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A House Committee Is Investigating Pharmaceutical Industry Pricing Practices

The House Oversight and Reform Committee announced on Monday the launch of an investigation into the pharmaceutical industry's pricing practices. Representative Elijah E. Cummings (D-Maryland), chairman of the committee, requested in-depth pricing information from 12 companies on major brand-name drugs that treat cancer, diabetes, and other conditions.

High drug costs in America are old news, and an issue that politicians across party lines have worked to address. The Trump administration has taken measures such as accelerating Food and Drug Administration approval of generic medications in order to lower prices through increased competition. Last week, Cummings introduced legislation that would lower drug prices to the level of those in other economically advanced countries (where research shows the same drugs cost under half the amount patients are charged in the United States)—a goal the Trump administration has expressed as well.

The Associated Press reports that the Pharmaceutical Research and Manufacturers of America didn't immediately respond to Cummings' announcement about the investigation. But the group has emphasized in the past that price regulation would be detrimental to the U.S. health-care system by eliminating companies' financial incentives to devote funding to research and development of breakthrough medications.

According to research published in the Journal of the American Medical Association, the claim that high drug prices can be justified by costly research and development isn't entirely sound. As Pacific Standard's Francie Diep reported, here's what the 2016 study found:

Any given drug's price tag isn't related to the amount of time or effort it took to be invented. Rather, prices are determined solely by what insurance companies and patients are willing to pay. After all, the prices of some generic and older drugs have been rising in recent years, even though generics cost relatively little to create and the costs of decades-old treatments were paid for long ago. The drug over which Martin Shkreli gained infamy for raising prices by 5,000 percent, for example, was invented 60 years ago.

The study concludes that, "[a]lthough prices are often justified by the high cost of drug development, there is no evidence of an association between research and development costs and prices; rather, prescription drugs are priced in the United States primarily on the basis of what the market will bear."

The House committee seeks to find out what pharmaceutical companies actually do with all of their drug revenue. Now, it's up to those companies to prove that they have nothing to hide.