Prescription Drugs: The High Costs of High Costs

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May 14th, 2013
Categories: Healthcare Reform

prescription drug high costsThe high cost of prescription drugs is a huge financial burden on patients and can have a negative impact on their health. One-fifth of American adults ask their doctors to prescribe a cheaper medication than the first choice, and 13% of adults 18-64 turn down prescribed medications because of cost.

The increasing utilization of prescribed drugs also has large cost implications on our healthcare industry and payers. From 1999 to 2011 use of prescribed medications has increased 43%, from 2.8 billion to 4 billion. This far outpaces the US GDP growth of 9%. Facing enormous costs, patients across the United States frequently resort to a variety of methods to help manage the expense of treating their conditions; from requesting a lower cost alternative to buying drugs from other countries, or even forgoing the prescription altogether. Some patients also choose to alter the frequency of their medications from what was prescribed. According the Centers for Disease Control and Prevention, these patients have poorer health status and increased emergency room visits, hospitalizations and cardiovascular events.  Not surprisingly, uninsured individuals and those with low incomes are the most likely to go without prescription drugs because of cost.

Recently, a survey of about 120 doctors in a medical journal commented that prices of drugs used to treat life-threatening diseases are astronomical, unsustainable and perhaps even immoral.  They suggested that charging high prices for medicine needed to keep someone alive is profiteering, similar to raising prices of essential goods after a natural disaster. Brand name drugs for example, can enter the market around $30,000/year and triple in price over a 10-year span. New drug competition does not seem to affect price growth of brand name drugs either, as they are typically even more expensive than existing medications on the market.

Drug manufacturers argue that very few patients pay the actual cost of drugs and attribute the high prices to the cost of research and the drug’s value in the marketplace. Costs associated with the development of released drugs include costs for unreleased medications as well, as manufacturers try to cover their expenses and make a profit.  Additionally, patent protection laws give manufacturers exclusive rights to the manufacture and sale of drugs for up to 20 years, adding to the high cost – since no generic form can be sold during patented periods.  Manufacturers also claim to offer their drugs to a number of uninsured/underinsured consumers each year in defense of their pricing schemes.

Over time, private plans and insurers have dealt with the rise of prescription drug costs by increasing out of pocket costs for members, excluding particular drugs from plans, having quantity limits, requiring pre-authorizations, or requiring patients to start treatment with the least expensive drug option. While tiering of prescription drugs and their coverage has both positive and negative effects, it is an incentive for consumers to choose the generic versions of medication over brand-name drugs.

Both Medicare and Medicaid help cover the costs of prescription drugs, but fall short. Medicare Part D outpatient prescription coverage requires extensive out-of-pocket expenses from the donut hole gap, and Medicaid has a variety of differences in each state’s policies on copayments and the number of prescriptions that can be filled. In the future, the Affordable Care Act will put into place a number of changes that should lower drug prices. Prescription drug coverage will be an essential benefit that must be provided in all health plans and the law will increase drug rebate percentages, improve coverage and reduce cost sharing in the Medicare donut hole.