Updated: Jan 18
Medical care costs have risen dramatically in the last decade. This week, a group of more than 100 cancer specialists called on pharmaceutical companies to lower prices for life-saving drugs, some of which cost over $100,000 a year. The doctors and researchers published a commentary in a medical journal saying that the high prices for cancer drugs are immoral and unsustainable. They blame pharmaceutical companies for profiteering on the backs of patients who can no longer afford treatment.
In response, drug companies told the New York Times this week that the high prices reflect the value of the drugs. They pointed out that many cancer drugs can dramatically lengthen patients’ lives and transform the diseases into manageable conditions. Plus, many companies operate assistance programs to give the drugs for free to uninsured Americans as well as patients in developing countries.
However, the doctors who wrote the report don’t agree with these claims. They describe how only a small minority of the people with chronic myeloid leukemia (the cancer in which the doctors specialize) receive the life-saving drugs. Instead, patients in developing countries often opt for riskier treatments such as bone marrow transplants because they’re cheaper than long-term drug treatments. Even in the United States, the survival rate for chronic myeloid leukemia is lower than expected because many patients can’t afford to continue treatment.
Furthermore, the doctors argue that the price of the drugs is unnecessarily high. In other countries, where governments play a larger role in controlling prices, the same drugs can cost half as much as they do in the United States. And even if most American patients don’t pay the price of these drugs out-of-pocket, the health care system has to bear that cost. Dr. Druker, director of the Knight Cancer Institute at Oregon Health and Science University, framed it this way: “If you are making $3 billion a year on Gleevac [a Novartis drug for chronic myeloid leukemia], could you get by with $2 billion? When do you cross the line from essential profits to profiteering?”
This debate highlights the tensions between the Price and Moral Systems of Exchange. The logic of the dominant Price System demands that economic actors seek the highest possible profits. Indeed, corporations in the United States are widely believed to have an obligation to their stockholders to maximize profits, which are distributed to stockholders as dividends. So according to the norms of the Price System, Novartis and other drug companies are entirely justified for charging high prices to maximize their profits.
However, even if the drug companies are fulfilling their Price-based obligations to stockholders, the doctors claim that they violate a moral obligation to their patients by charging astronomical prices. Drawing on the logics of the Moral System of Exchange, the doctors argue that drug companies need to keep the prices accessible to patients who desperately need treatment. Yes, drug companies need to be profitable, but their profits shouldn’t prevent patients from receiving appropriate treatment.
This tension between Price and Moral Systems raises some interesting questions: What is the dividing line between “essential profits” and “profiteering?” Who should decide when prices become “immoral” -- the companies who develop these drugs, doctors, consumers, or government regulators? And even if we could agree on a moral limit for profits, who should enforce it? As the debate over rising health care costs continues, we’ll be watching to see how different stakeholders answer these questions. Photo by Phil & Pam Gradwell.
Pollack, Andrew. (2013). “Doctors Denounce Cancer Drug Prices of $100,000 A Year.” New York Times. April 25. (http://www.nytimes.com/2013/04/26/business/cancer-physicians-attack-high-drug-costs.html)
Biggart, Nicole Woolsey and Rick Delbridge. (2004). “Systems of Exchange.” Academy of Management Review 29(1): pp. 28-49.