Rising Health Care Costs and Life-Cycle Management in the Pharmaceutical Market

The problem of rising prescription drug costs has emerged as a critical policy issue around the world, particularly in the United States. These costs strain the budgets of patients and health insurers, and directly contribute to adverse health outcomes by reducing adherence to important medications. Drug spending is driven by brand-name drugs, which currently account for about 20% of all prescriptions in the US, but 80% of costs. Brand-name drugs generally are granted periods of market exclusivity during which they charge high prices to account for the initial investment in research and development. In the case of small molecule drugs, once the market exclusivity period ends, competitors producing bioequivalent generic drugs can enter the market, and the drug price quickly falls. In this week’s PLOS Medicine, Nathalie Vernaz and colleagues study the consequences of this delicate balancing act going awry due to the cumulative effects of so-called life-cycle management (or ‘‘evergreening’’) strategies employed by the drug’s manufacturer [1].