Why are drug prices so high?

Most of us do not know the basics of economics, although we should. It impacts every one of us every day that we are alive. Yet, for most of us, once we get beyond the law of supply and demand, our knowledge of the subject starts to vaporize. I can't explain fiscal or monetary policy. While I regard economics as a science, it seems that experts routinely interpret data differently, which confuses beginners like me. What are novices to think when one expert hails our continued job gains while another laments our anemic recovery?

I have a general feel for market forces. If consumer demand for an item rises, then I will expect to pay more. If I want to make a purchase at an independent appliance store, then I will expect to pay more in return for superior customer service. If the item is manufactured in China, it will likely cost me less as this factory is not burdened with worker protections, environmental regulation and union wages.

The above common sense realizations do not compute in the medical universe. My fees, which I do not control, are unrelated to supply, demand or quality of the product. Moreover, medical costs are a mysterious enigma which confound physicians and our patients. Why does the cost of a simple bandage for a hospital patient remind us of the defense department's $400 hammer? Why can't I, a gastroenterologist, give a straight answer to the question, ‘how much does a colonoscopy cost?’

Reimbursement strategies in medicine are changing to a system that will pay physicians and hospitals for the value of their service, rather than the quantity. Like any slogan, it will sound appealing but will bring forth a bevy of burdens that will create foreseeable controversies and challenges. Stay tuned.

Let me share an absurd medical economic observation that occurred a few days prior to this writing. I received a phone call over the weekend from one of my patients who was suffering from a recurrence of Clostridium difficile (C. diff) infection and needed antibiotic treatment for this as soon as possible. The drug of choice was Vancomycin (Vanco). Physicians know that the cost of this medicine is often prohibitive. The patient and I made phone calls to area pharmacies in an effort to find the most affordable option. Let me juxtapose below results from two different pharmacies: pharmacy #1, $110. pharmacy #2, $2,500.

Okay, my economist friends, explain this discrepancy to me, if you can. Good luck.

Would it make sense to you if a Big Mac costs $3 at one McDonalds and $500 at another?

This post by Michael Kirsch, MD, FACP, appeared at MD Whistleblower. Dr. Kirsch is a full time practicing physician and writer who addresses the joys and challenges of medical practice, including controversies in the doctor-patient relationship, medical ethics and measuring medical quality. When he's not writing, he's performing colonoscopies.