Given its position as a global leader in healthcare facilities and research, the lack of affordable drugs in the United States seems appalling. So why are drug prices so high here at home? The

pharmaceutical industry’s argument is two letters: R&D. Research and development. Drug companies estimate the cost of research and development of each new drug to be $800 million. Clearly, American pharmaceutical companies need money to finance such expensive costs. Former Surgeon General, Richard H. Carmona, emphasizes, "The United States does the lion’s share of the research in the world, the research and development of drugs. So [that’s] why the Canadian government sells it cheaper, they don’t have the overhead." If the United States imposed price regulations, it could hamper possibly life-saving future research.

Since many argue that the profit from high cost drugs maintains the industry, some believe that imposing similar price controls would have negative consequences. In connection with the upcoming 2008 presidential election, healthcare is a hot topic, especially among Democratic candidates looking to encourage drug affordability. John R. Lott, Jr., a senior research scientist at the University of Maryland and author of the new book, Freedomnomics bluntly states, "all Democratic presidential candidates agree on pharmaceutical price controls, which means people will die." He continues, "[with] price controls on drugs, there will not be much sense in developing new drugs because the pharmaceutical companies will not be able to pay for it." The pharmaceutical industry must remain lucrative in order to maintain interest in development of new drugs and ensure a stable future for medicinal therapy. Dr. Harry Binswanger, professor of philosophy at the Ayn Rand Institute urges, "We desperately need the pharmaceutical business to be hugely profitable. That way, resources are drawn to the task of extending our lives."

In order to address the problems of drug prices, we must understand how the pharmaceutical industry operates and the potential issues that plague the outcome of affordable medication. A strong distinction exists between acquiring sufficient funds for research and having a gross surplus of extra cash. While the drug companies obviously need to make money, the profit margin of the industry appears excessive. In 2002, the combined profits for the top ten pharmaceutical companies in Fortune 500 ($35.9 billion) were more than the profits of all the other 490 put together ($33.7 billion). The industry sees a 2-3% economic return—further demonstrating an unnecessary influx of money.

Additionally, small fortunes are spent on marketing instead of research. In fact, U.S. drug makers spend 2.5 times as much on marketing and administration as they do on research. Ad campaigns can reach preposterous amounts: AstraZeneca spent over $16 million in a single month on Nexium advertisements alone. Former editor of the New England Journal of Medicine, Dr. Marcia Angell, explains, "If you want to argue that [companies] need the high prices to cover R&D, it would make more sense to argue that they need the high prices even more to cover their marketing costs."

Big Pharma, as the industry is commonly called, also devotes huge resources towards political lobbying to discourage legislation that would take away from their moneymaking power. Currently in Washington, there are over 600 lobbyists acting as drug representatives—more than one for every member of Congress. Meanwhile, countries such as Canada place a restriction on such advertisement spending and regulate lobbying in an attempt to further decrease consumer drug price.

Despite bringing in high earnings, drug companies often ignore social uproar and do little to address global health concerns when it’s not financially profitable. Instead, a large portion of research and development spending is distributed to more profitable, less beneficial drugs, such as those treating erectile dysfunction and hair loss. Senior economist of the Economics Policy Institute, Jared Bernstein, responds to negative statements concerning price controls by claiming, "you could easily argue that the current approach by pharmaceutical companies kills people. [Drug companies] spend more on marketing than on research; they spend more on lifestyle drugs to enhance sexual performance or diminish hair loss than on drugs to treat malaria which kills millions of people." A more global focus could save enormous numbers of lives but would offer little financial return to the company.