Pills cover a $100 bill

For decades, Americans have faced a worsening healthcare crisis; costs for prescription drugs keep rising. Price hikes in a given year can be anywhere from 6 to 5,000 percent, well beyond the rate of inflation, leaving patients with hefty drug bills regardless of insurance coverage. It’s a situation that has defied multiple presidential administrations’ promises of relief, and left millions of Americans stressed and vulnerable to losing sometimes life-saving medication.

The pharmaceutical industry has maintained over the years that its price hikes are a necessity, lest funding for research into new drugs and cures dry up. They’ve also pointed to the rebates, coupons, and discounts they offer patients and insurance providers. But these arguments have been difficult for many to accept, not least because America’s spiraling drug prices are not seen elsewhere in the developed world. The same drugs, made by the same companies, cost less — sometimes far less — in other countries.

The Asheville Citizen Times described the U.S. pharmaceutical industry, when compared to peer nations, as being in a select unregulated club. While not completely true — there is the FDA, after all — drug companies in America have long enjoyed less oversight of their business practices, and no real controls on how they price their products, all at consumers’ expense. And, through lobbying and loopholes in existing law, this lack of oversight has persisted. How did we get here? Here’s how America’s pharmaceutical industry got out of control.

The pharmaceutical industry skews research

Scientists in lab safety goggles using microscope

A standard line by the U.S. pharmaceutical industry — that price hikes are needed to fund research into new drugs — runs up against the fact that the federal government subsidizes a large portion of pharmaceutical research. Besides offering tax credits to drug companies and other industries that conduct research and development since 1981, the lion’s share of basic research used by such companies is done through public institutions. According to the Los Angeles Times, while publicly funded research has led to innovations, drug companies have long prioritized developing minor variants on existing medications. Their funds are more often directed towards sales and to financial practices meant to boost payouts to shareholders.

Drug companies also invest in education. For decades, it has poured hundreds of millions of dollars into funding opportunities for medical students. But some studies have found that a significant amount of this money has gone into entertainment, luxury, and other enticements rather than on anything directly pertaining to education. Some observers have said that such funding amounts to promotion of the drug companies to those who would be prescribing their products, and a compromising influence on educational institutions. Some schools have moved to reduce their reliance on commercial funding, and others have advocated for reforms to the way companies can make donations. Dr. Murray Kopelow of the Accreditation Council for Continuing Medical Education suggested putting such contributions into a blind trust (via the BMJ).

Drug companies lobby doctors to prescribe their drugs

Person in suit hiding money between papers

Many drugs developed by pharmaceutical companies are only available to customers through a doctor’s prescription. To boost sales, these companies have long targeted doctors through sales representatives, who frequent doctors’ offices carrying slick pitches and free samples of the latest pharmaceuticals. These free samples can then be offered to patients and, if effective or popular, lead to paid prescriptions. Up until 2002 (per DrugWatch), it was also routine for sales reps to socialize with doctors away from work and offer them gifts and entertainment, sometimes on a grand scale.

Studies have shown that, contrary to the claims of doctors and drug companies, this kind of aggressive lobbying has influenced which drugs are added to hospital formularies and which are prescribed by doctors. At times, this has led to unsafe medications going out to vulnerable patients. In 2005, sales reps for Merck & Co pushed arthritis drug Vioxx on doctors, leaving out of their pitch the fact that it significantly increased the risk of a heart attack (per The Washington Post).

Besides lobbying doctors to a point some have called bribery, drug companies have also courted doctors to endorse their products. TV commercials and live panels for other physicians regularly feature paid spokespeople, current or former practitioners, touting the benefits of a company’s drugs. These jobs pay well, but the talking points are dictated by the industry, and the doctors hired are not always qualified or credentialed.

Scattered pill bottles sidewalk surrounding dollar sign
Man looking at graphs pie charts computer screen