Cameron Miranda
While there is no federal anti-price gouging law in the United States, individual states have enacted their own statutes to prevent profiteering during emergencies. These laws vary significantly by state and are triggered by a declaration of emergency, aiming to protect consumers from predatory pricing practices during disasters such as hurricanes or pandemics. The applicability of these laws depends on the specific product and state legislation, with some states providing exceptions for promotional pricing or seasonal fluctuations. While most companies do not engage in price gouging, the surge in demand during emergencies can lead to shortages and increased supply costs, influencing pricing decisions. State Attorneys General have investigated and taken legal action against companies allegedly engaging in price gouging during the COVID-19 crisis.
| Characteristics | Values |
|---|---|
| High prescription drug prices | Americans pay up to 10 times more for medications than people in other similarly wealthy nations |
| Inadequate government action | The Biden administration's negotiations with Medicare were deemed "inadequate" by officials |
| Anti-competitive behavior | Pharmaceutical manufacturers and PBMs have been accused of anti-competitive behavior that keeps drug prices high |
| Lack of transparency | Pharmacy Benefit Managers (PBMs) are supposed to save patients money, but they have been accused of inflating drug prices |
| Ineffective policy | Existing policies, such as the Inflation Reduction Act, have not achieved aggressive enough price cuts |
| Medical debt crisis | Medical debt can lead to financial ruin and cause fear of seeking medical care due to cost |
| Predatory subscription services | Subscription services can be confusing and lead to unexpected charges |
| Price gouging | Drug prices are increased during drug shortages, affecting vulnerable populations |
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What You'll Learn
Predatory medical debt collection
In recent years, there has been a growing concern over predatory medical debt collection practices, which disproportionately affect the most vulnerable members of society. Predatory medical debt collection refers to aggressive and indiscriminate debt retrieval practices employed by healthcare providers and collection agencies, which often result in negative consequences for patients. These practices include referring patients with outstanding medical debts to collection agencies prematurely, without considering their financial situation or ability to repay. This has been exacerbated by the decline in charity care and the rise in uncompensated care, where healthcare providers aggressively pursue payment for medical bills regardless of a patient's ability to pay.
The impact of predatory medical debt collection can be devastating, with medical debt being the leading cause of bankruptcy in the United States. According to a 2023 study by the Commonwealth Fund, 40% of adults carry medical or dental debt, and medical debt collections comprise 58% of all debt turned over to collectors. The stress and financial burden of medical debt can lead to negative health-seeking behaviours, with many individuals delaying or avoiding seeking medical care due to cost concerns. This can have serious consequences, particularly for vulnerable communities, as individuals may forgo necessary treatment or only seek emergency care when their condition has worsened.
To address these issues, several states, including New York, have enacted laws to protect consumers from predatory medical debt collection practices. Governor Kathy Hochul of New York has signed four new laws to tackle price gouging, medical debt, and unfair business practices. These laws include prohibiting healthcare providers from placing liens on patients' homes and garnishing wages in medical debt collection cases, banning the reporting of medical debt to credit agencies, and requiring companies to notify consumers of automatic subscription renewals and clear cancellation instructions. Additionally, the Consumer Financial Protection Bureau (CFPB) has issued guidance to prevent illegal medical debt collection tactics, such as double-billing, inflated charges, and misrepresenting consumers' rights to contest bills.
While these efforts are a step in the right direction, more work needs to be done to eradicate predatory medical debt collection practices and ensure that individuals can access affordable and quality healthcare without the fear of financial ruin. This includes improving financial protections for consumers, increasing access to charity care, and addressing the underlying causes of high medical costs. By tackling these issues, governments can alleviate the burden of medical debt on individuals and improve health outcomes for vulnerable communities.
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Inadequate price negotiation
In the United States, prescription drug prices are notoriously high. Despite constituting less than 5% of the global population, the country accounts for nearly three-quarters of global pharmaceutical profits. Americans pay up to 10 times more for medications than people in other similarly wealthy nations.
In recognition of this issue, the Inflation Reduction Act of 2022 was signed into law by President Biden in August 2022. The Act includes provisions to lower prescription drug costs for people with Medicare and reduce drug spending by the federal government. A key provision of the Act is the requirement for the Secretary of Health and Human Services (HHS) to negotiate prices with drug companies for certain drugs covered under Medicare. This marked the culmination of years of debate among lawmakers over whether to grant the federal government the authority to negotiate drug prices in Medicare.
The first round of negotiations, which took place in 2024, involved 10 drugs covered under Medicare Part D. The process involved the exchange of offers and counteroffers between the Centers for Medicare & Medicaid Services (CMS) and drug companies, with three meetings held to discuss the evidence and attempt to reach a mutually acceptable price. This process resulted in agreements on negotiated prices for five of the selected drugs, with the remaining five accepting CMS's final written offer. The negotiated prices are referred to as Maximum Fair Prices (MFPs) and will go into effect on January 1, 2026. It is estimated that these negotiated prices will save an additional $1.5 billion for people enrolled in Medicare prescription drug coverage in 2026.
However, some officials have argued that the lower prices achieved through the Biden administration's negotiations were "inadequate". They believe that more aggressive price cuts are needed to truly address the issue of high drug prices. This sentiment led to the Trump administration's executive order in May 2025, which aimed to go beyond the achievements of the Inflation Reduction Act. Despite this, the drug price negotiation program has faced several lawsuits from drug manufacturers and entities representing the pharmaceutical industry. These lawsuits raise constitutional and statutory challenges, including allegations of unfair compensation and excessive fines.
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Anti-competitive behaviour by drugmakers
While governments have attempted to tackle anti-competitive behaviour by drugmakers, the issue persists. In 2013, the US Supreme Court ruled that large payments made by branded drug manufacturers to potential generic entrants to settle patent disputes could be considered anti-competitive. This ruling was upheld by the US Court of Appeals in 2021, which found that a generic drugmaker had engaged in an anti-competitive "reverse payment" settlement with a brand manufacturer.
In addition to legal rulings, competition authorities have also taken action against anti-competitive practices in the pharmaceutical sector. For example, the European Commission fined several pharmaceutical companies a total of €13.4 million for participating in a cartel that restricted competition. Similarly, the UK's Competition and Markets Authority (CMA) accused four pharmaceutical firms of partnering to avoid competition for a specific medication.
Despite these efforts, anti-competitive behaviour by drugmakers continues to be an issue. In 2025, US President Trump signed an executive order to slash drug prices, which were often higher than in other countries. This executive order was a response to anti-competitive actions by drugmakers that kept prices high.
To address this issue, the US government directed the Department of Justice and the Federal Trade Commission to take action against anti-competitive practices by drugmakers. However, the complexity of the pharmaceutical market, involving insurance companies and middlemen, makes it challenging to regulate prices effectively.
While governments have a role in preventing anti-gouging practices, other factors, such as manufacturing capacity and emerging technologies, also influence drug pricing. Therefore, a comprehensive approach that considers multiple factors is necessary to effectively tackle anti-competitive behaviour and ensure affordable medication for consumers.
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Lack of government intervention
One of the critical concerns regarding the lack of government intervention is the role of middlemen or Pharmacy Benefit Managers (PBMs). PBMs are intended to negotiate discounted prices from drug companies on behalf of insurance companies, ultimately saving patients money. However, they have been accused of doing the opposite and inflating drug prices. This practice has attracted the attention of lawmakers, but more concrete action is needed to curb this issue.
The absence of government intervention has also led to a reliance on foreign markets for generic drugs and active pharmaceutical ingredients (APIs). For instance, the US imports over 90% of its generic drugs from India, which, in turn, relies on China for almost two-thirds of its APIs. This overreliance on a limited number of suppliers poses a significant risk to the stability of the pharmaceutical supply chain in the US, making it vulnerable to geopolitical tensions and disruptions.
Furthermore, without sufficient government intervention, pharmaceutical manufacturers have been able to charge patients in the US higher prices for the same prescription drugs sold in other countries, often produced in the exact same locations. This practice has resulted in Americans paying up to ten times more for medications than people in other similarly wealthy nations. This price discrepancy is unjustifiable and places an undue financial burden on American citizens.
To address these issues, government intervention is necessary to regulate drug prices, improve supply chain resilience, and hold entities accountable for unfair practices. This includes enacting and enforcing anti-gouging laws, such as those implemented by Governor Hochul in New York, which prohibit the sale of medicine for an unconscionably excessive price during a drug shortage. By increasing government oversight, the affordability and accessibility of prescription drugs can be improved, ensuring that patients are not exploited by excessive pricing practices.
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High prescription drug prices
At the federal level, President Trump signed an executive order in May 2025 to slash drug prices, including weight-loss drugs. This order aimed to address the role of middlemen, known as PBMs, who work with insurance companies to negotiate drug prices. PBMs have been accused of inflating drug prices instead of saving patients money as intended. The Trump administration also planned to expand the importation of prescription drugs from countries beyond Canada, where drug prices are often lower than in the US. Additionally, the Department of Justice and the Federal Trade Commission were directed to take action against anti-competitive practices by drug manufacturers, which contribute to high prices.
The Biden administration also focused on lowering drug prices, particularly through the Inflation Reduction Act. While this act achieved some price reductions, officials under the subsequent Trump administration argued that more aggressive price cuts were needed. The Biden administration also addressed supply chain resilience and diversification, aiming to reduce reliance on a single supplier or a limited number of suppliers, which can drive up prices.
At the state level, Governor Kathy Hochul of New York signed four laws to protect consumers from price gouging, medical debt, and unfair business practices. One of these laws, Legislation S.608C/A.5653B, specifically prohibits selling medicine for an unconscionably excessive price during a drug shortage. This legislation enables New York State to sue and penalize entities that engage in price gouging of medicines, protecting vulnerable communities from being exploited by high prescription drug prices.
While efforts have been made to address high prescription drug prices, the complex nature of the pharmaceutical market, involving manufacturers, insurers, and regulators, makes it challenging to implement effective solutions.
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Frequently asked questions
The government can and has enacted anti-gouging laws on pharmaceuticals. For example, Governor Kathy Hochul of New York signed legislation to protect New York consumers from medicine price-gouging. This legislation allows New York State to sue and penalize entities that engage in the price gouging of medicines.
Examples of anti-gouging laws on pharmaceuticals include:
- Legislation banning healthcare providers from placing liens on patients' homes and garnishing their wages in medical debt collection cases.
- Legislation prohibiting the sale of medicine for an unconscionably excessive price during a drug shortage.
- Legislation requiring companies to notify customers of automatic subscription renewals and provide clear instructions for canceling.
One challenge is that the pharmaceutical industry is complex and involves multiple stakeholders, including drug manufacturers, insurance companies, and PBMs (pharmacy benefit managers). PBMs are supposed to save patients money by negotiating discounted prices from drug companies, but they have been accused of inflating drug prices. Additionally, there are concerns about supply chain resilience and diversification, especially regarding the US's dependence on China for active pharmaceutical ingredients (APIs).
Alternative approaches to address high pharmaceutical prices include:
- Encouraging the development of generic and biosimilar alternatives to higher-cost brand-name prescription drugs to increase competition and access to more affordable medicines.
- Expanding access to lower-cost drugs imported from outside the country.
- Improving transparency in the Medicare Drug Price Negotiation Program and reducing anti-competitive behavior from pharmaceutical manufacturers.
