Prescription drugs are lifesaving — but only if people can afford them. Right now, medication prices are surging, driven by pharmaceutical companies that operate with little regulatory oversight on pricing. Unlike hospitals and health insurers, which are both regulated by federal and state laws, prescription drug companies operate with little government influence over their pricing.
Drugmakers enjoy monopoly status for new drugs – U.S. Patent protections that, in some cases, extend more than a decade. Drugmakers also enjoy tax-exempt television advertising that is used to drive consumer demand for new, high-cost therapies.
Unchecked drug pricing, little competition and tax-exempt benefits contribute significantly to the affordability crisis, putting enormous financial pressure on the health care system and directly affecting health insurance costs for families and businesses.
At Blue Cross Blue Shield of Michigan, we believe a well-regulated health care system is essential.
The Problem: Unchecked Prescription Drug Pricing
The current environment allows drug companies unchecked freedom to set and raise prices:
Rapid and unexplained price hikes: In 2022, U.S. prices across all drugs (brands and generics) were nearly three times as high as prices in other developed countries. Even insulin — a century-old medication — has doubled or tripled in price over recent years.
Sky-high costs for breakthrough therapies: New gene therapies often cost millions of dollars per treatment. Without regulation, these high-cost therapies put enormous pressure on the health care system while compromising people’s ability to access them.
Excessive profits: Major drugmakers consistently report enormous profits. These profits – often in the billions – significantly surpass typical industry profit margins and directly result from unchecked pricing power. Meanwhile, Blue Cross experienced a $3 billion increase in medical and pharmacy claims costs in 2024 and reported a financial loss for the year.
What a Well-Regulated System Looks Like
The health insurance industry is heavily regulated. The prescription drug industry is unregulated and unaccountable for the prices they charge. We encourage discussions with policymakers around the high prices of drugs and their impact on health insurance affordability. We would encourage policymakers to consider policies that:
▪ Require price transparency: Drugmakers should publicly justify significant price increases to ensure accountability and fairness.
▪ Encourage competition: Shorten the exclusivity period drug companies have on brand-name medications. More generics and biosimilars in the market mean competition – and lower costs for all consumers as a result.
▪ Balance innovation and cost: Innovation is critical, but breakthrough medications must be priced reasonably. Solutions like outcomes-based payment models — where companies earn based on effectiveness of treatments — could help balance cost, incentives and innovation.
What Blue Cross is Doing About It
Blue Cross Blue Shield of Michigan and the national Blue Cross and Blue Shield Association advocate for regulatory reforms and transparency measures to ensure medication remains accessible and affordable for everyone we serve. Blue Cross is taking concrete steps by:
- Negotiating to secure lower drug prices.
- Innovating and introducing lower cost biosimilars and generics.
- Supporting policy reforms that allow price negotiation and shorten the length of monopolies – otherwise known as patent exclusivity periods – to foster competition and bring down prices.
- Advocating for transparency and fairness at both the state and national levels to ensure drug companies price responsibly.
Our Call to Action
Blue Cross alone can’t solve this crisis — we need collective action from drug companies, health systems, policymakers and the community. It’s possible to have life-changing treatments that people can actually afford. With a properly regulated system, we can have reasonable drug costs, innovation, better health and affordable care and coverage.
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