Developing new drugs is not easy; it is a stressful, unpredictable process that requires a great deal of energy. Even so, it can dash the hopes of the world's greatest scientists and the patients they serve in a heartbeat. The success of a first clinical trial can also quickly end in disastrous failure.

However, when the difficult drug development process and the pharmaceutical industry's unique mission to change lives meet the U.S. government's largely laissez-faire attitude toward regulating drug prices, things can descend into chaos. Under the current system, industry giants such as AbbVie, Pfizer, and Biogen have a virtual monopoly on the pricing of a drug, no matter how long it has been on the market. Every year, the pharmaceutical industry is taking advantage of this to raise drug prices, and 2021 is no exception.

Take AbbVie, for example. AbbVie acquired Allergan, the maker of Botox and its peer company, in a blockbuster deal in 2019. AbbVie makes Humira, the world's best-selling drug, which generated nearly $15 billion in sales in the U.S. in 2019 alone. This anti-inflammatory drug treats psoriasis, arthritis, Crohn's disease, and many other conditions. From this perspective, there is no reason to be cross with science. But Xomel was approved back in December 2002. Nearly 20 years later, AbbVie has been raising the price of this drug, even though nothing has changed in its ingredients.

Brad Loncar is a biotech investor who has close ties to the pharmaceutical industry and its innovation activities. But he has also been critical of this pattern of repeated cost increases to hedge against the risk of scientific failure. At the time of AbbVie's acquisition of Allergan, Loncar once told Fortune magazine that the model encouraged financial engineering rather than medical miracles, which are at the heart of what the pharmaceutical industry is built on. Do you know how much the price of Xumel has gone up at the beginning of 2021? 7.4%.

Pharmaceutical executives are at their wits' end about this situation. Pharma industry sources often argue that this description is unfair because the market price of a drug does not match the price paid by hospitals or insurance companies or patients.

The actual price a patient pays for a drug depends on his or her insurance status or the payment plan offered by a large pharmaceutical company. In addition to this, you may find new uses for existing drugs. A drug like Xumel may be marketed for just one disease, but it may eventually be used to treat more than a dozen conditions.

This has important financial implications for the average American. Data from the AARP Public Policy Institute and the University of Minnesota's PRIME Institute show that even before the latest round of price increases, the U.S. market price of a standard 40 mg Xumel injection pen's U.S. market price (for a one-year supply) rose from $16,636 in 2006 to $58,612 in 2017.

In addition to Loncar, other long-term investors in the life sciences sector see flaws in this model. This year, Tysabri, Boeing's drug used to treat multiple sclerosis, also announced a price increase.

AbbVie and Boeheim, mentioned separately in this article, have already announced price increases, but many other companies will follow the same pattern. Pfizer, Sanofi and GlaxoSmithKline are all mulling price increases of 0.5% to 8.6%, including several of these companies' flagship products, such as Pfizer's Ibrance for cancer and the anti-inflammatory Xeljanz.