Picture this: a man, probably in his mid-30s, rubs his knee as his dog looks on quizzically. A seated woman cringes as she massages her finger joints. A kettle squeals. Voiceover: "This is your wake-up call if you have moderate "to severe rheumatoid arthritis "month after month, the clock is ticking on "irreversible joint damage. "Ongoing pain and stiffness are signs of joint erosion. Humira can help stop the clock." We've all seen ads like this one and to varying degrees allowed name-brand drug titles to become absorbed in our minds. But what's the cost of these new drugs? Did you know that the average retail price in the U.S. of one carton containing two dosing pens of Humira is $5,684? This is according to the website GoodRx, which compares drug prices. But in Canada, you can purchase the same dose for about $1,600. The good news is that soon pharmaceutical companies will have to include the price of prescription drugs that are over $35 in their TV ads. So, now you could add the "erosion of your bank account" to the list of possible side effects. But why does it cost so much to buy prescription drugs in the U.S.? Today, I'm walking you through the history of prescription-drug regulation and the way that drugs are currently distributed as we try to understand these disproportionately high costs across the U.S..

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(Describer) Title: Origin of Everything.

Americans spent a ton of money on medicine. According to the Organization for Economic Cooperation and Development, we spent nearly $1,200 per capita on prescription drugs per year in the period from 2014 to '16, far outspending people from other industrialized nations. In fact, the Pew Charitable Trusts conducted a study of the drug spending estimates assembled by several public and private organizations. It turns out that spending on prescription drugs in the U.S. is not only rising, but also that it's expected to outpace growth in other parts of the health sector. But why? According to Austin Frakt in the "New York Times," this is not because Americans are buying more medicine than people in other affluent nations. He cites a 2013 report by the Association of the British Pharmaceutical Industry to support this claim. It's also not because Americans buy a greater percentage of name-brand drugs than generics than people in other countries. He cites a 2018 issue of the Journal of the American Medical Association to back this up. Instead, this is because there are less stringent government policies limiting prices of brand-name drugs in the U.S. than there are in other affluent nations. But it isn't that drugs aren't regulated in the U.S. In fact, they have been for almost 200 years. In the early years of the country, medical groups would compile lists of standardized drugs. But it wasn't until after the Mexican-American War, which lasted from 1846 to 1848, that the government really began to crack down on bad medicine. During this war, 1,721 American soldiers were killed on the battlefield, while 11,550 died from collateral causes. While some of these deaths resulted from poor food and living conditions, many were the byproduct of tainted drugs given to the soldiers. Public outrage led to the signing of the Drug Importation Act of 1848, which aimed to prevent these types of low-quality drugs from entering the country. Of course, all sorts of untested remedies were being made, advertised, and sold within the U.S. In 1905, the American Medical Association began to require drug companies to prove that their drugs did what they claimed if they were going to advertise in their publication or in related medical journals. A year later, President Theodore Roosevelt signed the Pure Food and Drug Act, making it illegal for states to buy or sell mislabeled or tainted food, drinks, and drugs. Sadly, this version of the act didn't do enough to keep consumers safe. In 1937, an elixir called sulfanilamide killed 107 people, many of whom were children. And in 1938, the Federal Food Drug and Cosmetic Act began a new system of drug regulation that set limits on poisonous matter and drugs. Wait, limits? Shouldn't it be "no poisonous matter"? Well, I guess what doesn't kill you makes you stronger. It also permitted the government to inspect factories. The FDA began to oversee manufacturing practices and set quality controls, and it also became authorized to stop the illegal sale of drugs by pharmacies. In the 1960s, the FDA started working with the National Academy of Sciences and the National Research Council to measure the effectiveness of thousands of marketed drugs. Ten years later, it required that all medicines be sold with information describing its risks and benefits to the patent office. In 1983, after cyanide-laced Tylenol capsules killed seven people in Chicago and others in copycat crimes around the nation, Congress made it a crime to tamper with packaged consumer goods. So, what does all this have to do with the high price of prescription drugs? Well, much as the government became involved in regulating the quality and packaging of drugs, it also became involved in regulating the distribution of both brand name drugs and their generic counterparts. So, if you're wondering, a generic drug is a pharmaceutical that contains the same chemical substances as a brand-name drug. For example, fluoxetine is the generic version of the antidepressant, Prozac. In 1984, the Drug Price Competition and Patent Term Restoration Act, also known as the more snappy "Hatch-Waxman Act," was passed. It allowed the FDA to approve applications for generic versions of brand-name drugs. And this part is important without the manufacturer of the generic drug repeating research that proved the safety and effectiveness of the brand-name version. Not needing to repeat the research, combined with not needing to advertise their brand name in flashy commercials, such as the one I described earlier, allows the producers of generic drugs to sell their products to consumers at a much lower price. This is all well and good, but here's the important caveat: Generic drugs cannot be sold until the patents on brand-name drugs expire. Generally, patents filed since 1995 last for 20 years from the date that the drug was invented. However, during much of this time, the drug is still being tested. The amount of time that the patent lasts once a drug has gone to market can vary. This is why the Hatch-Waxman Act allows manufacturers of brand-name medications to apply for up to an additional five years of protection. Another sidebar-- the The Hatch-Waxman Act does not apply to biologics or medications made from a living organism and its products. So, here's the bottom line: Because of these laws, patients who require new drugs or biologics that are still under protection must pay the market price in the U.S. This leads us to the million, or really, trillion-dollar question: Why are brand-name drugs and biologics more expensive within the U.S. than they are in Australia, Canada, New Zealand, and a host of other European nations? This answer pivots on how drug prices are negotiated. In countries that have universal health coverage, a single entity usually buys drugs in bulk from their manufacturers. The only organization that functions this way in the U.S. is the Veterans Administration, which purchases its large inventory through a single centralized purchasing and negotiating operation. It can also refuse to buy brand-name drugs that have not been proven more effective than generics. In the rest of the country, however, multiple buyers, including Medicare, state Medicaid agencies, and private insurers negotiate separately with each drug manufacturer. Less leverage often leads to higher prices. At the same time, most private insurance companies outsource negotiating medicine costs to pharmacy benefit managers, also known as PBMs. PBMs manage prescription drug benefits on behalf of health insurers, drug plans, large employers and other payers. You can think of them as middlemen who use their purchasing power to negotiate rebates and discounts from the drug manufacturers. Rebates on prescription drugs are generally paid by pharmaceutical manufacturers to a PBM. The PBM shares some of this rebate with the health insurance company. These rebates are mostly used for expensive brand-name prescription drugs in categories in which there are interchangeable products. The idea is to create an incentive for the PBM and health-insurance companies to include certain products on their list of covered treatments. But the problem is this: Since these rebates are calculated as a percentage of the manufacturer's list price, the PBMs have an incentive to favor purchasing higher price drugs. Several reforms have been proposed to regulate PBMs. Most of these center on providing greater transparency related to the size of rebates and how much of these are shared with payers or patients. It'll be interesting to see which, if any, are implemented over the next few years. For the most part, consumers who are lucky enough to have good drug benefit plans simply pay a copay for their medications. This enables many to remain blissfully unaware of what their prescriptions actually cost for uninsured patients. And for the uninsured, these high prices can be deadly. In 2018, the Kaiser Foundation published a study that showed that people without insurance were more than three times as likely to say that they postponed or did not fill a prescription drug due to its high cost. So, what are some potential ideas to reduce the cost of prescription drugs in the U.S.? For the answer, we might look back at history. Public outcry after the death of soldiers led to the Drug Importation Act of 1848. Protests after sulfanilamide killed 107 led to government regulation of drug contents and manufacturing practices. Outrage after people were killed by poisoned Tylenol caused the government to regulate packaging. There's similar sustained public outcry about the high cost of medication today, but part of the driving factor behind effective change in the past was that we had hard data about the direct negative impacts of badly handled medication. But today, it's challenging to determine the exact number of deaths that have resulted from patients postponing or failing to take their medication due to its high cost. The other half of the dilemma is for the public to discern what they're fighting for. It is very difficult to understand the subtle economics of drug pricing. Even I got a little confused in that PBM paragraph, but several ideas have been put forward as potential solutions. This includes moving towards a single-purchaser system, limiting the cost of new drugs and biologics, pricing new drugs based on their comparative effectiveness, and demanding more transparency out of PBMs.

(Describer) Accessibility provided by the US Department of Education. PBS Digital Studios.