November 29, 2022

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Why U.S. prescription drugs are so expensive?

Why U.S. prescription drugs are so expensive?



 

Why U.S. prescription drugs are so expensive?   The price of prescription drugs in the United States remains high. Who is the “drug benefit” given?

 

Many people know that buying prescription drugs in the United States is expensive. So how expensive is it?

 

The latest report by the non-partisan non-profit research organization RAND Corporation shows that the average price of prescription drugs in the United States is 2.56 times that of other Western countries.

 

Why U.S. prescription drugs are so expensive?
Image source: “International Preion Drug Price Comparisons: Current Empirical Estimates and Comparisons with Previous Study” (International Preion Drug Price Comparisons: Current Empirical Estimates and Comparisons with Previous Study)

 

 

In fact, the price of prescription drugs is constantly rising. From 2000 to 2017, spending on prescription drugs in the United States increased by 76%.

RAND expects that with the approval of a new batch of expensive patented drugs, the growth rate of prescription drugs in the next ten years will far exceed other medical fields.

 

 

Brand-name drugs are expensive

RAND researched 4 kinds of brand-name originator drugs (brand-name originator drugs, namely innovative drugs, self-developed drugs with patent rights), generic drugs, biologics and nonbiologic drugs prescription.

 

In the United States, some of the most expensive drugs are brand-name drugs, which can cost thousands of dollars per treatment. They are generally used to treat life-threatening diseases such as hepatitis C and cancer.

 

The survey report shows that the drug price gap between the United States and 32 other countries is so large. Brand-name drugs are the main reason. The price gap has even reached 3.44 times.

 

Overall, 33 countries, including the United States, spend nearly US$800 billion (approximately RMB 5 trillion) on prescription drugs each year. The US accounts for 58% of the total prescription drugs, but only 24% of the total expenditure.

 

The lead author of the report, Dr. Andrew Mulcahy, is a senior health policy researcher at RAND Corporation. He pointed out that we have found that no matter what method is used, the price of brand-name drugs has remained high.

 

Researchers used various methods to calculate the price index of prescription drugs. Although some sensitivity analyses have narrowed the drug price gap between the United States and other countries, overall, the price of prescription drugs in the United States still far exceeds that of other countries.

 

In addition, since the net price of drugs cannot be known, the research uses the manufacturer price of drugs.

In order to reduce the error, the researchers took into account the issue of discounts and lowered the price of medicines, but it still did not affect the results of the above research.

 

In fact, in the United States, generic drugs account for 84% of the total number of drugs sold, but their expenditures account for only 12%.

Moreover, the average price of generic drugs in the United States is even cheaper than those in other countries.

 

“Generic drugs account for the majority of prescriptions issued by doctors, and their prices are relatively low,” Markassi wrote in a statement. “There are only brand-name drugs that consumers need to buy at high prices.”

 

 

 

Multipayer insurance system pushes up drug prices

Thomas Miller is a senior consultant with Nixon Gwilt Law in Washington, DC. He sets and executes strategic goals for companies regulated by the U.S. Food and Drug Administration (FDA). Its clients Including medical devices, pharmaceutical companies and life science support companies.

He said that the US medical insurance system is completely different from that of other developed countries. The US is a multi-payer insurance system.

 

In the United States, several entities will intervene to extract profits from the delivery of drugs to consumers.

 

There is a unique group in the American medical system called “pharmacy benefit managers” (PBMs).

They negotiated drug prices with pharmaceutical companies and included them in health insurance coverage lists, also known as formulaies.

 

Timothy Faust, a healthcare reform advocate, public speaker, and author of “Health Justice Now: Single Payer and What Comes Next,” said, ” Drug benefit administrators and insurance companies usually require pharmaceutical companies to provide benefits in exchange for a quota on the list. There are two forms of benefits: direct discounts and rebates.”

 

“Direct discounting is to reduce the price of the drugs on the list, and giving rebates is very evil. After the drug benefits administrators purchase drugs, they receive rebates from the pharmaceutical companies, and this money is usually divided between the insurance company and the drug benefits administrators. , Consumers rarely enjoy it. In any case, the amount consumers pay is determined by the price on the list.” He said.

 

However, consumers sometimes do enjoy discounts on some drugs, which is another factor that makes it difficult to evaluate the net price of prescription drugs.

 

Foster said, “Pharmaceutical companies sometimes provide discounts directly to consumers, such as GoodRX (Editor’s Note: GoodRx is a prescription drug discount platform in the United States. It has websites and APP programs that can query and compare the prices of various prescription drugs in the United States, and Free drug coupons are provided to the public.) Such companies will collect and issue some discount coupons.”

 

Pharmaceutical welfare managers and insurance companies want to fill their pockets, while pharmaceutical companies have to earn higher profits. The end result is an internal price war.

Pharmaceutical companies increase the prices of drugs on the list, and at the same time increase discounts for drug welfare managers to satisfy them.

 

“What is the’real’ price of a drug? It depends on who is involved,” Foster said, “because every participant is constantly pushing up drug prices.”

 

It is worth noting that relevant data show that the growth rate of the gross price of prescription drugs in the United States is significantly higher than the growth rate of its net price.

In the past three years, the net price of medicines has continued to decline, which means that there is an unfair cost transfer problem, which has caused patients’ out-of-pocket expenses to continue to grow, while the net cost of insurance companies continues to decline.

 

 

The Medicare Plan should be given the right to negotiate drug prices

Brandon Newman, co-founder and CEO of Xevant, a US drug analysis company, said, “In the United States, the pharmaceutical industry is one of the largest industries. Pharmaceutical companies use their huge resources to protect the pharmaceutical industry from The impact of regulatory policy changes. Because once the regulatory policy changes, it may reduce its market share. And this self-protection approach of pharmaceutical companies in disguised form increases the price of prescription drugs.”

 

To reverse the situation, a force strong enough to resist the entire coalition of interests is needed.

 

Dr. Wayne Winegarden is an economist at the Pacific Research Institute (PRI) and director of the PRI’s Center for Medical Economics and Innovation (PRI’s Center for Medical Economics and Innovation). He added: “Based on reality, the United States needs to fundamentally reform the rebate system, not only to solve the problem of cost transfer, but also to make the net drug price more open and transparent.”

 

In addition, other means can be used to exert pressure.

 

For example, ensure that medical insurance covers all people. Foster said that in order to allow consumers to buy cheaper drugs-generic drugs, insurance companies will adjust the structure of the formulary, such as significantly increasing the price of brand-name drugs.

As a result, consumers without insurance have no choice but to let the market manipulate them.

 

Another way is to give Medicare the ability to negotiate drug prices.

The Medicare program accounts for nearly one-third of total retail drug expenditures.

Some experts say that if the Medicare program is given the ability to negotiate, it will help reduce drug prices.

 

According to the survey, Medicare Part D (Medicare Part D)-prescription drug insurance and Medicare Advantage plans spend 73% more on medicines than Medicaid and more than the United States Department of Veterans Affairs. of Veterans Affairs, VA) 80%.

 

Democrats estimate that if the expenditure of the former and the latter two are equal, the insured can save at least US$15 billion (about 971.4 billion yuan) each year.

 

David Mitchell, chairman of the American non-profit organization Patients for Affordable Drugs, said that the Medicare’s ability to negotiate drugs is the basis for lowering drug prices.

 

Kurt Mosley, vice president of the Merritt Hawkins Healthcare Consulting Strategic Alliance, said: “Negotiations can make prescription drugs more affordable for more people. There is no doubt that millions of patients will benefit from it.”

 

In addition, Mosley added that lowering the price of prescription drugs can reduce the overall medical expenditure of the elderly.

If the elderly have access to suitable medicines, the risk of illness can be reduced, and medical expenditures will also be reduced. This is especially true for low-income elderly people.

 

A follow-up survey conducted by Kaiser Permanente shows that 92% of Americans want the Medicare plan to be able to negotiate drug prices with pharmaceutical companies.

Mosley said, “It’s time to take action. If you can’t afford it, even the best medicine in the world will not help.”

 

 

 

 

 

 

 

References:

1. Healthline: Preion Drug Prices in the U.S. Are Twice as High: Here’s Why

2. Healthline: What Would Happen If Medicare Started Negotiating Drug Prices?

3. RAND Corporation: Preion Drug Prices in the United States Are 2.56 Times Those in Other Countries

4. RAND Corporation: International Preion Drug Price Comparisons——Current Empirical Estimates and Comparisons with Previous Studies

Why U.S. prescription drugs are so expensive?

(source:internet, reference only)


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