Prescription drug costs in the United States are a hot topic for patients, politicians and everyone in between, but why are the cost of drugs so wide ranging and unpredictable?
One of the main reasons for high drug prices has to do with patents on medicine. A drug company holds a patent on a drug for 20 years, and during that time it is legal to raise the price whenever they want. This is what happened with the Epi Pen situation at Mylan, which garnered a lot of attention. The company raised the price dramatically because it was the only company producing the drug.
Many drug companies try to extend this patent, and thus their monopoly on that drug, by tweaking the drug so they have to get a brand new patent. By treating the drug as a new product, the company continues controlling the price of the drug and can make it as expensive as they want.
This kind of price flexibility adds to why health insurance costs are going up. Because Medicaid and Medicare are two of the biggest purchasers of drugs, private health insurance premiums have to subsidize drug prices for people using those programs. So when drug prices increase, so do health insurance rates.
Another reason drug prices are so high has to do with the doctors prescribing them. Unlike other marketplaces where there are competing products that drive down prices, drugs don’t give the consumer that option. A patient can’t walk into their doctor and ask for a specific drug, the doctor makes that choice for them. Which means marketing to healthcare providers is a huge part of any pharmaceutical company’s budget, because doctors often prescribe the medicine they are most familiar with.
According to the AARP article, drug companies spend $24 billion a year on marketing efforts for doctors and other health care workers, in hopes they will prescribe that company’s drug more often.