5 Reasons Prescription Drug Prices Are Going Up For Many Americans

Image courtesy of Joel Zimmer

If you feel like you’re paying more for medication, you’re not alone. A new investigation from our colleagues at Consumer Reports finds that one-third of Americans are seeing higher prices for prescriptions, and one-in-six people chose to avoid getting a prescription filled because of the cost. So what’s behind the increased cost of staying well?

While it would be nice to have a single bogeyman to blame for higher drug costs, it’s a combination of drugmakers and insurance companies pushing the limits on what they can charge patients — and those patients not always fighting back or looking for alternatives.

“Consumers aren’t used to questioning prices for pharmaceutical drugs—nor are they used to shopping around and haggling,” explains Lisa Gill, deputy editor CR Best Buy Drugs, “but they could save themselves a lot of money if they do.”

According to the report, price hikes can generally be attributed to the five following factors:

1: Drug companies can charge whatever they want
While insurance companies and Medicare/Medicaid negotiate the prices they will pay to drugmakers for their products, those pharmaceutical companies are generally free to set their sticker price wherever they choose. Additionally, there are often few restrictions on how much a drug company can raise its price on an existing product. According to IMS Health, a group that tracks drug sales and marketing, the country’s biggest pharma firms made an additional $25.6 billion in 2015 from price increases on brand name drugs.

2: Insurance companies are also charging you more
According to data from the Kaiser Family Foundation, the number of employees enrolled in plans with deductibles over $1,000 has increased from less than 10% to almost 50% in just ten tears.

In addition to facing higher deductibles, Americans are increasingly paying higher monthly premiums, and higher co-pays for expensive drugs. Some plans now offer “co-insurance” on prescriptions, meaning the patient pays a percentage of the drug’s price rather than a flat co-pay.

3: Old drugs are reformulated as costly new drugs
You’ve probably heard stories of big-name drugs suddenly — after years on the market — realizing that their medication could be used for something slightly different than what it was originally intended for. The makers of OxyContin and Viagra have each toyed with the idea of making kid-targeted versions of their big-ticket drugs; not just to reach a new market, but because it can extend the patent on the original drug by several years.

It’s a tactic known as “evergreening,” and, deployed creatively, it could add more than a decade to the existing patent, meaning consumers won’t have the option of a lower-cost generic. Perhaps the most notorious example of evergreening is diabetes drug insulin, which was discovered in 1921 but is still unavailable as a generic in the U.S. because the brand-name companies that make it are granted patent extensions for each improvement.

4: Generic drug shortages can trigger massive price increases
While much of the price-increase issue has focused on brand name and specialty drugs, patients taking lower-cost generics can also be slammed by price increases, especially when there’s a shortage.

An arthritis patient profiled in the CR investigation went from paying $32 for a three-month supply of the generic hydroxychloroquine, to paying $500 for the same quantity. She’s been able to bring that down to $300 with the use of discount drug coupons, but that’s still nearly ten times what she was paying before the shortage — an increase that some patients would not be able to afford.

5: Specialty drugs are costing all of us
We’ve all heard of the sky-high prices for drugs like Daraprim, Solvadi, and Harvoni, and the defenders of the platinum-plated sticker prices on these drugs have brushed off concerns by saying they are for a niche, specialty market.

However, CR points to a report by the Congressional Research Service finding that very expensive drugs that account for fewer than 1% of prescriptions in the U.S. represent about one-third of total drug spending. The spending on specialty drugs is likely to grow, as more than half of the medications approved by the FDA last year were specialty drugs.

For more, check out the full investigation at Consumer Reports.