The rising cost of prescription drugs in the United States has caused wide-reaching consequences for the American people. Between the years of 2022 and 2023, the cost of 46% of prescription drugs has increased greater than the rate of inflation, leaving 1 in 3 Americans unable to afford their medications. To reduce unethical price increases, the Inflation Reduction Act was passed, which requires drug companies to pay rebates if Medicare price increases exceed the inflation rate. In addition, the new legislation caps the annual out-of-pocket prescription costs for Americans with Medicare and allows Medicare to negotiate prices with drug companies directly. While these legislative actions are steps towards lowering the cost of medications for some consumers, many areas within this industry still require attention to influence more substantial change.
What Factors May (Or May Not) Drive the Cost of Pharmaceutical Drugs?
Pharmaceutical companies claim that drug prices reflect the time and cost associated with the extensive research and development (R&D) efforts required to bring a drug to the market; however, this does not paint the full picture. This claim does not adequately defend the cost of drugs, as there is no correlation between the cost of research and development for a drug and the price. Other than R&D, pharmaceutical companies pay a substantial amount of money advertising drugs. Even with high operating costs, these companies are still able to profit billions from consumers.
Pharmacy Benefit Managers (PBMs) have an influence on drug prices by managing the relationship between insurers, drug companies, and pharmacies. The PBM has a role in managing drug costs for insurance companies through negotiating prices with drug companies and pharmacies. Ultimately, they help decide which drugs should be covered and how much patients should pay. With their directive authority in the industry, PBMs play a pivotal role in driving pharmaceutical costs.
In addition, pharmaceutical companies have creative ways to secure more profits. For example, these companies will utilize different methods to keep a patent for a drug they’ve developed. When a pharmaceutical company receives a patent for a drug, they are the only company able to manufacture it, securing an easy way to streamline profits. However, once the patent expires, additional companies can manufacture the same drug and sell it under a “generic” brand. The generic version of the drug is commonly cheaper, and multiple companies can produce it, which creates competition and drives costs down even further. Pharmaceutical companies have been known to use patent law to their advantage by making small adjustments to the drug formulation and filing for an additional patent. This loophole has allowed pharmaceutical companies to maintain market exclusivity of a drug for decades. While the opportunity to receive a patent incentivizes pharmaceutical companies to develop novel drugs, it also serves as a tool to inhibit competition and maximize profits over an extended period.
How to Navigate the Pharmaceutical Industry as a Patient
As a patient, it’s challenging to pick up a prescription your healthcare provider called in, only to find out it will cost you a fortune. In this case, make sure you speak to your pharmacist and provider to understand what your options are. A very easy way to save costs on medications is to use the generic version of the drug, which has the same active ingredients and efficacy. If a generic option isn’t available or is still too expensive, your provider may be able to recommend a different drug that can meet your needs. Next, be aware that each pharmacy may have different prices for the very same drug. Do your research, shop around, and find a pharmacy that carries the drug for a cheaper price. Lastly, seek out coupon savings such as GoodRx and utilize Patient Assistance Programs if you are eligible.
References
Why do your prescription drugs cost so much? - Harvard Health
Changes in the List Prices of Prescription Drugs, 2017-2023 | ASPE
Drug Companies Continue To Hike Prices Above Inflation - Center for American Progress
Commemorating the 2nd Anniversary of the Biden-Harris Lower Cost Prescription Drug Law | CMS
6 Ways to Reduce Prescription Drug Costs Assessed and Endorsed by the MedReport Medical Review Board