Drug Pricing Tendency

It’s not a secret that drug prices in the US are pretty high, and most Americans believe that in comparison with Europe and Canada, the cost of the medicines is overpriced. Unfortunately, in recent years, the situation has become even worse as prices continue to show high growth rates. In the United States, the high cost of prescription drugs is of great concern to almost everyone, including patients, physicians, and politicians.

Special research, which was done at the beginning of 2023, showed that while businesses in European nations are compelled to lower costs over time, in the USA, the average cost of registered new pharmaceuticals indicates a general rise of 23%. During the research the costs of 30 innovative medications that were commonly used in the European Union and the United States were compared. Unfortunately, the aggressive tendency of increased prices forces people to find new ways of getting their desired prescribed medications.

The statistics show that the average American has to spend about twice as much money on medicines as people in Europe. For example, between 2019 and 2022, prescription drug spending increased by about 20% in the United States, with an overall increase in total health care spending of 11%. Undoubtedly, some expensive medicines represent major clinical advances, but there are many medicines that are difficult to justify as cost-effective in terms of patient investment. High pricing may cause patients to self-reduce their therapy doses, as well as some patients to stop receiving treatment, in addition to having a negative impact on health care expenses. For instance, 18% of patients over 65 in 2020 were unable to pay for the medications that were previously prescribed to them by doctors.

Having been criticized for unreasonably high prices, drug companies have limited drug price growth this year. As a rule, manufacturers of prescription drugs increase the recommended prices for their products every year. However, in January 2023, pharmaceutical companies raised prices for fewer items than a year earlier, a study by investment firm Raymond James & Associates showed. At the same time, not all companies are holding back drug prices. More recently, Marathon Pharmaceuticals announced that a yearly course of treatment for muscular dystrophy would start at $89,000. Before Marathon was approved to sell the drug in the United States, Americans could buy it in other countries for $1,600 per year. The flurry of criticism forced Marathon to delay the launch of the drug on the market. There were a couple more incidents with some other companies, which reduced the number of potential buyers.

The Reason of Increased Drug Pricing

One of the reasons for the increase in drug costs is the high cost of raw materials and original drugs. But still, it takes only 10% of the general amount of all prescription medications. The main reason for the high cost is that the government enables manufacturers to determine their own prices. Long-term patent protection is also the crucial element that enables manufacturers to demand high costs. Small-molecule drugs automatically receive a guaranteed period of 5 to 7 years before other companies can launch generics on the market, and new biologics are protected from competition for 12 years. There is also another type of exclusive license that gives you the right to protect inventions from competition for 20 years or more. It applies to inventions that are “innovative”, “useful” and “non-obvious”. Despite existing regulatory limits on the duration of patents, their actual duration is much longer. Companies have the right to extend the patent term: if taking into account the long period of consideration of the prescription drug within the framework of registration, up to 5 years; if taking into account half the time for clinical trials, up to 14 years. As a result, the average effective exclusivity period is 12.5 years for widely used drugs and 14.5 years for innovative, first-in-class drugs.

In addition to patent renewals, manufacturers often turn to the practice of patenting marginally improved versions of drugs whose patents are about to expire. As a result, they are able to go from one product to another without any interruptions in sales. To this purpose, an active, and sometimes aggressive, advertising campaign is being conducted among doctors to justify the uniqueness and importance of the new qualities of the drug, even if the changes are essentially insignificant. This practice is possible only because of one more important factor in the US drug supply system: the roles of patients, pharmacists, doctors, and payers are completely separated. Doctors write prescriptions based on their own experience and the advertising promises of companies, not on the cost of therapy, pharmacists sell them; and patients or their insurers pay for the treatment.

Ways to Reduce Drug Prices 2023

The only form of competition that is consistently and significantly able to reduce selling prices for drugs is the entry into the market of generics after the expiration of the patent. In some states, generics can replace 90% of the originator drug within the first year of their release. The level of substitution varies by state, as 30 states have drug choice laws that allow but do not require pharmacists to perform general substitution. In 26 states, pharmacists must obtain the patient’s consent before switching to a drug with a similar active substance. If we turn to the average statistics, then the prices of medicines are reduced to about 55% of the cost of the original drug in the case of the appearance of two generics. Using generics for prescription drugs is a great way to save money and control prices.

Companies are holding back price increases for fear of irritating the public. Producers stick to what they think the market can handle: close to 10% but single-digit growth rates. Also, in order to reduce prices, pharmaceutical companies hope that they will be allowed to negotiate prices directly with the agency responsible for purchasing drugs for state insurance programs.

Of course, it is not possible in the USA to buy prescription drugs without a doctor’s permission and a prescription. But if patients want to save money, they can ask for generics instead of brand-name products. But, still, even effective generics demand a prescription after a thorough medical examination.