Recent national polls reveal that 80% of adults believe the cost of prescribed medication is unreasonable [1]. The prices of many lifesaving drugs have skyrocketed; for instance, Mylan’s EpiPen, an emergency treatment for severe allergic reactions, has seen a 600% increase in cost [2]. Unfortunately, such cases are not uncommon as the U.S. government spends around $1,200 per person on prescription drugs—the highest amount globally and 2.56 times higher than comparable countries [1]. The majority of Americans want lower drug prices, yet pin-pointing the exact cause of price inflation is challenging due the complex nature of the problem.
Developing new drugs is a costly endeavor; it is estimated that creating a new drug therapy costs $172.7 million on average and, when factoring in the cost of failure, this average rises to a staggering $515.8 million [4]. While it is a common belief that high drug costs are solely due to research and development (R&D) costs, many researchers contest this claim. A recent study published in the Journal of American Medical Association examined this idea by investigating the correlation between market prices and R&D costs. Analyzing 60 new therapies approved by the FDA from 2009 to 2018, the study found no association between the two variables, suggesting that variations in drug prices could not be explained by R&D investments [5]. However, it's essential to consider that there are two sides to this issue, and maintaining high profit margins might be a plausible explanation.
Another facet of the issue that has captured public attention is the role of middlemen between drug manufacturers and consumers, particularly Pharmacy Benefit Managers (PBMs). PBMs act as intermediaries, negotiating between drug companies, insurers, and pharmacies. Recently, Republicans, Democrats, and drug companies have all pointed fingers at PBMs for raising drug prices [6]. PBMs negotiate rebates from drug manufacturers on behalf of insurance plans and then secure a spot on an insurance plan’s formulary list, which outlines the drugs covered by the plan and suggests safe, cost-effective treatment options. In return for their role in promoting the drug, manufacturers provide rebates that eventually benefit the consumer [7]. However, PBMs keep a portion of these savings as their profit. Lawmakers are currently focusing on the lack of transparency in this process and its contribution to price hikes. PBMs take "a slice of the pie," which could be avoided in a more straightforward system. Furthermore, the PBM market is dominated by three major players—Express Scripts, CVS Caremark, and OptumRx—which control about 80% of the market, thereby stifling competition, according to critics [7].
Overall, the question of why prescription drugs are so expensive is complex. It is easy to point fingers, and the numerous actors in the system blame each other. Surveys of the American public have shown that 65% of Americans are extremely or very concerned about the issue. Additionally, 88% believe that lowering medication costs should be a top priority for candidates running for Congress [8]. This data illustrates that reducing prescription drug prices is a cross-party issue that would benefit the majority of Americans.
Reviewed by Abby Winslow
References
[1] https://www.universityofcalifornia.edu/news/why-are-prescription-drugs-so-expensive-its-not-necessarily-high-rd-new-study-shows
[2] https://www.economist.com/the-economist-explains/2016/09/12/why-drug-prices-in-america-are-so-high?utm_medium=cpc.adword.pd&utm_source=google&ppccampaignID=17210591673&ppcadID=&utm_campaign=a.22brand_pmax&utm_content=conversion.direct-response.anonymous&gad_source=1&gclid=CjwKCAjw5Ky1BhAgEiwA5jGujijkyjR5SyJUagi1VQGCtsDBTInzPpxG_kG1RDZzrXozGWXW7EmFahoCRhMQAvD_BwE&gclsrc=aw.ds
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