The United States spends the most per capita on prescription drugs compared to other high-income countries. Although prescription drugs are an integral part of healthcare, the high cost can take a big chunk out of the monthly budget for most U.S. citizens. People face high out-of-pocket costs, and not just the uninsured but also those that can afford good health insurance. Seeing how the costs of medicine have risen over the past decade, many people are having difficulty paying for the drugs they need.
A 2019 Kaiser Family Foundation poll found that among those who are currently taking prescription drugs, 24% of adults and 23% of seniors find it difficult to afford their medicine. Those that didn’t take their prescription drugs because of the cost resorted to other cost-saving measures.
Here’s more about the cost of medicine in the U.S. and how it affects people.
Why are prescription drugs so expensive?
Various factors contribute to high drug prices in the U.S. including lack of price regulation, a complex supply chain, and marketing, among a few. Programs, funded by the pharmaceutical manufacturers of a prescription drug, help lower the out-of-pocket costs by providing patients with medication coupons. These coupons also help uninsured and underinsured people and help people to search and compare prices before they purchase the medicine.
Complex supply chain
Drug manufacturers determine how much money American patients pay for their prescription drugs. The FDA only regulates how new drugs are tested, marketed, and released but they don’t have any price control over them. Prices for brand-name drugs are rising at a rate that outstrips inflation, and drug manufacturers, insurers, and PBMs (pharmacy benefit managers) are behind these rapid price spikes. They create a complicated supply chain helping drive drug prices aggressively upward.
Many variables depend on the amount you pay for brand-name drugs including your insurance plan, the size of your deductible, and the deal your insurance has with the drug’s manufacturer. The system becomes more complex because of the power of the PBMs. They wrangle discounts from the manufacturers in exchange for getting the drugs placed on the insurance companies’ formularies that help determine where the drugs will be on the formulary hierarchy.
When new drugs hit the market, they’re instantly placed under patent that lasts 20 years. Drug exclusive protection means that other pharmaceutical companies cannot compete by developing generic drugs with similar effects. Drug manufacturers can stall a generic competitor from entering the market by filing patents covering the drug’s active ingredients, and also whether the drug takes the form of a pill or a liquid.
Drug exclusivity and patenting inspire further research and development of more effective and better treatments for diseases such as cancer, and now aiding the race to find effective treatments and vaccines for the coronavirus. This protects hard-earned research from being stolen by a competitor, however, this leaves the payers stuck with high drug prices.
U.S. citizens usually pay several times more for healthcare than people from other high-income countries. According to a study, the U.S. spend almost twice as much as 10 high-income countries on medical care in 2016. Prices of devices and pharmaceuticals, as well as administrative costs, appeared to be the main reasons for the differences in spending.
Keep in mind that many parties are involved in getting a prescription drug to a patent, including manufacturers, PBMs, insurance companies, wholesalers, and many more. There are many opportunities to enhance the participants’ revenue and profits, generally at the expense of patients. Unfortunately, financial details aren’t made public, which makes it even more difficult to understand how these parties affect the price of drugs.
Marketing and advertising
Companies spend large sums of money to market and advertise their drugs. They even spend less money on research, testing, and developing them. As it drives up the cost of doing business, it contributes to high drug prices. Direct-to-consumer advertising stimulates patient demand for pharmaceuticals, influencing physician-prescribing habits and may increase drug spending.
According to the Food and Drug Administration, most physicians view DTC (direct-to-consumer) ads as one of the many factors affecting their medical practices and interactions with patients. In the past, prescription drug manufacturers promoted their products only to healthcare professionals, so they can interpret drug information for their patients. Since drug manufacturers began targeting consumers, DTC ads have become a popular promotional tool, contributing to rising of the prices.
Thanks to the development of new drugs, many medical conditions can now be cured or managed effectively. However, prescription drugs are among the fastest-growing segments of healthcare spending, and the changes we make need to ensure the continued development of drugs while keeping costs in check.