My Prescription Costs How Much?

Those in generally good health may not realize the steep price of prescription drugs those with chronic conditions, such as type 1 or 2 diabetes, must face.

It seems safe to assume people appreciate having medications available that bring physical relief and extend lives, yet are understandably frustrated when that relief creates financial hardship.

Prescriptions for a single diabetes drug, such as generic metformin, will cost the uninsured $4 to $100 a month, which may be manageable. However, without health insurance a multi-drug diabetes regimen may cost individuals $200 to $500 or more per month; those with insurance can have monthly out-of-pocket drug expenses above $200.

Because They Can

While there are several reasons why drug companies set the price of some medications so high, they do it largely because they can—there is nothing stopping them.

Unlike many other countries that drive hard bargains with their drug companies, U.S. manufacturers can set their own price. They also hold 20-year patent rights on their supplies of newer medications, and during that time are free to charge whatever they believe the market will bear.

Though the uninsured, and those with chronic conditions experience the direct impact of hefty prescription prices, they affect all of us. High costs lead to increased premiums, deductibles, and out-of-pocket expenses even for people with good health coverage. Greater spending by Medicare and Medicaid can also translate into higher taxes, and (or) programs cuts.

Other Price Factors

If consumers, and physicians shopped for medications as we shop for computers or TVs, drug companies would have to prove their new drugs are better than rival or existing ones, generating price lowering competition.

As it stands, most doctors write prescriptions for drugs they are familiar with, and their medication information typically comes from drug manufacturers who spend billions per year marketing to medical professionals.

Prescription prices are also high because:

  • Drug companies can continue their price monopoly over a medication by finding a way to extend the original patent. For instance, they might slightly vary the original medication by creating an extended release version.
  • Medicare is one of the largest purchasers of prescription medications, and they are prohibited by law from negotiating drug prices. In contrast, the Veterans Health Administration can negotiate drug prices, and they pay 80 percent less* for brand name meds than Medicare Part D.
  • Drug pricing has become a complex system involving middlemen who negotiate deals between manufacturers and insurers.

Though the high cost of prescriptions causes some people extreme hardship, drug companies are doing nothing illegal. Pharmaceutical executives say they need to be highly aggressive to meet the demands of investors, and frequently cite the high cost of drug research and development.

High Price Remedies

Despite the complexities involved, experts from various organizations, and policymakers are working to bring the price of medications down by advocating five changes:

  1. Allow Medicare to negotiate prescription prices. This change alone could generate up to $16 billion in yearly savings.
  2. Create a safe system for the importation of less expensive drugs to save consumers money, and put pressure on U.S. drug prices.
  3. Implement transparent pricing that links a drug’s cost with its actual research and development costs.
  4. Distribute research data comparing the safety and effectiveness of all available drugs to create price competition, and eliminate ineffective treatments.
  5. Begin a shift to value-based pricing, where a drug’s cost depends on how well it works, instead of what the market will bear.

While these changes would likely improve our drug cost situation, passing laws that enforce these changes is expected to be a slow, and difficult process.

Source: AARP; Cost Helper
Photo credit: Charles Williams

* As reported by Carleton University in Ottawa, Ontario, and the advocacy group Public Citizen

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