.
In a decision awaiting approval by the 9th U.S. Circuit Court of Appeals, drugmaker Abbott agreed last week to pay up to $27.5 million to settle a lawsuit over a 400% price increase on its HIV/AIDS drug Norvir. Settlement did not lower the price.
But some senators are on the case:
Sen. Amy Klobuchar, D-Minn., and Sen. Charles Schumer, D-N.Y., asked the Government Accountability Office last week to investigate large price hikes. Klobuchar asked the Federal Trade Commission in April to investigate Ovation Pharmaceuticals, which raised prices on four drugs in 2006 by up to 3,436%.
Drug companies say the price hikes cover the costs of keeping the drugs on the market. They say the drugs are often less costly than alternative treatments, such as surgery or newer, high-tech medicines.
