Are drug companies overcharging?

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  • Robert Kltzman: Issue of drug pricing is increasingly affecting all of us
  • A broad discussion of pricing issues needed among policymakers, health care providers, drug firms and public, he says

Robert Klitzman is a professor of psychiatry and director of the Masters of Bioethics Program at Columbia University. He is author of "The Ethics Police?: The Struggle to Make Human Research Safe." The opinions expressed in this commentary are solely those of the author.

(CNN)How much profit should drug companies make? The question might seem a little abstract, something that belongs in a business journal. But it's one that is increasingly affecting all of us. That was abundantly clear in the wake of the latest price hike controversy to hit the headlines.

Drug company Mylan has raised the price for EpiPen, which it bought nine years ago, from less than $100 in 2009 to around $600. The drug rapidly treats allergic reactions, for example to bee stings. But the medicine -- epinephrine -- is generic and cheap, and the device (essentially a syringe without a needle) has been around since the 1970s. EpiPen long ago earned back many times the cost of its research and development, meaning the huge jump in price is essentially profit.
    Robert Klitzman
    Countless patients and doctors have described the new price as outrageous. It does appear to be. But it also raises broader ethical issues.
    Unfortunately, there is no inherent cap on drug prices. Drug companies invest money in developing and investigating new chemicals that will hopefully help patients. Alas, most new experimental medications prove ineffective, and companies therefore have to invest in many potential new drugs to find one that actually works. All that costs money, and so drug companies certainly deserve to earn a profit.
    But how much? And should a company be allowed to squeeze needy patients for as much as it wants?
    Since Hippocrates in ancient Greece, health care has been seen as a noble art, in which physicians should treat patients -- even those who are poor -- and put the interests of the patient first. Physicians generally follow the principles of beneficence, of helping patients and not harming them.
    It seems increasingly, though, as if many drug companies don't follow such principles. Indeed, greed seems to be the prime motivating factor.
    Some might argue that they are private entities, and therefore under no obligation to put the consumer first. The trouble with this argument is that vast amounts of taxpayer money has gone into research to help pharmaceutical companies develop drugs.
    The Orphan Drug Act of the 1980s, for example, spearheaded by former Rep. Henry Waxman, used government funds to encourage drug companies to develop treatments for rare diseases that these companies were otherwise ignoring. Waxman himself recently said drug companies are now abusing this act.
    EpiPen is hardly a lone example. For example, drug makers priced hepatitis C drugs Sovaldi and Harvoni to $1,000 a pill.
    Many drug companies say they charge these prices to cover the costs of research and development. But the reality is that many companies are spending more on advertising than they are on these other expenses.
    Some economists have argued that drug companies should be able to charge an amount that will allow them to earn, say, 10 times the cost of research and development of a new drug. And you would think that would be enough. But in the case of EpiPen and other medications, companies are charging what they want -- and often much more.
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    In a humane society, a certain basic amount of health care is -- or should be considered -- a human right. If your house is on fire, you don't first have to give firefighters your credit card number before they go to extinguish the flames. Similarly, most would surely agree that certain goods and services should be as widely available as possible, not based on your ability to pay.
    Sadly, unless action is taken, the prices of ever more drugs can be expected to skyrocket. Cases like EpiPen underscore the need for a broad discussion of pricing issues among policymakers, government officials, health care providers, drug companies, insurers and the public at large.
    How much should drug companies charge, who should decide and how? And how much is too much? More transparency is desperately needed. That will allow us to have the conversations we should all be having around this issue, discussions that will benefit all of us, not just those seeking to make huge profits.