Prescription Drug Prices in the U.S.
Why we pay more than any other industrialized nation and how that affects people's lives
The United States pays more for prescription drugs than any other industrialized nation in the world. Whether this is necessary to allow for further research and development or the result of pharmaceutical companies trying to make as much as possible, it still affects people's everyday lives.
Martine Hackett, a professor in the department of population health at Hofstra University, explained how the pharmaceutical industry works at the most basic level.
“The thing that’s clear to know is pharmaceutical companies for the most part are for-profit institutions, and their goal is to make money for their shareholders,” she said.
Richard Himelfarb, a professor of political science at Hofstra, explained that this for-profit model allows for many advantages when it comes to healthcare.
“The United States is unique because we don't impose price controls. Practically every other industrialized country, to my knowledge, does impose price controls,” Himelfarb said.
Because of these limitations on companies, he explained, those other nations are not able to provide the most current or quickest treatment.
“But in terms of getting what you need in a timely manner, you can't match what we have in this country,” he said.
Graph created by Annabel Hofmann with data from the International Federation of Health Plans
Graph created by Annabel Hofmann with data from the International Federation of Health Plans
Graph created by Annabel Hofmann with data from the International Federation of Health Plans
Graph created by Annabel Hofmann with data from the International Federation of Health Plans
Graph created by Annabel Hofmann with data from the International Federation of Health Plans
Graph created by Annabel Hofmann with data from the International Federation of Health Plans
Graph created by Annabel Hofmann with data from the International Federation of Health Plans
Graph created by Annabel Hofmann with data from the International Federation of Health Plans
Graph created by Annabel Hofmann with data from the International Federation of Health Plans
Graph created by Annabel Hofmann with data from the International Federation of Health Plans
Graph created by Annabel Hofmann with data from the International Federation of Health Plans
Graph created by Annabel Hofmann with data from the International Federation of Health Plans
Research and development costs
The pharmaceutical industry invests lots of money into the research and development (R&D) of new drugs. According to Himelfarb, the high cost of prescription drugs is necessary for these companies to continue investing in the engineering of future medicines and treatments.
“But basically, you've got a window in which you can try to make as much money as you can, because you've hit the jackpot,” Himelfarb said.
This window is 20 years – the length of a patent in the U.S. After that time runs out, generics can come into the market, and the pharmaceutical company loses their monopoly.
Or is that an industry talking point?
However, some argue that this emphasis on R&D is just the industry speaking.
Timothy Dunn, a professor who teaches a class on medical sociology at Salisbury University, called this “regulatory capture.”
“It's when the industry that's supposed to be being regulated by various government agencies, actually, has captured those agencies they have so thoroughly lobbied them and convince them that their particular outlook on things is correct, that the regulatory agency started thinking the same way the industries do,” he said.
Dunn cited a study by the Journal of the American Medical Association saying that pharmaceutical companies spend 20% of their annual revenue on R&D, compared to almost 30% on selling and administrative work.
He added that this 30% includes advertising and lobbying efforts – which prove to be highly effective.
Photo by National Cancer Institute on Unsplash
Photo by National Cancer Institute on Unsplash
Photo by Solen Feyissa on Unsplash
Photo by Solen Feyissa on Unsplash
Marketing strategy geared to doctors
“The main audience, for a lot of pharmaceutical industry promotions, is not only the public, although it is the public, you can see all the advertisements, but it's also the doctors,” he said. Dunn explained that the companies try to convince doctors that their medicine is the best and the one they should be prescribing.
Often the drug these companies are pitching is not particularly different from a previous one for the same disease.
“Because if you have something that's officially a new drug – it's genetically different than its predecessor – you get a patent,” he said. “So, there's no competition.”
This is when companies can attempt to “hit the jackpot,” as Himelfarb said.
"Shopping for lead authors"
Additionally, Dunn said, the pharmaceutical companies attempt to make their drugs seem beneficial. They will design a study, conduct research, interpret the data and write a journal publication in support of a medication.
“And then the industry will go shopping for lead authors who are affiliated with prestigious medical schools and research facilities, preferably academic ones that are not tied to industry.”
Professors often take the offer, Dunn explained, because they need journal publications for promotions and raises.
Powerful lobbyists
Additionally, the pharmaceutical industry has many lobbyists on Capitol Hill that influence policy making. Dunn explained that although lowering the cost of prescription drugs has substantial support, it is very difficult to pass in Congress.
“This is how strong the pharmaceutical industry is. These measures have like 78% public support, right? They can't get it passed, or get just a very, very modest thing passed.”
Real problem affecting real people
No matter what the reason is for the high cost of prescription drugs, it is still a problem that affects people’s lives on a daily basis.
Ed Dombrowski, whose 12-year-old daughter has Type 1 diabetes, said he pays over $500 every 90 days just for her insulin. Without insurance, this would be $3000, he said.
Dombrowksi feels grateful he can afford the cost of getting his daughter the best medicine and care possible.
“I'm fortunate I can absorb these costs. If I had a lower paying job, this would be a financial hardship,” he said. “And I wouldn't want to, you know, give her less medicine or make her life that much harder.”
Both of his kids also need Epi-pens, another prescription drug that costs substantially more in the U.S. than other developed nations. Dombrowski voiced frustration at the cost of Epi-pens and the frequency with which they need to be replaced.
“Does it really expire? Or, you know, does it need to expire every year?”
He also mentioned that you need one for school and one for at home, so the price is essentially doubled. But, the risk you take by not having one is worse.
“You're not going to take a chance on your kid's life and not have this,” he said.
Uninsured or underinsured suffer more
If you don’t have an income that allows you to absorb these costs, the burden is even greater.
Teresa Reid has been prescribed a number of different medications for her Type 2 diabetes. She relies on samples that drug representatives provide to doctors’ offices.
Often, she isn’t on the proper dose because she can’t get the sample of it. She expressed frustration at always having to change medicines and dosages.
“The thing of it is, when those samples run out, you have to go with something else. Then your body has to get adjusted, and they can’t start you at a higher dose; they have to start you at a low dose and then bring you up to the next dose until your body gets adjusted until you get on the right dose. It made it very hard to stay on track.”
At one point, Reid was on a program where she could get a coupon which allowed her to get better medicine for $25 per month. But it ran out after one year, and she had to go back on the cheaper medicines that were not as effective, Reid explained.
Reid said she is constantly fearful and worried about her health because she doesn't have reliable access to her medicines.
“You’re afraid to eat, you’re afraid not to eat.”
She said that she is really appreciative of the medicine and works hard to keep herself healthy by walking and eating healthy.
“The whole time I was on Trulicity, I didn’t just say ‘oh I’m on Trulicity, I can go eat what I want do what I want,” Reid said.
Reid feels the price of prescription drugs is unfair.
“A person that is trying to make it and trying to do right can’t get the medicine they need to save their life,” she said.
Congressional action
To attempt to address the high cost of prescription drugs, Congress passed the Inflation Reduction Act in August 2022. The law capped the price of insulin at $35 per month, limited out of pocket costs and allowed the government to negotiate the prices of around 10 different prescription drugs. However, all of these regulations only apply for people on Medicare.
Himelfarb explained the danger of these types of price controls. He said that the provisions remove funding from drugs that are currently being developed.
“For the things that are out there now, great. You're going to be able to get them to be a lot less expensive. But for things that might be coming five, 10, 15, 20 years down the road, that's going to slow,” he said. “It's going to slow the flow. And that's going to be demonstrably bad.”
Hackett believed there was hope for the future, however. She referenced COVID-19 and the way the government worked with pharmaceutical companies to make the vaccine available to everyone.
“Not only was [the vaccine] made available, but it was free. That really shows you that it is possible to have that partnership, to be able to make something that is necessary available for everyone.
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