The Controversy of Daraprim's Price Hike and Its Impact on Affordable Medications

Why are prescription drugs so expensive in the United States?

"Drug prices in this country are so high because there is zero transparency in the system, and when there's zero transparency in a market, there is no way for it to be efficient," says Mark Cuban, the serial entrepreneur, investor on Shark Tank, and guest on the first episode of the second season of Why We Can't Have Nice Things. 

When a market is inefficient, adds Cuban, "people learn very quickly how to take advantage of those inefficiencies to their own profit, and that's exactly what's happened in the health care and pharmacy side."

Cuban is trying to do something about the lack of transparency in the prescription drug market. In 2022, he launched CostPlusDrugs.com, a website that offers low prices and direct shipping for hundreds of pharmaceuticals and generics. By showing their markup—a standard 15 percent on everything—and encouraging consumers to make their purchases without going through insurance plans, Cuban's project is attempting to inject a bit of capitalism into a health care market that sorely needs it.

It's the perfect story to kick off the new season of Why We Can't Have Nice Things, which focuses on how bad regulations and anticompetitive rules are making Americans poorer and sicker. Over the next six weeks, this limited-run Reason podcast series will dive into some of the acute problems with the American health care system, examining how poor policy making is keeping doctors from treating patients and blocking patients from getting needed treatment.

The lack of transparency in drug pricing is one of those problems. Price signals are essential to a functioning market—but the prescription drug market seems designed to hide those signals as much as possible.

The result is higher prices for everyone. For a lot of Americans, those prices are a source of economic hardship. According to the Kaiser Family Foundation, 21 percent of adults say they have not filled a prescription because of the cost. Meanwhile, about one in 10 adults say they have cut pills in half or skipped doses of medicine in the last year because of the cost.

Cuban's newest venture could be part of the solution. A Vanderbilt University Medical Center study published last year found that the federal government could save taxpayers up to $2.15 billion annually if insurers operating in the Medicare prescription drug plans purchased seven generic oncology drugs at the prices obtained by Cost Plus Drugs.

More transparent pricing would have a bigger impact if more Americans were in control of their own health care spending, argues Michael Cannon, the director of health policy for the Cato Institute.

"You can show them the prices, but they're not going to care unless it's their money on the line," Cannon says. Unfortunately, close to 90 percent of all health care spending in the United States comes from the government or from private insurance companies, leaving individuals with little influence.

"As a result, we get a health sector that doesn't serve the needs of consumers and patients," says Cannon. "We get a health sector that serves the needs of employers and of the government and whoever controls the government, which ends up being the health care industry."

Further reading for this week's episode:

"Mark Cuban Has a New Job: Working at an Online Discount Pharmacy," by Joseph Walker at The Wall Street Journal

Recovery: A Guide to Reforming the U.S. Health Sector, by Michael Cannon

The War on Prices, by Ryan Bourne

Pharmacy Benefit Managers: History, Business Practices, Economics, and Policy, by David Hyman, Ge Bai, and T. Joseph Mattingly II

Overcharged: Why Americans Pay Too Much for Health Care, by David Hyman and Charles Silver

Written by Eric Boehm; produced and edited by Hunt Beaty; fact-checking by Anthony Wallace. 

• Producer: Hunt Beaty

The post <em>Why We Can't Have Nice Things</em>: Can Mark Cuban Make Prescriptions Affordable Again? appeared first on Reason.com.