A recent Kaiser poll showed that most Americans agree that medications cost too much. In fact, the majority of Americans are more concerned about the cost of drugs than any other health issue facing our nation. While about three-quarters said they could easily afford their medicines, about 20 percent said they have difficulty footing the bill. One in four said they did not fill a prescription within the last year because they couldn’t afford it.
The cause of high drug prices is somewhat complex and hotly debated. While most blame the pharmaceutical companies, there are other players in the mix as well, including the health insurance companies, our government and laws, and the overall state of the U.S. economy.
Most other wealthy nations pay a fraction of the cost that Americans pay for the same drugs. For example, Canada spends about 70 cents for each dollar spent in the United States per person and the United Kingdom spends just under 40 cents. Some of the more expensive and newer cancer drugs are priced 20 to 40 percent cheaper in European countries.
However, many of these foreign countries have centralized or universal health care systems that regulate costs and spending for medical care across the board. Authorities in these countries negotiate drug prices and put restrictions for use on new and expensive medications.
Price negotiation in the U.S. takes place on an individual level with each private insurer negotiating the price of each medication. Presently, the Center for Medicare and Medicaid Service (CMS) is the largest payer for healthcare in the U.S. However, current law prevents Medicare from negotiating drug prices with the makers of pharmaceuticals. This means that Medicare pays for 100 percent of whatever price the manufacturer determines. But, many individuals under Medicare Part D also have a pharmacy benefit program that can negotiate the price of pharmaceuticals.
Health insurance plans have been changing over the last few years, putting more of the financial burden on the members. Higher deductible plans oftentimes keep monthly premiums lower, but lead to more out-of pocket expenses for prescriptions and overall health care.
Pharmaceutical companies state that it is the high cost of researching and developing new drugs that drives up the cost of medications. When developing a new medicine it takes an incredibly long time (10 to 15 years), it is quite costly ($60 million to $90 million), and more drugs fail than succeed. Critics of pharmaceutical companies indicate that only a small portion of the drug companies’ expenditures are used for research and development; the majority of their money is spent in marketing and administration.
In regard to newer and higher priced drugs, the real question that must be asked is “what value does this medication give over other drugs used for the same medical condition?” Many new drugs are just “me too” drugs, meaning they give no added benefit over other less expensive medications in the same class.
However, some newer drugs are the first of their kind. Such is the case with new cancer therapies that cost $100,000 per year and the recently released pills to treat hepatitis C. Since these drugs are unique, the pharmaceutical companies can charge inflated prices.
One benefit to our less restrictive and capitalistic approach in the U.S. is that it encourages research on new drugs. In countries that greatly restrict pricing of all medications, there is little incentive for companies to spend millions on the development of a new medicine.
While some high cost treatments save money in the end (preventing future hospitalizations, further treatments, and loss of work), the fundamental reason for making and prescribing medications is often lost- we treat individuals to allow them to live a quality life. “Medicine is for the people. It is not for the profits” – George Merck, son of the founder of the pharmaceutical company.
The content in this column is for informational purposes only. Consult your physician for appropriate individual treatment. Dr. Reynolds practices Family Medicine in Chesterfield.
