CBCD: Soaring Pharmaceutical Drug Prices Explained with Economic Theory

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“Since October 2007 the cost of brand-name medicines has soared, with prices doubling for dozens of established drugs,” according to an article on Businessweek.com published on May 8, 2014 (1). The Center for the Biology of Chronic Disease (CBCD) is using basic economic theory to identify the reason for the increase in drug prices.

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According to the FDA, there are tests other than double blind, placebo controled, that can prove the safety and efficacy of treatments. - CBCD

Drug prices are increasing. For example, “one diabetes drug quadrupled in price and another rose 160 percent, according to an analysis by DRX (1).” DRX is a provider of comparison and management software for health plans. Additionally, “Generic drugs such as Pravastatin, which treats high cholesterol, and the antibiotic Doxycycline spiked upwards of 1,000 percent in 2013, according to a survey by the National Community Pharmacists Association.” (See Breitbart.com, February 1, 2014) (2).

What is the cause of the skyrocketing pharmaceutical drug prices? The CBCD uses the model of supply and demand to explain the reason for the increase in price. According to this model, the price is determined at the intersection of supply and demand. In other words, at a price where the quantity supplied equals the quantity demanded. Now, there is no evidence for an increase in demand. In other words, the demand for drugs by patients and doctors has stayed roughly the same. On the other hand, the supply for drugs decreased. This decrease is a result of efforts by the pharmaceutical industry. Let us explain.

One action taken by the big pharmaceutical companies is to consolidate. “Pfizer’s (PFE) has proposed a $100 billion-plus takeover of AstraZeneca (AZN) as part of Pharma’s biggest period of consolidation in a decade… (1).” The CBCD believes that one major reason for this consolidation is to eliminate competition. When two giants manufacture competing drugs, one of these drugs will be discontinued. That will create a decrease in supply. Another action taken by the pharmaceutical industry to decrease supply is to de-legitimize alternative medicine. This is done by erecting a barrier in the minds of doctors and patients against the use of natural products.

How do they erect this barrier?

This is done by convincing the public that only treatments that were tested using a double blind clinical study are proven effective. All other means of testing treatments are unreliable and therefore mocked.

Readers should be aware that the cost of conducting these double blind clinical studies is enormous, in the range of tens or even hundreds of millions of dollars. Who are the only companies that can afford these clinical studies? Large pharmaceutical companies. Who cannot? Small companies that sell dietary supplements and natural products. In economic terms, this action by the pharmaceuticals is called “erecting a barrier to entry.” Note that these barriers are psychological, and not technical. That is, as long as the medical profession accepts the pharmaceutical propaganda, this barrier will remain indestructible.

An interesting observation is that this dogma has been rejected by the FDA. According to the FDA, there are other legitimate tests to prove the safety and efficacy of treatments. For example, “The FDA guidance lists five types of controls for both pre marketing and post marketing studies: 1) Placebo Concurrent Control, 2) Pre-treatment Concurrent Control, 3) Dose-response Concurrent Control, 4) Active (Positive) Concurrent Control, 5) External Control (Including His- torical Control). The External Control “can be a group of patients treated at an earlier time (historical control).” (See Pharmacology & Pharmacy, from September 2013) (3). Surprisingly, this is a “secret” that is well-kept from doctors and the general public. The success of keeping this “secret” under wraps is a testament to the effectiveness of pharmaceutical industry propaganda.

What is the result of this successful campaign by the pharmaceutical industry? A decrease in supply.

Let’s summarize what we have so far. Consolidation, which decreases supply, and the erection of the double blind barrier against natural treatments, which also decreases supply. What is the effect of this decrease in supply? An increase in prices.

If the government is interested in stopping the increase in drug prices, what should it do?

The government can object to or even prevent consolidation. In addition, it can embark on a campaign that will promote trust in other methods of testing treatments. In particular, those already accepted by the FDA. As a first step toward this process, the CBCD has conducted a study on Gene-Eden-VIR that proved its efficacy without the double blind method, and published the results of this clinical study in a peer reviewed medical journal. We urge other research entities to follow the lead of the CBCD and hope that such a movement will eventually bring down the price of drugs.

To learn more about the CBCD, or to request an interview with a Center representative, please visit http://www.cbcd.net.


(1) Big Pharma's Favorite Prescription: Higher Prices. Published on May 8, 2014.

(2) Cost of Generic Drugs Soaring Due To Increased Demand from Obamacare. Published on February 1, 2014.

(3) Gene-Eden-VIR Is Antiviral: Results of a Post Marketing Clinical Study. Published in September 2013.

The Center for the Biology of Chronic Disease (http://www.cbcd.net) is a not-for-profit tax-exempt organization under section 501(c) 3 of the IRS tax code. The center’s mission is to advance the research on the biology of chronic disease and to accelerate the discovery of a cure for these diseases.

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Hanan Polansky
Center for the Biology of Chronic Disease (CBCD)
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