The Trend in Rising Prescription Drug Costs
There is a trend of rising prescription drug costs. Americans pay more toward prescription drug costs that our counterparts elsewhere in the world. In 2017, insurers, insureds, and the government spent over $330 billion, according to data from the National Health Expenditure.
The cost of prescription drugs continues to climb each year. Yet the prescription benefit managers claim the yearly increase is being about 2%.
This minimal increase comes by revamping the formulary every year. It’s an effective way to manage increases to premiums.
Trends in Rising Brand Name Prescription Drug Cost
I have a friend that had been taking pantoprazole for seven months with great success. Pantoprazole is a generic drug that minimizes stomach acid.
When the 2019 prescription policy went into effect, the drug was no longer covered by the formulary. She tried switching to Omeprazole, another proton pump inhibitor, and a generic prescription.
That medication didn’t provide the same relief. The preferred pharmacy wanted $70 for a one-month supply.
I directed Susan to a website called GoodRx, where she was able to download a coupon for the medication to be filled for $9 at a local pharmacy.
Both prescriptions are generic drugs, and formulary guidelines require at least one drug have coverage in each classification. The PBM did its diligence.
Now, her options were clear; she could have asked her doctor to write the insurance company explaining the Omeprazole was not effective in managing her condition. The doctor could have appealed to the company.
However, with the coupon from GoodRx, it’s more economical to get a prescription at the local pharmacy for $9 instead of completing the extra paperwork and paying a $10 copay.
Historical Trends in Prescription Drug Costs
Most people remembered the Drug Price Competition and Patent Term Restoration Act back in 1984. It’s the law to lower-cost generic drugs.
After the initial patent, competing companies only had to prove the same active ingredients as the brand name drug was in the generic. Then, the prescription drug market brought consumers more affordable drug options.
Prescription Drug Research and Development
Research and development account for about 17% of total spending by the most significant drug manufacturers.
After approval by the FDA, research and development will pretty much cease. Prescription costs relate to income and not on the actual price to develop the drug.
Cancer drugs are big money makers for pharmaceutical companies. For example, some cancer drugs are over $100,000 per year.
It’s anticipated that nearly 2 million new cases of cancer will be diagnosed in 2020. Cancer is a lucrative market for drug companies. It’s no wonder they focus on researching and developing cancer treatments.
The Increasing Cost of Brand Name Prescriptions
Over the last seven years, the cost of brand name prescription drugs has been climbing. Even the most common brand-name drugs are increasing
With the availability of so many drug options, it seems impossible the most frequently used brand name drugs doubled in price over seven years.
It would be reasonable to expect the cost of a drug to lower over time, that’s not always the case. Currently, drug manufacturers are using a rebate system.
Higher list prices rely on rebates, which increases the overall costs to the consumer.
This rebate system works in favor of the prescription benefit manager (PBM), your prescription drug company. Also, the PBM keeps the brand name drug on the formulary.
As a consumer, you pay the higher cost for the brand name drug, and the PBM keeps the rebate from the drug manufacturer.
Solutions to the Rising Cost of Brand Name Drugs
The increase in the amount of money paid by Americans for prescription drugs along with the drug patent protection requires transparency.
Pharmaceutical companies should show the manufacturing cost for drugs to prevent the price gouging we’ve seen over the last decade. America is the only developed country that doesn’t impose a price regulation on the pharmaceutical industry.
Perhaps if the rebate system was gone, and the drug companies must adhere to transparency laws, we could see prescription drug prices level out.