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Shadow pricing and the art of profiteering from outdated therapies

Nature Biotechnology volume 37, pages 217–220 (2019)Cite this article

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An Author Correction to this article was published on 01 November 2019

This article has been updated

To the Editor — According to conventional economic theory, novel products entering a market should introduce pricing competition and render legacy products obsolete. Yet in the US pharmaceutical market, existing drugs are not rendered obsolete and phased out as expected; instead, their prices are readjusted to reflect the higher prices of newly developed therapies entering the market. As prices rise, the price hikes are passed onto patients, who are increasingly having to pay more out of their own pockets.

Here we focus on this observed ‘shadow pricing’ phenomenon, which seemingly throws all established laws of the free market out the window. We find that an increasing number of aging drug therapies fall under this pricing model, with massive incentives for both the drug companies and healthcare payers in a coordinated monopoly. Consumers, both insured and uninsured, often bear the burden of these costs through increased premiums, copayments and retail prices. If this situation continues, the US healthcare model is likely to become increasingly unsustainable, resulting in increased calls for governmental action, technological action and policy reform.

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Fig. 1: ‘Shadow pricing’ between Lantus and Levemir from 2015 to 2016.

Bloomberg Intelligence Analysis of Data retrieved from Symphony Health Solutions.

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  • 01 November 2019

    An amendment to this paper has been published and can be accessed via a link at the top of the paper.

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  1. Indian Institute of Technology Delhi, Department of Chemical Engineering, Hauz Khas, New Delhi, India

    Anurag S Rathore & Faheem Shereef

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  1. Anurag S Rathore
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Correspondence to Anurag S Rathore.

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Rathore, A.S., Shereef, F. Shadow pricing and the art of profiteering from outdated therapies. Nat Biotechnol 37, 217–220 (2019). https://doi.org/10.1038/s41587-019-0049-7

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