Do you dread every visit to the pharmacy to renew your prescriptions? Are you worried about the ever-rising prescription drug costs in the U.S.?
If so, you’re not alone. A recent poll showed that 72% of Americans feel that prescription drug costs are unreasonable.
This is understandable, considering how much we spend on drugs compared to other developed nations. In 2013, the average American spent $858 each year on prescription medications. Residents of other western lands averaged only $400 per year.
What’s led to the skyrocketing costs of prescription drugs in America? Read on to learn five reasons behind the outrageous prices.
1. No price controls
Countries with national healthcare programs have government representatives that negotiate prescription drug costs. This is a normal and accepted practice in every other developed country on earth.
The U.S. has no such provision.
In 2003, Congress approved a new program (Medicare Part D) to help 40 million American seniors buy prescription drugs. The catch?
The federal government was banned from negotiating cheaper prices for any of those medications. Instead, cost negotiation would be outsourced directly to insurance companies.
Basically, the U.S. government passed a law forbidding itself to negotiate prescription drug costs.
The result? Drug companies are free to set their prices based on the costs of competing drugs and whether their new product is better.
It also means they can gouge prices as much as they want…and no one is legally able to stop them. One example is the life-saving EpiPen, which jumped from $90 per dose to over $600.
Other drugs hit the market at ridiculously high rates from the start, like the hepatitis C drug Harvoni. In 2016, a 30-day supply of Harvoni would cost a patient a staggering $87,800!
How are the drug companies able to get such legislation passed? Experts blame lobbying and campaign contributions from pharmaceutical companies.
Take, for example, what happened while the bill for Medicare Part D was in Congress. Lobbyists argued that giving negotiating power to Medicare would result in better price control!
2. Government-protected monopolies
The structure of the American patent system allows drug manufacturers a 20-year monopoly on any product they develop.
This means that for the first 20 years of any drug’s existence, no generics are allowed onto the market to serve as competition. The Food and Drug Administration (FDA) also grants exclusive rights for certain drugs, such as those that treat very rare diseases.
As if these monopolies aren’t powerful enough, many drug companies have found ways to circumvent the patent laws.
A common practice is to make slight adjustments to the nontherapeutic parts of the medication, such as the pill coating. They may also introduce an extended-release formula or combine two existing drugs into one.
This effectively creates a “new” product.
Drug companies may also pay settlements to generics manufacturers who try to sue them over patent violations.
3. Not enough competition
For many specialized drugs, there simply isn’t enough competition to bring down costs.
Some older generic drugs are no longer profitable, so manufacturers stop making them. Once there are only a few companies that produce the drug, the price usually increases again.
For conditions too rare to merit multiple manufacturers, the maker of the brand-name drug may forever hold a monopoly on the product.
Another issue is the length of time it takes generic drugs to reach the market.
Some drugs have been delayed four to five years (or longer) due to application backlogs at the FDA. In other cases, only one or two generic versions of off-patent drugs get approved. This is generally not enough competition to see a noticeable decline in the name-brand price.
Many once-affordable generic brands have also become increasingly scarce in recent years. Reasons include material shortages, quality control issues, or manufacturing problems in foreign factories.
4. Limitations on generics
Many well-intentioned laws actually limit a generic’s ability to lower prescription drug costs.
In 26 states, pharmacists are required to get patient approval before switching from a brand-name drug to a generic. In 2006, this policy cost Medicaid $19.8 million dollars over one statin drug, Zocor.
What went wrong? Costs skyrocketed because many pharmacists failed to get patient consent. Medicaid then had to pay for the brand-name drug even though a cheaper option was available.
To make matters even more confusing, you never truly know the price of the drug you’re getting at the pharmacy. The real price is established between the manufacturer and your insurance company, while you simply provide the co-pay.
Insurance companies usually don’t deal directly with the manufacturers. Rather, they work with pharmacy benefit managers to negotiate discounts and rebates on the company’s behalf.
Of course, this comes in exchange for preferential placement on the pharmacy’s list of covered medications.
5. R&D is no excuse
Drug manufacturers always cite research and development costs to justify high prescription costs. But most research studies conducted by drug companies are funded by federal or private grants.
So is this really the case?
It takes an average of 10 years and $2.6 billion to bring one new drug to market. Of that amount, around half is spent on actual costs, while the remainder is wasted on “capital costs.” Capital costs are defined as the time and money a company sacrifices on an unproven drug.
For this reason, most drug companies focus their attention on products that will generate the highest profits. The majority of new drugs approved by the FDA are specialty drugs needed for fewer than 200,000 people.
The average cost of these medications? $140,000 per year.
The battle against prescription drug costs
Fixing America’s prescription drug problems will undoubtedly take a lot of time. In the meantime, you may have other options available to you.
One thing you can do is research natural treatments that may reduce or eliminate your need for expensive prescription drugs.
Another option is to use a service like HealthPricer to compare prescription medication prices – for free! We work with only trusted online health merchants to bring you the medicine you need at the lowest possible prices.
We invite you to browse our website and see for yourself how much money you can save!