Drug prices have continued their upward climb in the last few years and consumers aren’t happy about it. But unfortunately, their complaints – though mentioned by some presidential candidates – seem to have resulted in no changes thus far.
“It used to be the drug companies only took one price increase a year. Now what they’re doing is taking multiple price increases multiple times a year,” Dr. Steve Miller, chief medical officer at Express Scripts, told the New York Times.
What's more, insurers are passing the burden on to consumers, placing an even greater strain on their wallets. Increasingly, health insurance companies have done this by adopting cost-sharing models, which require consumers to pay more out of pocket for prescription drugs.
Why the Continuous Price Hikes?
In 2015, the average out-of-pocket cost for a brand-name prescription medicine was $44, according to an IMS Health study released in April. This number has increased by more than 25% since 2010; what’s contributing to the rise is “the increased prevalence of health plans with pharmacy deductibles, co-payments and co-insurance,” according to the IMS Health research.
Among the more egregious examples: drug manufacturers Turing Pharmaceuticals and Valeant Pharmaceuticals International acquiring exclusive rights to relatively inexpensive drugs and implementing astronomical price hikes. “Turing expected to book $200 million by raising the price of Daraprim, an antiparasitic used for a rare infection, by 5,000%, according to company documents released by Congressional investigators,” Reuters reports.
Drug manufacturers dispute that price rises are capricious and just to boost profits. For starters, many have claimed that the extreme price hikes implemented by Turing and Valeant definitely aren’t the industry norm. They’ve also pointed to research and development costs, along with expenses incurred to “pay for clinical trials to broaden the use of approved drugs,” notes Reuters. While the costs are steep, drug makers are confident the investment is worthwhile since their medications may help consumers avoid lengthy hospital stays.
The Problem with Cost-Sharing Plans
Pharmacy deductibles and co-payments are usually disclosed in your policy’s literature, so you know what to expect when you head to the pharmacy to pick up your drugs. But that’s definitely not the case with co-insurance, and apparently, this trend is becoming more common among insurers.
A study from the Kaiser Family Foundation revealed that “patient cost-sharing rose by 77%, from an average of $422 in 2004 to $747 in 2014. During that period, average payments by health plans rose 58%, from $2,748 to $4,354. This reflects a modest decline in the average generosity of insurance – large employer plans covered 86.7% of covered medical expenses on average in 2004, decreasing to 85.3% in 2014.” While these figures concern overall healthcare costs, prescription drugs are definitely a factor.
Generics to the Rescue
Fortunately, there are generic products on the market to help you avoid the rising costs. Generic prices have remained constant at $8 per prescription since 2010, according to IMS Health. However, if your condition requires prescription drugs that don’t have generic alternatives, you will have to find other ways to offset price hikes (see more on this, below).
Keep in mind that many generics have not yet been approved by the Food and Drug and Drug Administration (FDA). Since these drugs help lower consumer costs, the delays in approvals have brought the wrath of lawmakers down on the FDA. The agency claims to be catching up, however, thanks to reforms instituted in 2012 that have significantly reduced the backlog, notes the Wall Street Journal.
No Help from Congress?
Lawmakers have held several hearings in the past year to address price hikes, but no changes have resulted thus far. One theory is that price hikes are partly because pharmaceutical companies want to rake in all the income they can, under the assumption that at some point Congress will put its foot down.
“When you see this type of very aggressive pricing action across many products, then you start to scratch your head and say, is this the industry preparing for a more challenging price environment? There’s just a general fear of the unknown,” Geoffrey Porges, author of an analysis by the investment bank Leerink Partners, told the New York Times.
How to Fight Back Against Rising Drug Costs
If you have a cost-sharing pharmaceutical plan, you can try to negotiate the rate to curb the costs billed by your insurer. If you don’t have insurance, your options include requesting a price break on the grounds of financial hardship, enrolling in a discount plan or using coupons or vouchers from drug manufacturers to help lower costs. (See also Prescription Drugs: How to Spend Less on Them and 7 Ways to Save on Prescription Drugs.)
The Bottom Line
Despite pushback from Washington, from financially strapped consumers and even from presidential candidates, pharmaceutical companies continue to raise the prices on drugs. However, there are several ways to soften the blow to your wallet, whether or not you have health insurance. To date, Congress has not taken any measures to put an end to the frequent price hikes. Whether this will change once a new President and Congress are elected remains to be seen.
You may also be interested in Keeping Drug Prices Down When You’re Retired.=