Why Are Prescription Drugs So Expensive?
The cost of prescription drugs is uniquely high in the U.S., even for those with health insurance. While the reasons for these costs are complex, the leading causes include the following:
- A lack of single-payer healthcare means the U.S. government has less negotiating and regulatory power to lower the costs set by drug manufacturers.
- The one-two-punch of Covid-19 and rising inflation has significantly disrupted the supply chain, skyrocketed the demand for pandemic-era drugs, and stressed the healthcare system.
- Drug manufacturers also commonly charge more to cover the research and development (R&D) and patenting process required for name-brand drugs, and to make up for a lack of competition and generic alternatives that could help lower drug costs.
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Bureaucracy
It would require an overhaul of the bureaucratic system that governs drug prices in order to pay less for prescriptions in the U.S.
Lack of Single-Payer Healthcare
Many other countries offer single-payer healthcare, which means the government pays the majority of healthcare expenses for citizens. Single-payer countries can better leverage themselves against drug manufacturers when it comes to negotiating lower drug prices. Without a single-payer healthcare system in place, the U.S. allows multiple private insurers to do its bidding, weakening its position to negotiate successfully.
Lack of Regulation
The U.S. also lacks the regulation to protect consumers by capping the cost of high-priced drugs. Many other countries employ regulatory systems, such as Canada’s Patented Medicine Prices Review Board and the European Medicines Agency, to review and approve the cost of new drugs entering the market. Such agencies can also help negotiate discounts and price caps for high-cost and experimental drugs, whereas U.S. drug manufacturers set their own prices at will.
Inflation
The cost of prescription drugs is currently outpacing the rate of inflation. AARP’s 2021 Rx Price Watch Report determined the prices for common medically necessary medications increased by nearly 3% from 2019 to 2020, whereas the rate of inflation was only 1.3% during this period. Instead of lowering drug prices to help consumers offset rising inflation rates, manufacturers disproportionately raise prices for new and existing drugs, especially those in high demand.
Covid-19
The early stages of the Covid-19 pandemic presented an immediate strain on global healthcare systems, but the sustained ripple effects are still transforming healthcare as we know it today.
Supply Chain Disruptions
Covid-19 disrupted the supply chain of critical prescription medications, leading many manufacturers and third-party sellers to engage in price-gouging or upselling practices. With indefinite lockdowns becoming commonplace worldwide, manufacturers could not get life-saving medications to healthcare facilities or pharmacies for broad distribution. Any suppliers who did see an opening to ship their product could set their own prices in an era of desperation.
Increased Demand for Some Drugs
As the pandemic continued to infiltrate the furthest corners of the world, physicians and scientists honed in on medications to treat the symptoms of Covid-19. With the global supply chain already struggling to deliver product, the demand for existing medications that could be used to treat Covid-19-related conditions such as asthma, emphysema, or respiratory disease surged, along with their prices.
Strains on the Broader Healthcare System
Covid-19 put a heavy strain on the broader healthcare system, including a permanent hike in prescription drug costs. Hospitals in the U.S. continue to struggle with recruiting and maintaining staff, supply shortages, and space limitations since the height of the pandemic. Medications used to treat Covid-19 symptoms and related conditions still fetch a high price today, even as healthcare professionals try to mitigate costs in other areas.
Drug Manufacturers
Drug manufacturers ultimately control the cost of their products for consumers. Drug companies may incorporate R&D costs, exclusive patents, and their monopoly of the market into their price-setting process.
R&D Costs
Drug manufacturers often cite long-term, comprehensive R&D as a costly expense that drives up prices for consumers. While drug manufacturers build extensive testing and trials into the R&D process for name-brand drugs, they typically spend less on developing generic alternatives, which could save consumers money on their prescriptions.
Patent Concerns
Many name-brand drug manufacturers hold exclusive patents on their products, limiting competitors’ opportunities to develop identical or similar medications as generic alternatives. Some pharmaceutical companies employ teams of legal professionals solely to carry out their patent process, threatening legal action against any competitors offering a more affordable version of their drug.
Lack of Competition For Some Drugs
A lack of competition among manufacturers of certain drugs can lead to higher drug prices. For example, suppose your doctor tells you you must start taking a particular life-saving allergy or blood pressure medication, and there is only one manufacturer of that drug. In that case, that company has a monopoly on selling that product. By contrast, competition drives a choice of options, such as generic alternatives at a lower cost.
What Are The Best Ways To Save On Prescription Drugs?
- Consider a mail-order or online pharmacy. Some mail-order pharmacies offer discounts for refilling prescriptions in advance or in bulk, especially generic medications. Always make sure the pharmacy is a reputable service provider, especially if operating exclusively online. Keep in mind that is illegal to purchase prescriptions online from retailers outside of the US.
- Purchase medication in bulk, whenever available. Many insurers offer discounts for buying a 90-day supply of medication at a time; however, this may require pre-approval through your insurance policy and/or a new prescription refill from your medical provider.
- Confirm your medication is covered by insurance. Depending on how critical prescription drug coverage is for you, it might be worth it to switch insurance providers if yours does not cover the medications you need.
- Always ask for the generic version of your medication. Many insurers automatically default to the generic version of a popular medication; however, others may do so only at the patient’s request. Most states require that pharmacists provide generics when available. However, you may want to consider shopping around for your medication at different pharmacies as the cost of drugs may vary by retailer.
- Get on a patient assistance program for brand-name drugs. By contrast, in some cases you can receive discounts directly through the manufacturer if you forgo the generic version for the original name-brand drug.
- Inquire about coupons at your preferred pharmacy. You may be able to save money on select prescriptions as a frequent customer or through other pharmacy-sponsored coupons.