The prices of prescription medications in a US pharmacy store are higher than anywhere else in the world and there are reasons why this is so. The biggest reason for the price factor is that the government backs the monopoly rights of the drug companies. A number of studies have been conducted to identify and solve the drug pricing crisis in the US. This is a complex problem that has a number of factors that contribute to it. US drug pricing affects the patients in many ways too and not everyone can afford healthcare insurance. The pricing of prescription medications is such that even though inflation has raised the prices of other consumer products, drugs cost much more than they did on a comparative basis. For instance, Viagra was $10 when it is was launched in 1998. The same drug currently retails for around $50 to $60.
The drug pricing situation in the US continues to remain complex. Some of the key factors for this fix are explained below.
- Drug makers fix their own prices
Major drug manufacturers of important prescription drugs online have the power to set their own prices, unlike the norm in other countries. Moreover, government entities of national health programs in other countries can negotiate the drug prices or even decide not to cover the drug if it is deemed excessive. In the US, Medicaid covers all medications approved by the FDA and private insurers do not negotiate the pricing either. The price fixing tremendously affects those who cannot afford any of these healthcare plans but who may be required to take certain drugs.
- Monopoly in the market
The US has a system of monopoly that is backed by the government with the logic that drug companies can hold patent rights for a new drug for up to twenty years, along with pricing power, to promote innovation. Often, these patent rights are held by a single company that has the medicine to treat rare diseases. The loopholes in the system enable drug companies to make minor tweaks to the drug formula and therefore extend the patent holding years of the company. The problem that this causes is the delay in the availability of generics, which would help reduce the cost of the brand name drug to some extent.
- Generic drugs take a long time to get approval
All generic variants of brand name drugs are subject to FDA approval before being available in the market. Despite the generic having the same active ingredient as the brand, the FDA can at times take three to four years before approving the generic. The delay in availability of generics keeps the brand name drugs priced high for as long as possible. Besides, the requirement of getting the patient’s consent before switching to the generic can build up overall costs faced by the insurers.
- Drug prices do not match the R&D costs
Drug companies have for long argued that the higher pricing of prescription medications helps in continuing funding research and development endeavors. However, this seems to be untrue as R&D is often funded through federal grants and venture capital. The pharmaceutical companies spend a lot of marketing as well, and this cost is passed on to the customer.
The prescription medication pricing problem in the US is not something that can be fixed easily by just pointing out its flaws. Laws need to be changed if it has to become more customer-friendly. A number of policies will have to be modified in order to see a real change in this problem and help fix the high costs.