It’s a challenge to find a neutral source of information about prescription drug prices. Articles range from thinly veiled PR attempts by the pharmaceutical industry to economic mumbo-jumbo to ideological agendas written by political publications.
So who has the facts? And how inflated are prescription drug prices?
It Takes A Scandal
By now, you’ve probably heard about the drug price-gouging scandal involving former Turing Pharmaceuticals CEO, Martin Shkreli. Shkreli boosted the cost of a drug his company acquired (rather than researched and developed) by a whopping 5,000% for no apparent reason.
The internet responded by doing what it does best: it shrieked with outrage. Shkreli lost his job, which some considered a victory. But the more meaningful result of the price-gouging was the start of a public conversation about how much prescription drugs should cost.
Are Prescription Drug Prices Actually High?
Some big pharma executives are giving damage-control interviews to refute the idea that they arbitrarily increase profits like Shkreli did. But, by almost any measure, prescription drug prices in the US are high. Let’s take a look at some cold, hard facts about current prescription drug prices. According to the 2013 AARP Public Policy Institute’s Rx Price Watch Report:
- Retail prices for specialty prescription drugs increased by an average of 10.6% while the inflation rate for the same time period only rose 1.5%.
- The average annual cost for one specialty drug was over $1,100 more than the US median household income, over twice the cost of the median income of a Medicare recipient, and almost three times higher than the average social security benefit.
- Cancer drug prices increased tenfold between 2000 and 2012.
- It’s not just specialty drugs that have risen in price. The price of brand name drugs has risen 43% since 2010.
- Even generic drug prices have risen between 100% to 1,000% between 2013 and 2014.
What’s Behind the Increasing Drug Prices?
There are several factors that can influence higher drug prices, like:
- Recent and ongoing consolidation of drug companies, which leads to less price competition.
- A pharma company’s profit faltering due to a lack of market diversification.
- Absence of price intervention by the US FDA which requires fewer hurdles to market than many European drug agencies.
- Current drugs being priced to fund the research and development of future drugs long after their own R&D has been recouped.
- Companies increasing the pricing of patented drugs to compensate for the recent expiration of a valuable patent.
The Consequences of Inflated Prescription Drug Prices
Despite what pharmaceutical companies may say in the press, high drug prices aren’t an endangered species. Instead, rising prices are becoming the norm. According to the AARP report, if rising drug prices continue, it will eventually impact all Americans in the form of higher healthcare premiums, higher taxes, public program cuts, and poorer health outcomes. Staying healthy may soon become a luxury.
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