7 Reasons the Price of Prescription Drugs Is So High in the United States

You don’t have to visit the pharmacy often to know the cost of prescription drugs is both outrageous and on the rise. Even with health insurance coverage, the cost of prescriptions can be crippling for many. 

With an average of 57 percent rise in drug prices from 2006 to 2014, the increase in prices is not your imagination. What is causing the price of prescription drugs to rise so dramatically?

The drug companies would like you to believe the rise in costs is attributed to their research and development costs. The truth is that it does cost a lot of money to develop, test, and take a drug to consumers. 

But the answer is not that reason alone. In fact, many believe the cost of prescription drugs is directly connected to the actions of the drug companies. Read on to learn about the reasons behind the high cost of prescription drugs.  

1. Price Increases

While drug companies want consumers to believe the cost of drugs is related to research and development. The truth is they are raising their prices on existing drugs. 

These are drugs that have been on the market for a long time. Patients are using them in an established manner. But because patients have a connection to the drug, the drug companies know that their profits will increase by raising the prices. 

Patients are already using drugs. They know they are working. The likelihood of a prescription change is lower. So by making a hike in the price, they make more money.

2. Competition and Regulations

In the U.S. drug companies continue to get larger and more powerful. They, therefore, face much less competition.  Their lobbying power also creates a scenario where they have fewer regulations. 

This combination of events makes for drug companies that are powerful and face reduced competition. The less competition they face, the more they control pricing. 

While this scenario might be good for drug companies. It is bad business for consumers who must pay the price put forth by the companies. 

3. Pharmacy-Benefit Managers

Pharmacy-benefit managers work with both drug companies and insurance companies as a sort of middleman. The PBM work with drug companies to set rates for the insurance companies will pay. Then sell to the local pharmacies and set the rates for insurance companies. 

In theory, they should be able to negotiate good prices for insurance companies. They buy drugs in larger quantities, then pass on the savings. 

Unfortunately, that theory has not worked. The RBM does buy in bulk. But before offering the discount to them, the drug companies raise the prices. The consumer never gets the benefit of the discount. 

4. Rebates, Not for the Consumer

Similarly, drug companies offer rebates to hospitals, clinics, pharmacies and doctor’s offices. The drug company sells the drugs to the location. They offer a rebate back from the purchase.

They also give the suggested pricing for the drugs. This doesn’t include the rebates. While the rebates and reduced pricing is in place. The only one benefitting from it are the ones dispensing the drugs. 

The consumer getting the actual prescription is not getting the rebates passed down to them. 

5. Drug Company Muscle

Imagine this scenario as a little like the drug company using their proverbial muscles to control what’s on the market. 

The drug companies offer better “deals” on more expensive drugs. Doctors and hospitals get higher rebates for dispensing high-cost drugs. Those same rebates are not offered for less expensive drugs. 

In effect, the high price drug gets prescribed more because of the rebates. The lower price one gets left behind because it doesn’t get prescribed as the rebates and benefits from the drug companies are not in place.

Eventually, this narrows down the number of drugs available and also drives up costs because of the lack of competition.

6. Drug Safety Versus Price Controls

The U.S. has led the world in developing to market drugs that are changing the face of medicine. Health conditions, like hepatitis C for example, once would have been death sentences. Now with proper pharmaceuticals are curable. 

This takes long term research and development on the part of the drug companies. Many believe that alone drives up the cost of a prescription drug. Just by the nature of how long it takes to research, pass FDA standards before it goes on the market is immensely costly.

In essence, the drug companies must follow all the regulations involved with putting drugs on the market for consumers. 

The problem lies in that there are not any regulations connected to pricing. This means that drug companies can charge the prices they want and they think the market will sustain. Because they are also controlling the level of competition, they can price however they want without any government regulations.

7. Many Hands in the Pot

Pharmaceuticals start out with the drug companies. Yet, many are involved before the drugs actually get to the consumer. Insurance companies, pharmacy benefit managers, doctors, and hospitals all are part of the chain the drugs “travel” through to get to consumers. 

The more groups involved, the higher the price. If you go to your local pharmacy for prescription, you hope for the best price. Yet, the drug companies have often distributed to the PBM who in turn distributes to hospitals, doctors and pharmacies. Any rebates or discounts offered by the drug companies are not being passed on. 

The groups involved distribute the drugs but keep the discounts for themselves. 

When getting a prescription, consumers will save money when they work to cut out the middle man. Many are choosing to get prescriptions, for example, from online sources. This reduces the overhead and extra groups involved which adds to the cost of the drugs. 

For more information about getting online prescriptions, check out this website

High Price of Prescription Drugs

If you need a prescription, you need it. Unfortunately, that puts you in a spot where you have to pay the going rate. Most of the time, that rate is being manipulated by the actions of the drug companies. 

The price of prescription drugs is high, no doubt. Consumers need to be smart and savvy about where they get their prescriptions to save every penny possible. 

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