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Demystifying Drug Pricing
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Demystifying Drug Pricing

The Future of Prescription Drugs

Elizabeth Fowler, Henry Aaron, Gail Wilensky and Steve Clemons
The Atlantic, 2017
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Editorial Rating

8

Qualities

  • Controversial
  • Innovative
  • Eye Opening

Recommendation

In recent years, drug-industry executive Martin Shkreli and Mylan, the makers of EpiPen, garnered infamy for their pricing strategies. Yet consumers remain largely in the dark about drug pricing. Atlantic editor Steve Clemons questions a knowledgeable panel about the opaque math behind drug pricing – and then presses for better solutions. getAbstract recommends this elucidating and timely, yet frequently digressing, discussion.

Summary

How do pharmaceutical firms set drug prices? The answer is complex. Say a company makes a drug that could extend by 10 years the lives of 10,000 patients who otherwise would die. In “value-based pricing,” every additional year of life is worth a standard, yet controversial, $100,000. Thus, for 10 years of added life, the drug’s value per consumer is $1 million. The drug firm spends $1 billion on development, and manufacturing individual doses costs $1,000. So which price does the company choose? Many regard $1 million as an outrageous demand on individual consumers, but a price of $1,000 wouldn’...

About the Speakers

Henry Aaron is a senior fellow with the Brookings Institution, a public policy organization. Elizabeth Fowler is a global health policy executive for Johnson & Johnson. Gail Wilensky is a senior fellow with Project HOPE, a worldwide health foundation. Steve Clemons is editor of AtlanticLIVE, the events branch of The Atlantic magazine.

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