A recent study published in The Journal of the American Medical Association, has examined the multiple factors that contribute to the high cost of prescription pharmaceuticals in the US, including the granting of government-protected monopolies and the constraints on price negotiations. The authors have also put forth some short-term strategies which could be used to get drug pricing under control.
The topic of the review article is a salient one: patients, physicians, governments and payers are all affected by rising prescription drug costs. To explore this issue, Dr. Aaron S. Kesselheim, of Brigham and Women’s Hospital and Harvard Medical School, and colleagues reviewed the medical literature published between 2005 and 2016 which addressed drug pricing policies in the US.
Not surprisingly, the authors found that the US spends more per capita on prescription drugs than any other country in the world. They say this fact is largely attributable to the increasing price of branded drugs, which exceeds rates calculated based on the consumer price index.
In 2013, per capita drug spending in the US was $858 – more than double the average of $400 for 19 other industrialized countries. Prescription medications now account for approximately 17 percent of total personal healthcare services in the US today.
As the US is the only industrialized nation which allows pharmaceutical companies to set their own prices for their drugs, this is one of the factors that the study authors say leads to higher costs. Other countries with national health insurance programs have the power to negotiate prices with drugmakers, and since governments may decide not to cover a drug, manufacturers will be more likely to lower costs.
US Food and Drug Administration (FDA) drug approvals and patents allow pharmaceutical companies to gain market exclusivity for a given product, adding to their ability to charge higher prices. While the availability of generics is steadily increasing in the US, multiple barriers to market competition still exist.
While substantial research and development costs are often used to explain high drug prices, the researchers say that this isn’t the whole story. Their findings suggest that prescription drugs are priced based on what the market can support.
The researchers suggest a number of potential solutions to the drug pricing issue including enhancing market competition through generics availability, awarding government payers more price negotiation power, and rethinking the granting of exclusivity rights. Though potentially difficult to implement, these interventions could make a big difference in the affordability of medications in the US.
“There is little evidence that such policies would hamper innovation, and they could even drive the development of more valuable new therapies rather than rewarding the persistence of older ones,” write the study authors. “Medications are the most common health care intervention and can have a major benefit on the health of individuals, as well as of populations, but unnecessarily high prices limit the ability of patients and health care systems to benefit fully from these vital products.”