Pricing prescription pharmaceuticals is a complex process that entails the consideration of a multitude of factors, not the least of which is the research and development expenditure exhausted by drug makers to gain FDA approval. While public sentiment has increasingly turned against the pharmaceutical industry due to its perceived greed as manifested in the high cost of its drugs, the intricacies of pricing such unique products is rarely discussed. A recently proposed New York state bill, the Pharmaceutical Cost Transparency Act (the NYPCTA), continues this unfortunate trend, by requiring companies to disclose the R&D costs of newly approved drugs in an effort to educate the public—and to shame drug makers into lowering their prices. The NYPCTA, however, paints an overly simplistic picture of the prescription drug pricing formula, leaving out important variables including the cost of drugs that failed in testing and price controls on drugs in many foreign markets. Given these shortcomings, the bill finds itself at risk of failing the minimal scrutiny constitutional standard applied to government regulation of businesses. This risk would be eliminated with minor amendments and additions to the NYPCTA, which would bolster the legislation to where it would genuinely educate the public on the factors that converge in setting a drug's price.
John G. Curran,
The New York Pharmaceutical Cost Transparency Act: How a Narrow View of the Prescription Drug Pricing Puzzle Renders a Well-intentioned Bill Irrational,
82 Brook. L. Rev.
Available at: http://brooklynworks.brooklaw.edu/blr/vol82/iss1/8