The Cost of Prescription Drugs

The Cost of Prescription Drugs

Blog Contribution by AARP

Prescription drug prices in America are among the highest in the world. On the campaign trail, President Trump said drug companies were “getting away with murder.” Is that true? Or are these firms the beneficiaries of a system that turns a blind eye to excessive profit-making at the expense of society?

“The simple answer is because there’s nothing stopping them,” says Leigh Purvis, director of health services research for the AARP Public Policy Institute.

Other countries drive a much harder bargain with drug companies. In contrast, the U.S. allows drug companies to pretty much set their own prices.

And as we all know, when demand is high for a product, companies often raise prices. That’s exactly the case for many prescription drugs.

Tens of millions of Americans suffer from conditions like high cholesterol, high blood pressure, and diabetes, all of which can be treated successfully with prescription medications.

More recently, drugmakers have developed game-changing therapies for a host of serious illnesses, including multiple sclerosis, hepatitis C and several cancers. That means people are living longer lives.

The supply of a newer medicine, however, is controlled entirely by the drug manufacturer that holds the patent rights. That gives the manufacturer a monopoly on the drug for the 20-year life of the patent. During that time, it is free to raise the price as frequently and as much as the market will bear. An example: Last February, the price of Evzio, an auto-injected drug that is used to treat an opioid overdose, jumped to over $4,000 — from just $690 in 2014 — just as demand for the medicine was quickly rising.

You may not realize the high cost of medicine if you’re relatively healthy and have insurance to cover those occasional needs for, say, a week’s course of antibiotics. But if you or someone in your family develops a chronic or serious condition, prepare for sticker shock — even if you have insurance.

When Janet Huston was diagnosed with a rare stomach cancer in 2009, surgery seemed to offer a cure. But a year later cancer — called gastrointestinal stromal tumor or GIST — returned with a vengeance. The 66-year-old retired lawyer is now taking an arsenal of drugs, including Gleevec, to contain her tumor and control its symptoms. But the medicines that allow her to lead “a somewhat normal life” cost her more than $17,000 a year, including about $12,000 for Gleevec.

“That’s about 30 percent of my total income,” says Huston, who lives in Des Moines, Iowa, on Social Security and a modest pension from her years as an attorney. “I don’t always take my medication as I should, especially in the months when income taxes and property taxes come due,” she admits.

It’s not just people like Huston who suffer financially. “High prescription drug prices affect everyone,” Purvis says. “Even if patients are fortunate enough to have good health care coverage, higher prices translate into higher out-of-pocket costs, premiums and deductibles. And greater spending by taxpayer-funded programs like Medicare and Medicaid are eventually passed along to all Americans in the form of higher taxes, cuts to public programs or both.”

Put even more simply: One reason that your health insurance rates are high is because you are subsidizing other people’s high-cost medicines. For example, imagine the euphoria if a company developed a breakthrough treatment for Alzheimer’s disease. Let’s say it costs $60,000 a year per patient, and it gets prescribed to every American with the disease. To pay for the medicine,  insurance premiums for each privately insured person in the U.S. would increase by more than $140 per month, based on a new calculator developed by the Biotechnology Innovation Organization.



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