10 Questions in the U.S. Health Care Cost Debate

How Much Does the Cost of Drugs Contribute to the Problem?
Martin Shkreli, former CEO of Turing Pharmaceuticals, sparked outrage when he hiked the price for an AIDS drug 5,000 percent overnight. Here he smirks during a hearing on Capitol Hill for fraud charges unrelated to his drug pricing. Mark Wilson/Getty Images

People often lament the greedy pharmaceutical industry, and there's definitely a basis for their complaints, as pricey drugs are one of the main reasons Americans pay so much for health care. (Remember when drug company CEO Martin Shkreli raised an AIDS drug's price from $13.50 a pill to $750 overnight?) In most developed countries, the government negotiates with drugmakers to come up with fair prices. Not in the U.S. Only the Veterans Health Administration and Medicaid can negotiate drug prices — and their prices are the lowest in the nation. But everyone else is at the whim of drug companies, which charge whatever they want to, at least while any given drug remains under patent [sources: Epstein, Consumer Reports].

A quick example: Sovaldi (still under patent), is used to treat hepatitis C, a disease that affects mainly seniors, and costs $1,000 per pill. That's $85,000 to $150,000 for a course of treatment. When Congress created Medicare Part D in 2003 to offer drug coverage to Medicare recipients, it specifically said the federal government could not negotiate drug prices. Yet the Congressional Budget Office estimated the federal government could save $116 billion over 10 years if just low-income Medicare Part D recipients were allowed the same drug discounts as those given to Medicaid recipients [sources: Consumer Reports, Epstein]. Some say that because the U.S. has no cap on drug prices and most other nations do, the country is in effect subsidizing the global market for developing new drugs.