The High Cost of Prescriptions
by Nicole Smith
July 18, 2018
Prescription drugs are an expense that almost everybody has had to deal with. Whether it was that one time you had to get an antibiotic, or a monthly routine, we’ve all done it. For some of us the cost is reasonable while for others the decision to get the drug or pay rent becomes real. Doesn’t it seem that with all the technology and Affordable Care Act that prescriptions should be getting less expensive each year? Why are some of them getting more expensive? Without direct access to manufacturers and a clear understanding of the process, we are getting gouged. Understanding what our options are, what the process looks like, and being aware of what to ask will help us better navigate the overspend on prescriptions.
What makes a drug so expensive?
There are a few factors that play into the cost of a drug – A new brand name drug coming to the market can be very costly while it’s still under a patent or trying to obtain one (this is roughly a seven-year process). These first years are spent working with the Federal Drug Administration to get approval of the intended purpose and dosages; along with testing and research and development. Once approved, a drug enjoys an exclusive timeframe in the market, and creates an opportunity for these companies to advertise to the public and speak to the “newness” and “uniqueness”. By doing so, drug companies are giving permission for the consumers/patients to inform their doctors of what drugs they will be on and why they need to be. “In 2016, the top three ads based on total spending were Lyrica, with $313 million in spending; rheumatoid arthritis drug Humira at $303 million; and Eliquis, a treatment for a type of heart arrhythmia, at $186 million, according to Kantar.” (Appleby, 2017) The amount of money that companies are spending to build awareness requires high prices at the cash register. If a company couldn’t re-coup some of the cost of the marketing, they wouldn’t be able to have a profit and keep their doors open. Patients have very limited understanding of how this increases the costs they pay and the burden it creates in the market for insurers as well as themselves. Current estimates state that 20% of cost is due to marketing.
Another component to high drug costs is that we allow the drug manufacturers to decide on their own pricing; which is unique to America. Other countries set limits to what can be charged for a new drug to the market and allows for discussion if a prescription cost seems too high. As stated in the paragraph above, creating a demand from the public and taking advantage of their lack of knowledge on pricing, guarantees that John Smith needs the new drug; regardless of cost – giving them the ability to price drugs high. “Canada’s Patented Medicine Prices Review Board (PMPRB) requires that a new medication cannot cost more than the median price of the drug in other countries” (Beaugureau, 2017) A lack of government involvement on setting the price of drugs results in rising prescription costs and forces families to decide between a pill to save a life or rent/car payments. For some of these drugs, the cost is 440% higher.
Gleevec (a cancer treatment): $6,214 (per month/per customer) in the United States, compared to $1,141 in Canada and $2,697 in England.
Humira (for rheumatoid arthritis): $2,246 in the United States, compared to $881 in Switzerland and $1,102 in England.
Cymbalta (for depression): $194 in the United States, compared to $46 in England and $52 in the Netherlands. In fact, there is also a generic version of Cymbalta so these prices reflect having a cheaper alternative. (Kounang, 2015)
Recently, manufacturer Mylan (EpiPen) try to set their own pricing, only to have it backfire. In 2009 a pharmacy would pay $103.50 for a set of two pens, and by 2015 the cost had gone to $608.61 – resulting in an outcry from the public and a few new competitors in the market. (Varandani, 2016)The public became vocal about how outrageous this cost is and the increase over a few years – forcing the market to change and offer a few varieties of a generic version – which can be bought as low as $0 copay with some insurances. With enough pressure (and publicity) consumers were able to demand more options and receive them.
Brand Name vs. Generic – What’s the Best
When filling a prescription with your insurance, prescription drugs will fall into different tiers based on how the insurance contracts are set up. It’s important to have a general understanding of how these tiers work (and check with your policy for more clarification) before filling any prescriptions.
Tier 1: this is typically a generic drug.
Tier 2: drugs are normally preferred brand name
Tier 3: drugs will be the non-preferred brand names.
Tier 4: drugs are usually going to be the specialty drugs or high cost drugs.
The price difference between a tier 1 drug and a tier 4 drug can be enough to encourage some people to consider the lower cost generic version; and for a lot of people, generics do the job. For other people, they need to have the brand name drug and then are forced to pay the higher cost of these drugs. We discussed brand name drugs in the first section- so let’s look at generics now.
Generic drugs have the same active ingredients as their brand name counterparts, but the inactive ingredients are not always the same – i.e. the size of the pill or color would be different than the brand name. Both brand name and generic drugs are rigorously tested by the FDA for approval prior to being sold to the public. For this reason, generic drugs cost less. Generic drugs are designed to have “exactly the same dosages, intended uses, effects, side effects, route of administration, risks, safety, and strength as the original drug” (Melissa Stoppler, n.d.). The fear that generics are sub-par or inferior needs to be squashed. These drugs have the same ingredients and are as effective.
A generic drug may cost up to 85% less than a brand name drug, which causes some people to wonder if that drug will be as effective- or safe- as a brand name. Both generic and brand name drugs are FDA approved and safe. The cost difference is going to be seen in the amount of R&D and testing required to create the brand name drug.
What about the Pharmacies – are they to blame?
When we feel the pinch on our wallets, we are always quick to blame the doctors, the pharmacies, or the drug companies… why are they doing this to us? Don’t they know we need our prescription? Yes, they do, however, they aren’t the only ones to point our fingers at. Pharmacy Benefit Managers (PBM - the companies that negotiate and manage prescription services for health plans, large employers, labor unions, pharmacies and drug manufacturers) become the middle man and intercept some of the increased price as well.
Currently prescription costs account for about 10% of the $3.2 trillion in healthcare costs – patients and consumers with high cost drugs or maintenance drugs – will be the first to say that t hey understand these numbers (Konrad, 2017). A PBM’s job is to negotiate the price and availability of drugs to different pharmacies. However, that isn’t always the case. When a drug is sold in a large quantity at a discounted price to a pharmacy, it is assumed that same discount will be passed along to the consumer. We are seeing though, that isn’t usually passed on! When you go to pick up a prescription, the list price matters – especially when you use your insurance card! Say a prescription is listed at $600 and your co-insurance is 20%; but the pharmacy bought the drug at $175. You will still pay 20% of the $600 per your insurance contract - regardless of the discount. Another sneaky thing that PBM’s are doing these days is called a “Clawback” – where a prescription is purchased for less than the copay the insurance company requires the consumer to pay.
While there is little that we can do about these negotiations, being aware of them is key. Make sure that when you’re picking up to ask the pharmacist about the cost with your insurance and the cash price. The cash prices are passed along to consumers and the real place we have some control.
How Do You Afford The Expensive RX?
There isn’t a magic formula for how to get expensive things for free This piece really does become the responsibility of the patient to know their rights and know what questions to ask.
Talking with your doctor when you see him or her about your prescriptions and letting them know what you can afford is a good start. Your doctor won’t know what your budget is and they likely won’t know what your insurance will cover, but the doctor has a general idea of if the drug will be expensive or not.
You can also talk to your pharmacist – they are trapped right in the middle of the good bad and ugly of the prescription market, but they can help steer you in the right direction. The pharmacist cannot change your prescription and they also cannot break the law, so be patient with them while they work with you to find a more reasonable solution.
Ask about alternative options – perhaps your doctor would suggest a change in diet, exercise, or physical therapy? Keeping your mind -and options- open might help you find a solution that works and save your wallet at the same time.
Prescription Helper companies – there are companies out there that will help you locate coupons and discounts. Run a Google search for these companies and try it out – you might find something there that eases the pain.
Know your budget and your plan – if you have tried everything else and nothing is working, you may need to evaluate your budget and make decisions ahead of time. Sadly, until this is all addressed, we will see more people looking to extra income to cover their prescriptions.
