Although brand-name drugs account for only 10 percent of all
dispensed prescriptions in the U.S., they make up 72 percent of drug
spending, doctors note in a paper in JAMA.
Between 2008 and 2015, prices for the most commonly used brand name
drugs surged 164 percent in the U.S., far outstripping the 12
percent gain in the consumer price index, which measures what people
pay for retail goods, Dr. Aaron Kesselheim of Brigham and Women’s
Hospital and Harvard Medical School in Boston and colleagues point
out in the paper.
“High prescription drug prices in the U.S. are due to a combination
of the market exclusivity given to pharmaceutical manufacturers by
patents and other U.S. laws that protect them from direct
competition for years - potentially over a decade -after the drugs
are first marketed, as well as limitations on payors’ ability to
negotiate effectively either because they are restricted to do so by
law or because there is not enough good comparative effectiveness
information available,” Kesselheim said by email.
To assess the forces driving drug costs, Kesselheim and colleagues
reviewed research published from 2005 to 2016 exploring the sources
of drug prices in the U.S., the consequences and possible solutions.
In the U.S., per capita spending on prescription drugs was $858 as
of 2013, more than twice the $400 average for 19 other
industrialized nations, the analysis found.
List prices for the top 20 drugs by revenue help explain this chasm.
Combined, average list prices for these drugs were three times
greater in the U.S. than in the U.K.
Drug prices are higher in the U.S. than in the rest of the
industrialized world because manufacturers set the prices. In many
other countries, regulators negotiate prices or reject coverage of
medications when they consider the price too high based on the
amount of benefit patients might get from the treatment.
High prices can reflect the increasing cost and complexity of drug
development, Kesselheim and colleagues concede.
But in the U.S. they are also the result of a regulatory system that
protects brand name drugs from lower-cost generic competitors,
coverage requirements for government-funded drug benefits and
restrictions on how much public and private insurers can negotiate
drug prices, the authors argue.
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High prices were once limited mostly to brand name drugs for rare
diseases. But drugs for common medical problems like diabetes and
cancer now have high costs, too.
Many new cancer medicines are debuting with price tags exceeding
$100,000 for a course of therapy, the authors note. And the average
price of insulin for diabetes has surged 300 percent from 2002 to
Doctors, too, are part of the problem because they don’t necessarily
consider costs even when comparable alternatives are available at
wildly different prices, the authors note.
This problem persists in part because drug costs can vary by health
plan and not all patients have the same out-of-pocket fees, noted
Stacie Dusetzina, a pharmacy researcher at University of North
Carolina at Chapel Hill who wasn’t involved in the study.
“If the provider and patient had reliable information about the
price of different treatment options then they might consider
prescribing or using the less expensive drug – saving both the
health system and, possibly the patient, money,” Dusetzina said by
One fix to this might be an idea known as value-based pricing, which
weighs both the cost and benefit of medicines. This approach would
marry appropriate prices to lower costs for patients, because higher
out-of-pocket fees are generally driven by steep price increases,
noted Dr. Peter Bach, director of the Center for Health Policy and
Outcomes at Memorial Sloan Kettering Cancer Center in New York.
“But to be clear, I believe that we should not put patients in the
position where they are being asked to make therapeutic tradeoffs
against their own economic ones,” Bach, who wasn’t involved in the
study, added by email.
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