Big Picture
Americans have been burdened with high prescription drug costs for ages now, a critical issue closely tied to health outcomes. The United States is the global leader in per capita pharmaceutical spending, with 2021 data showing that the average American is spending $1,432 on prescription medicines and self-medication.
The consequences of these exorbitant prices are both alarming and tragic. Many patients are compelled to skip doses or halve their medication due to financial constraints, which significantly undermines their health and hinders their recovery.
The factors driving these high costs are complex. They include pharmaceutical brand influence and substantial marketing expenditures.
Current regulations often target specific groups, leaving many without enough protection and struggling to afford essential medications. This situation calls for immediate action to ensure that all Americans, especially those facing significant health challenges, can access the medications they need without depleting their financial resources. Addressing these critical issues is vital to establishing a more equitable and sustainable prescription drug pricing system in the United States.
Operative Definitions
- Prescription Drugs: Medications prescribed by a doctor, dispensed by a pharmacy, intended for use by a single individual and regulated by the Food and Drug Administration (FDA) through the New Drug Application (NDA) process.
- Out-of-Pocket Costs: Expenses for medical care that are not reimbursed by insurance.
- Affordable Care Act (ACA): A comprehensive healthcare reform law enacted in 2010, aimed at improving prescription drug affordability and access by expanding health coverage and enhancing drug rebate programs. However, several states have not adopted these provisions yet.
- Medicare Part D: “A voluntary outpatient prescription drug benefit for Medicare beneficiaries is provided through private plans that contract with the federal government”. To be eligible for Part D, participants must be eligible for either Part A or Part B of Medicare, which is available to most individuals aged 65 and older and also extends to those under 65 who receive disability benefits from Social Security or the Railroad Retirement Board, as well as those with End Stage Renal Disease (ESRD).
- Generic Drug: “A generic drug is a medication created to be the same as an already marketed brand-name drug in dosage form, safety, strength, route of administration, quality, performance characteristics, and intended use.”
- Brand-Name Drug: A drug sold under a proprietary name or trademark by a pharmaceutical company and is protected by a patent.
Important Facts and Statistics
- The United States accounted for over 42 percent of global pharmaceutical spending in 2022, making it the largest national pharmaceutical market by a significant margin.
- Pharmaceutical companies in the United States spent nearly $8.1 billion on direct-to-consumer advertising in 2022 alone.
- From January 2022 to January 2023, more than 4,200 drug products experienced price increases, with 46 percent of these increases exceeding the rate of inflation. On average, drug prices rose by 15.2 percent, representing an additional $590 per drug product.
- Generic prescription drugs are typically 80-85% cheaper than brand-name drugs.
Four-Point Plan
(1) Enhance Price Transparency
In the United States, several states have implemented drug pricing transparency laws that require entities in the drug supply chain, including manufacturers, pharmacy benefit managers and health plans, to disclose information detailing significant price increases and the costs of new, high-priced drugs. Despite these efforts, the initial prices of new drugs and overall spending on prescription medications continue to rise, underscoring the need for further action to increase transparency. Enhanced price transparency would benefit all stakeholders, especially patients and their families. Often lacking a professional background, they bear the burden of overwhelming prescription drug costs. Clearer access to the factors driving these prices would also empower consumers and policymakers to make more informed healthcare decisions.
(2) Expand Inclusion Criteria for Lower-Priced Prescription Drugs
Existing laws and regulations cap prescription drug costs with a focus on certain populations. For example, one of the primary goals of the Affordable Care Act (ACA) is to make prescription drugs more affordable for its beneficiaries by capping out-of-pocket costs for specific prescription drugs. However, not all states have adopted these provisions. Starting in 2025, Medicare Part D will implement a new prescription drug law that caps annual out-of-pocket costs at no more than $2,000 once beneficiaries reach the catastrophic coverage phase. While these programs offer essential protections, they do not reach everyone struggling to afford the medications they need. Disparities in adoption across states and stringent requirements for receiving benefits create gaps that undermine the equity and sustainability of the healthcare system. To ensure equitable access and protect the well-being of all Americans, efforts must be expanded to complement existing social programs and address the needs of the most vulnerable populations. This would make prescription drugs in the U.S., which currently have the highest per person spending, more manageable for everyone.
(3) Encourage Greater Competition from Generic Drugs
Evidence shows that increased competition from generic drugs contributes to lower overall drug prices. In addition, a major contributor to high drug costs is the substantial spending on marketing by pharmaceutical companies. A Government Accountability Office (GAO) study found that drug manufacturers spent $17.8 billion on direct-to-consumer advertising (DTCA) for 553 drugs from 2016 through 2018, with spending remaining stable at around $6 billion per year. Nearly all DTCA spending was on brand-name drugs. While marketing increases the exposure of branded drugs, there are more cost-effective alternatives, such as educational resources provided by government agencies, which can offer consumers relevant information without additional costs. Encouraging the entry of more generic brands into the market, along with implementing policies or funding that equip them to compete with well-resourced big brands, would help lower overall market prices and improve affordability.
(4) Implement International Benchmarking
A 2022 study comparing U.S. prescription drug prices to those in other countries found that U.S. prices were 278% higher on average across all drugs and 422% higher for brand-name originator drugs specifically. For every dollar paid in other countries, U.S. consumers pay $2.78. This price gap is widening as U.S. drug prices increase more rapidly than those in other countries. Introducing a benchmarking system to align U.S. prescription drug prices with those in other countries would break down international barriers to price information, allowing all stakeholders in the pharmaceutical industry to access better data. While the current law does not permit the importation of prescription drugs into the U.S. from other countries (except by manufacturers), benchmarking would still clarify how U.S. prices compare internationally, giving stakeholders stronger grounds to negotiate and secure fairer prices.
Why This Initiative Is Important
Unlike other consumer goods, prescription drugs are essential for those who need them. Most people rely on these medications to maintain their health or well-being. It is unacceptable to force people to compromise their health simply because they cannot afford the medications they need.
By refining the existing regulatory framework and providing patients and their families with more equitable access to affordable medications, this proposal seeks to address the fundamental injustice of the current system. Patients are often the most vulnerable stakeholders in the healthcare system, lacking the negotiation power that providers and pharmaceutical companies have. It is essential to develop solutions that allow them to obtain the medications they need at a reasonable price. Every American deserves access to affordable medication without having to sacrifice their financial security.
Acknowledgment: The opinions expressed in this article are those of the individual author.
Sources
Adams, Ben. “The Top 10 Pharma Drug Ad Spenders for 2022.” Fierce Pharma, 1 May 2023, www.fiercepharma.com/special-reports/top-10-pharma-drug-brand-ad-spenders-2022 . Accessed 26 Aug. 2024.
“An Overview of the Medicare Part D Prescription Drug Benefit.” KFF, 17 Oct. 2023, www.kff.org/medicare/fact-sheet/an-overview-of-the-medicare-part-d-prescription-drug-benefit/#:~:text=Published:%20Oct%2017%2C%202023 . Accessed 26 Aug. 2024.
Bosworth, Arielle. “Changes in the List Prices of Prescription Drugs, 2017-2023.” ASPE, 6 Oct. 2023, aspe.hhs.gov/reports/changes-list-prices-prescription-drugs#:~:text=Over%20the%20period%20from%20January . Accessed 26 Aug. 2024.
“Brand Name (Drugs) – HealthCare.gov Glossary.” HealthCare.gov, www.healthcare.gov/glossary/brand-name-drugs/#:~:text=A%20drug%20sold%20by%20a . Accessed 26 Aug. 2024.
Conrad, Ryan, and Randall Lutter. Generic Competition and Drug Prices: New Evidence Linking Greater Generic Competition and Lower Generic Drug Prices Authors Affiliations. Dec. 2019, www.fda.gov/media/133509/download#:~:text=With%20two%20competitors%2C%20AMP%20data . Accessed 26 Aug. 2024.
Division (DCD), Digital Communications. “What Is the Affordable Care Act?” HHS.gov, www.hhs.gov/answers/health-insurance-reform/what-is-the-affordable-care-act/index.html#:~:text=The%20%E2%80%9CAffordable%20Care%20Act%E2%80%9D%20( . Accessed 26 Aug. 2024.
Eisley, Abigail. “How the ACA Has Affected Prescription Access and Affordability.” GoodRx, GoodRx, 20 June 2022, www.goodrx.com/hcp-articles/providers/aca-impact-prescription-access . Accessed 26 Aug. 2024.
FDA. “Generic Drugs: Questions & Answers.” FDA, Mar. 2021, www.fda.gov/drugs/frequently-asked-questions-popular-topics/generic-drugs-questions-answers . Accessed 26 Aug. 2024.
Hausman, Sandy. Why Are U.S. Prescription Drug Prices so High? www.commonwealthfund.org/sites/default/files/documents/___media_files_multimedia_podcasts_cmwf_podcast_transcript_rxdrugs.pdf . Accessed 26 Aug. 2024.
Kaiser Family Foundation. “Status of State Medicaid Expansion Decisions: Interactive Map.” KFF, 7 Feb. 2024, www.kff.org/affordable-care-act/issue-brief/status-of-state-medicaid-expansion-decisions-interactive-map /. Accessed 26 Aug. 2024.
Kurani, Nisha, et al. “How Do Prescription Drug Costs in the United States Compare to Other Countries?” Peterson-KFF Health System Tracker, 8 Feb. 2022, www.healthsystemtracker.org/chart-collection/how-do-prescription-drug-costs-in-the-united-states-compare-to-other-countries/ . Accessed 26 Aug. 2024.
MacKrill, Kate, et al. “The Effect of Rebranding Generic Medicines on Drug Efficacy and Side Effects.” Psychology & Health, vol. 34, no. 12, May 2019, pp. 1470–85, https://doi.org/10.1080/08870446.2019.1616088 . Accessed 26 Aug. 2024.
Mikulic, Matej. “Top Pharma Markets by Country Market Share 2018.” Statista, 24 Mar. 2023, www.statista.com/statistics/245473/market-share-of-the-leading-10-global-pharmaceutical-markets/ . Accessed 26 Aug. 2024.
Mulcahy, Andrew W., et al. “International Prescription Drug Price Comparisons: Estimates Using 2022 Data.” Www.rand.org, 1 Feb. 2024, www.rand.org/pubs/research_reports/RRA788-3.htm l. Accessed 27 Aug. 2024.
NASHP. “Drug Price Transparency Laws Position States to Impact Drug Prices.” NASHP, 10 Jan. 2022, nashp.org/drug-price-transparency-laws-position-states-to-impact-drug-prices /. Accessed 26 Aug. 2024.
NASHP. “Prescription Drug Pricing Transparency Law Comparison Chart.” NASHP, 1 Nov. 2021, nashp.org/state-tracker/prescription-drug-pricing-transparency-law-comparison-chart/#:~:text=A%20number%20of%20states%20have . Accessed 26 Aug. 2024.
Office of Communications. Medicare. 2016, www.ssa.gov/pubs/EN-05-10043.pdf . Accessed 26 Aug. 2024.
“Out-of-Pocket Maximum/Limit – HealthCare.gov Glossary.” HealthCare.gov, 2019, www.healthcare.gov/glossary/out-of-pocket-maximum-limit/ . Accessed 26 Aug. 2024.
Pestaina, Kaye, and Catherine Stamm. “Prescription Drug Importation Gets Renewed Attention.” Www.mercer.com, 21 Feb. 2020, www.mercer.com/en-us/insights/law-and-policy/prescription-drug-importation-gets-renewed-attention/ . Accessed 27 Aug. 2024.
“Pharmaceutical Spending.” OECD, 2024, www.oecd.org/en/data/indicators/pharmaceutical-spending.html#:~:text=2021 . Accessed 29 Aug. 2024.
“Pharmaceutical Spending per Capita by Country 2018 | Statista.” Statista, Statista, 2018, www.statista.com/statistics/266141/pharmaceutical-spending-per-capita-in-selected-countries/ . Accessed 26 Aug. 2024.
“Prescription Drug Prices in the U.S. Are 2.78 Times Those in Other Countries.” Www.rand.org, www.rand.org/news/press/2024/02/01.html . Accessed 27 Aug. 2024.
“Prescription Drugs and Over-The-Counter (OTC) Drugs: Questions and Answers.” FDA, Apr. 2019, www.fda.gov/drugs/frequently-asked-questions-popular-topics/prescription-drugs-and-over-counter-otc-drugs-questions-and-answers . Accessed 26 Aug. 2024.
“Prescription Drugs: Medicare Spending on Drugs with Direct-To-Consumer Advertising.” Gao.gov, 2021, www.gao.gov/products/gao-21-380#:~:text=Highlights . Accessed 26 Aug. 2024.
