Want to know why drugs cost so much?

This whole article is great. Gladwell is sharp...

"The problem with the way we think about prescription drugs begins with a basic misunderstanding about drug prices. The editorial board of the Times has pronounced them much too high; Marcia Angell calls them “intolerable.” The perception that the drug industry is profiteering at the expense of the American consumer has given pharmaceutical firms a reputation on a par with that of cigarette manufacturers.
In fact, the complaint is only half true. The “intolerable” prices that Angell writes about are confined to the brand-name sector of the American drug marketplace. As the economists Patricia Danzon and Michael Furukawa recently pointed out in the journal Health Affairs, drugs still under patent protection are anywhere from twenty-five to forty per cent more expensive in the United States than in places like England, France, and Canada. Generic drugs are another story. Because there are so many companies in the United States that step in to make drugs once their patents expire, and because the price competition among those firms is so fierce, generic drugs here are among the cheapest in the world. And, according to Danzon and Furukawa’s analysis, when prescription drugs are converted to over-the-counter status no other country even comes close to having prices as low as the United States.
It is not accurate to say, then, that the United States has higher prescription-drug prices than other countries. It is accurate to say only that the United States has a different pricing system from that of other countries. Americans pay more for drugs when they first come out and less as the drugs get older, while the rest of the world pays less in the beginning and more later. Whose pricing system is cheaper? It depends. If you are taking Mevacor for your cholesterol, the 20-mg. pill is two-twenty-five in America and less than two dollars if you buy it in Canada. But generic Mevacor (lovastatin) is about a dollar a pill in Canada and as low as sixty-five cents a pill in the United States. Of course, not every drug comes in a generic version. But so many important drugs have gone off-patent recently that the rate of increase in drug spending in the United States has fallen sharply for the past four years. And so many other drugs are going to go off-patent in the next few years—including the top-selling drug in this country, the anti-cholesterol medication Lipitor—that many Americans who now pay more for their drugs than their counterparts in other Western countries could soon be paying less."