In the United States, the high cost of prescription drugs is of great concern to patients, physicians, payers, and politicians. The cost of drugs in the U.S. is highly overestimated compared to European countries and continues to show high growth rates in recent years (Mulcahy et al., 2021). Undoubtedly, some high-cost medicines represent major clinical advances, but there are many drugs that are difficult to see as cost-effective in terms of their contribution to patient care. Moreover, in addition to a negative contribution to health care costs, high prices may lead patients to self-adjust dosages of therapy, and some to even withdraw from treatment. This paper will analyze the causes and consequences of high drug prices in the U.S. market.
The main reason for the increase in drug prices is sourced from the distinction between brand-name originator drugs and generics. Although brand-name originator drugs account for only 28.5% of all prescriptions issued, they contribute to 79.6% of expenditures in value terms (Schondelmeyer, 2022). Schondelmeyer (2022) also supply that across 424 brand-name drug products the prices changed price more than two times in 316 cases and even four times for 23 drug products. Moreover, the cost of drugs in the United States is higher in comparison with other industrial countries due to the government’s allowance of prices set by drug manufacturers.
The experience of European countries, such as Germany, France, and the United Kingdom, is indicative in this case. There, a national health insurance system has been built with the delegation of the right to negotiate prices to the responsible organization, depending on the level of cost-effectiveness of drugs (Smith, 2022). New drugs are rigorously evaluated for efficacy and safety profiles and compared with existing treatments. If a new drug does not have a significant additional benefit in terms of efficacy or safety, its cost cannot be higher than the registered analogues. Thus, European countries control the pricing of drugs reimbursed by the insurance system, optimizing health care costs.
In the U.S., the ability of pharmaceutical and insurance companies to maintain high prices is shaped by two factors: increased government protection from competition and limited bargaining power. The most important aspect that allows manufacturers to charge high prices is the long-term patent protection (Smith, 2022). New small-molecule drugs automatically receive a guaranteed period of several years before other companies can launch generics on the market, and new biologics are protected from competition for years. There is also another type of exclusive license that gives the right to protect inventions from competition for 20 years or more. It is valid for inventions that are innovative, useful, and non-obvious.
Despite existing regulatory limits on the duration of patents, the period of their actual validity is much longer. Companies even have the right to extend the patent term significantly. In addition to patent renewals, manufacturers also often turn to the practice of patenting marginally improved versions of drugs which patents are about to expire. This gives them the ability to seamlessly transition from one drug to another, avoiding sales dips due to expiring exclusivity. Moreover, pharmaceutical companies dare not limited in their ability to set process for drugs: they can also change price for existing drugs which have been on the market for a long time. To this end, an active, and sometimes aggressive, advertising campaign is being conducted among doctors to justify the uniqueness and importance of the new qualities of the drug, even if the changes were essentially insignificant (Berkeley, 2022). This practice is possible only because of the second important factor in the U.S. drug supply system: the roles of patients, pharmacists, doctors, insurance companies, and payers are completely separated. Physicians write prescriptions based on their own experience and advertising promises from companies rather than the cost of therapy, while pharmacists sell them, and patients or their insurers pay.
The only form of competition that is consistently and significantly able to reduce selling prices for drugs is the entry of generics into the market after the expiration of the patent. However, as was previously noted, generic drug launches are delayed as much as possible by originator companies due to patent renewal mechanisms and sometimes additional payments to generic companies for launch delays or cancellations. In addition to the competitive nature of the prescription drug market, the role of public and private payers in driving drug prices high cannot be overlooked.
Certain features of the U.S. market limit the ability of public and private payers to negotiate drug price cuts. For example, in the case of Medicare, federal law does not allow its considerable purchasing power to be used to lower drug prices. Meanwhile, it also requires the widest possible coverage of costs, including all available drugs in a number of therapeutic areas, such as oncology. Congress has included a provision in the law that prohibits Medicare & Medicaid Services Centers from engaging in drug price negotiations or interfering in negotiations between individual drug providers and pharmaceutical companies (Smith, 2022). Similarly, statewide Medicaid is required by law to cover all approved drugs, even if a particular drug has alternatives that have a safer, more effective profile or a lower cost.
My experience with high costs in pharmacy occurred amidst the COVID-19 pandemic when I began volunteering at a community pharmacy. One of the customers was frustrated because they could not afford their medications. I tried my best to help the customer by searching through medication coupons, but it was not enough to cover the majority of the costs. The experience was positive because, ultimately, the customer was satisfied with my willingness to help. However, I experienced a feeling of helplessness for a long time after that incident. Learning about the nature of the high cost of pharmacy drugs provided me with valuable insights into the economics of the pharmaceutical industry. However, as a worker in a fast-paced community pharmacy, the best I can do to help patients is to improve my critical thinking, problem-solving, and teamwork skills. In the future, I plan to work more on multicultural communication skills in internship and volunteering work.
Thus, in this analysis, it was found that high drug prices are largely the result of the US approach to granting a kind of monopoly and exclusivity to drug manufacturers, while limiting price regulation. Such an approach is completely uncharacteristic of the leading industrialized countries., and the experience from Germany, France, the United Kingdom, and other European lands shows how to manage healthcare costs more efficiently. Perhaps, it could be beneficial to review the drug patenting strategies and guidelines to reduce the instances of borderline fraudulent schemes from pharmaceutical corporations and insurers.
References
Berkeley, L. J. (2022). The Inflation Reduction Act aims to lower drug costs — but here’s how Big Pharma could get around it. NBC News. Web.
Schondelmeyer, S. W. (2022). Prescription drug price changes in January 2022. Web.
Smith, C. H. (2022). Why are prescription drugs more expensive in the U.S. than in other countries? GoodRx. Web.