Consumer Reports just released an investigation into the cost of prescription drugs. The article attempted to answer the age-old question of why Americans pay the highest prices in the world for prescription drugs. It came up with five main reasons which are discussed a bit more below. But some other facts came out which should give us food for thought.
The report stated Americans paid $424 billion for prescription drugs last year and that number is going to continue to rise. It also pointed out that Americans are less able to rely on their insurance plans to cover the escalating costs of prescription drugs. A decade ago less than 10% of American workers had health plans with a deductible of $1000 or more, now that number is closer to 50%. Insurance plans are increasingly changing their formularies and placing drugs in higher tiers, making them more expensive to consumer overall.
The report identified five main reasons drug prices keep rising.
- Drug companies can charge whatever they want. There are no rules, regulations or guidelines to cover how much a drug company can charge for their product.
- Insurance companies are charging more but covering less. Drug companies control their drug costs by raising premiums, increasing co-pays and categorizing drugs into different tiers so they pay less of the cost.
- Old drugs are being tweaked or slightly altered and re-patented as overpriced “new” medication. Through “evergreening” drug companies make small modifications to old drugs and/or find a new use for them to obtain a new patent. This protects them from generic competition and keeps their prices high for a long time.
- Generic drug shortages trigger big price increases. From 2013 to 2014 generic prices increased by 9%. Drug shortages caused by supply chain disruptions or lack of manufacturing capacity can drive up drug prices significantly; and manufacturers may drop production of certain drugs if they aren’t profitable enough.
- Expensive specialty drugs are costing us all. Specialty drugs are very expensive and treat very specific or relatively uncommon conditions. They account for less than one percent of all prescriptions in the US but make up close to 1/3 of prescription drug spending. Insurance plans cannot absorb these high and rising costs indefinitely and will adjust premiums and benefits to deal with them.
Personal importation of prescription drugs is an immediate solution to this problem. Millions of Americans have tried it and they have found they can get the lifesaving and health maintenance drugs they need at prices that can be up to 80% less than price in the US. Congress needs to open up this path to affordable and safe medications and stop stalling. No American should have to worry about choosing between paying rent or buying food and buying the prescription drugs they need.