Why do prescriptions cost so much

High prescription drug prices are sustained by the fact that treatments for serious disease are not luxury items, but are needed by vulnerable patients who seek to improve the quality of life or to prolong life. A high price is not a barrier.

For serious diseases, patients and their families are willing to pay any price in order to save or prolong life. Drug development is a long and expensive endeavor: it takes about 12 years for a drug to move from preclinical testing to final approval. Although the high cost of drug development is a major issue that needs to be addressed, some experts consider these estimates to be vastly inflated 8 , 9.

Further, the costs of development are inversely proportional to the incremental benefit provided by the new drug, since it takes trials with a larger sample size, and a greater number of trials to secure regulatory approval.

More importantly, we cannot ignore the fact that a considerable amount of public funding goes into the science behind most new drugs, and the public therefore does have a legitimate right in making sure that life-saving drugs are priced fairly. Although nations recognize the major problems posed by high prescription drug prices, little has been accomplished in terms of regulatory or legislative reform because of the lobbying power of the pharmaceutical and healthcare industry.

There are no easy solutions to the problem of high drug prices. The underlying reasons are complex; some are unique to the United States compared with the rest of the world Table 1. One of the main ways to limit the problem posed by monopoly is to limit the duration of patent protection. Current patent protections are too long, and companies apply for multiple new patents on the same drug in order to prolong monopoly.

We need to reform the patent system to prevent overpatenting and patent abuse Patent life should be fixed, and not exceed 7—10 years from the date of first entry into the market one-and-done approach These measures will greatly stimulate generic and biosimilar competition. The approval process for generics and biosimilars must be simplified. A reciprocal regulatory approval process among Western European countries, the United States, Canada, and possibly other developed countries, can greatly reduce the redundancies In such a system, prescription drugs approved in one member country can automatically be granted regulatory approval in the others, greatly simplifying the regulatory process.

This requires the type of trust, shared standards, and cooperation that we currently have with visa-free travel and trusted traveler programs 6. For complex biologic products, such as insulin, it is impossible to make the identical product Biosimilar approval process is more cumbersome, and unlike generics requires clinical trials prior to approval. Further impediments to the adoption of biosimilars include reluctance on the part of providers to trust a biosimilar, incentives offered by the manufacturer of the original biologic, and lawsuits to prevent market entry.

It is important to educate providers on the safety of biosimilars. A comprehensive strategy to facilitate the timely entry of cost-effective biosimilars can also help lower cost. Success is mixed due to payer arrangements, but when optimized, these can be very successful. One way of lowering the cost of prescription drugs and to reduce drug shortages is nonprofit generic manufacturing.

This can be set up and run by governments, or by nonprofit or philanthropic foundations. A recent example of such an endeavor is Civica Rx, a nonprofit generic company that has been set up in the United States. Developed countries should be more willing to use compulsory licensing to lower the cost of specific prescription drugs when negotiations with drug manufacturers on reasonable pricing fail or encounter unacceptable delays.

This process permitted under the Doha declaration of , allows countries to override patent protection and issue a license to manufacture and distribute a given prescription drug at low cost in the interest of public health. The cost of prescription drugs in the United States is much higher than in other developed countries.

The reasons for these are unique to the United States, and require specific policy changes. Unlike other developed countries, the United States does not negotiate over the price of a new drug based on the value it provides.

This is a fundamental problem that allows drugs to be priced at high levels, regardless of the value that they provide. The lack of value-based pricing in the United States also has a direct adverse effect on the ability of other countries to negotiate prices with manufacturers. It greatly reduces leverage that individual countries have.

Manufacturers can walk away from such negotiations, knowing fully well that they can price the drugs in the United States to compensate. A governmental or a nongovernmental agency, such as the Institute for Clinical and Economic Review ICER , must be authorized in the United States by law, to set ceiling prices for new drugs based on incremental value, and monitor and approve future price increases.

Until this is possible, the alternative solution is to cap prices of lifesaving drugs to an international reference price. In addition to not having a system for value-based pricing, the United States has specific legislation that actually prohibits the biggest purchaser of oral prescription drugs Medicare from directly negotiating with manufacturers.

However, the high cost of prescription drugs can take a big chunk out of the monthly budget for most people in the U. It can even hurt those who are able to afford good health insurance plans—not to mention people who opt for Medicare. The price of more than 3, prescription drugs skyrocketed in , with an average increase of Unfortunately, this means some patients are struggling to pay for much-needed prescriptions or, in worse cases, skipping them altogether.

And even without the yearly price hikes, some prescription drugs are jaw-droppingly expensive. And those are just the brand-name drugs with no generics available. Despite how drug costs affect our health on a day-to-day basis, few of us are aware of exactly how the pharmaceutical market works, what drives up already high drug prices, and how to save money on prescription costs.

At a basic level, drug manufacturers call the shots when it comes to how much American patients pay for their prescriptions. In May , the Trump administration finalized a new requirement for manufacturers to include the list price of drugs in their TV advertisements.

This could enhance transparency by helping customers compare the list price of drugs set by manufacturers to their copay set by insurers. The pharmaceutical company will, depending on the drug and buyer, provide a variety of discounts off the list price.

Wholesalers pay the manufacturer the full or close to the full price and make it available to pharmacies. The consumer with health insurance pays an amount that ranges from a fixed co-pay to some percentage of the full list price, depending on the terms of the plan and whether deductibles have been met.

For many patients, out-of-pocket costs can be cut further by coupons the manufacturer distributes through doctors or online, which can make patients likelier to ask for a certain drug by name. When the buyer is the government, discounts are typically standardized. The price Medicare pays for a branded drug that is self-administered taken at home instead of administered in a clinical setting, like chemotherapy is based on the average sales price of that drug across different health plans, taking into consideration all discounts and rebates.

Medicaid gets a better deal: the government insurance program is entitled by law to receive either This complex system becomes even more so, thanks mostly to the power of the PBMs. An insurance plan may cover, for example, three psoriasis drugs, but they are on different tiers. A drug on a preferred tier will have a larger rebate, making it cheaper for patients.

Ideally, drugs would be tiered only according to their effectiveness, and there is certainly an element of that in the mix, especially for patients with Medicare. But a lot of it has to do with which manufacturers are willing to offer the greatest discounts. Price pressure intensifies as companies scramble not to get cut. When the system is working, PBMs do perform a service, getting manufacturers to lower costs. A big reason for this is that PBMs are not incentivized to negotiate for lower list prices as much as they are for higher rebates, since the share of those refunds they keep is a part of how they make their money.

Manufacturers, competing to secure high formulary tiers, know PBMs want juicy rebates. And so they have two options: offer a larger discount and make less money on the drug, or offer a larger discount while also raising the list price of the drug, therefore keeping the net price level. Inside the pharmacy, a white-haired man in a suit tells people he wants to make it stop. Another woman tells him how she spent her twenties in and out of intensive care because of complications from rationing insulin.

The sky-high price of many drugs — and the increasing contribution expected even from insured patients — is a potent subject ahead of the US election. Sixty-two per cent of voters say healthcare is the most or the second most important issue for the future of America. President Donald Trump knows this: at the last election, he pledged to bring down the cost of prescriptions. His opponents, too, see an opportunity to propose more ambitious plans as, three years into his term, Trump has not yet helped patients at the pharmacy counter.

Increasingly, politicians on both sides of the aisle are looking for solutions — to Canada and beyond. But the president and a number of other candidates have proposed legalising mass importation from Canada , while some are also looking to peg US prices to those in other developed countries. He is adamant he would go further than stopgap measures that rely on pricing policies in other countries.

If he becomes president, he would instruct his attorney-general to use antitrust laws to break up industry monopolies and end price fixing. So what you do is you throw these people in jail if they engage in price fixing. Drugmakers — often forgotten in countries where medicines are cheap — loom large in the lives of Americans like those on the trip.

Kathy Segos from Indiana describes how their decisions have dictated her life. She says she has sat in the dark when her electricity was cut off because she chose to pay for insulin to keep Hunter alive. When Hunter discovered this, he tried to ration his insulin, affecting his performance at college. Medical bills are the primary reason why Americans go bankrupt. Have you or someone you know suffered due to soaring drug prices? Share your experience with us in the comments below. If you'd like to share your story privately you can also reach Hannah at hannah.

How politicians attempt to limit drug prices will dictate the way Segos — and many others — vote next year. Almost a quarter of American patients have trouble affording their prescriptions , according to a survey by health research institute the Kaiser Family Foundation. The opaque US health system makes it hard to draw drug-by-drug comparisons with prices abroad.

But more patients are affected by frequent smaller rises from big pharmaceutical companies. In the first quarter of this year, thousands of drugs rose by an average of 10 per cent , according to data compiled by RX Savings Solutions, which sells software that tracks pharmacy prices.

All over the world, drugmakers are granted time-limited monopolies — in the form of patents — to encourage innovation. But America is one of the only countries that does not combine this carrot with the stick of price controls.

Employers foot much of the bill for the majority of health-insurance plans for working-age adults, creating a huge cost for business. They argue that if Americans stopped paying such high prices for drugs, investment in innovative treatments would fall. The medication has been improved since then but there seems to have been no major innovation to justify tripling the list price for insulin, as happened in the US between and Other drugs are more innovative — and their development undeniably expensive.