Bitter pills: on Court’s intervention, drug pricing

The Supreme Court has upbraided disparities between the price to retailer (PTR) and the maximum retail price (MRP) of certain drugs, including those used to treat cancers, in some instances up to 1,000%. These drugs are not available over-the-counter, so hospitals often control which brand a patient uses. As a result, pharmaceutical companies compete for the hospitals’ business, not patients’. To incentivise a hospital to stock specific drugs, they deliberately specify inflated MRPs while offering the hospital low PTRs, and the hospital can pocket the difference. The practice does not technically amount to a kickback but is one economically, as manufacturers effectively promise hospitals an embedded financial reward to pick specific products, and leave patients to potentially pay more than the medicines’ supply price because hospitals have an incentive to sell brands with the largest margins.