ARTICLE
Why do prescription drugs draw so much attention? Because millions of Americans rely on them, and 8 out of 10 say the cost is “unreasonable.” America spends about $460 billion a year on these drugs, roughly as much as the combined revenues of the top three car makers. That spending flows mainly in two ways: retail drugs sold at pharmacies, and drugs provided by doctors and other clinicians at hospitals, outpatient clinics and long-term care centers. Retail drugs account for about 10% of all health care spending. The doctor-administered drugs add about another 6% to 7%. Between the drugmakers and the patients lie an array of middlemen, who end up masking the true prices through discounts to one another and rebates to patients. What are some of the reasons why prescription drugs are so lucrative, so widespread? Lobbying Ever since the passage of the Medicare Part D prescription drug benefit, pharmaceutical companies have invested heavily in lobbying. No industry group spends more on lobbying — by a long shot. The insurance industry came in a distant second at $158 million on lobbying last year. NOPE/LOPE About a third of all retail prescriptions come at no cost to the patient. Another half have a low out of pocket expense of under $10. In recent years, the average out-of-pocket cost has fallen from about $10 to a bit over $8. But just because the pressure has eased on average doesn't mean the financial burden isn't intense for the relative few. A small number of people and prescriptions accounted for a huge share of the estimated total out-of-pocket costs of $57.8 billion in 2017. “Taxing” Even if most individuals are cushioned from rising drug prices, taxpayers, through the federal government, are not. Spending skyrocketed after the Medicare Part D prescription drug benefit took effect in 2006 and has continued to rise rapidly since. The Shell Game One of the reasons the prescription drug market poses a challenge to lawmakers is because it has many moving parts. On the payer side, there are patients, the government and employers. On the receiving end are drugmakers, wholesalers, health care plans, pharmacies and pharmacy benefit managers, which are firms that negotiate prices on behalf of payers. The money moves around a lot. One policy analyst modeled the flow among all the players to estimate how much money ended up with each one. For 2016, the drugmakers were the top gainers, with $204 billion (on the retail side), but the pharmacies also did well with about a quarter of the total. U.S. Profit A New York-based health policy group, compared a basket of common retail drugs in the United States and several other countries. It calculated the cost in Canada, the United Kingdom, France, Germany, Switzerland and Australia. Germany was the closest match to the American price tag, but Canada, the U.K. and Australia were all about half the cost. Other studies reached the same general result. U.S. spending was about twice as high as the average elsewhere. Broadly, the United States spends more on drugs because prices for many drugs are higher, and patients, usually on the advice of a doctor, take newer, high-cost drugs. Source: https://www.news-medical.net/news/20190508/The-money-and-politics-of-prescription-drugs-What-you-need-to-know.aspx
Why do prescription drugs draw so much attention? Because millions of Americans rely on them, and 8 out of 10 say the cost is “unreasonable.”
America spends about $460 billion a year on these drugs, roughly as much as the combined revenues of the top three car makers.
That spending flows mainly in two ways: retail drugs sold at pharmacies, and drugs provided by doctors and other clinicians at hospitals, outpatient clinics and long-term care centers. Retail drugs account for about 10% of all health care spending. The doctor-administered drugs add about another 6% to 7%. Between the drugmakers and the patients lie an array of middlemen, who end up masking the true prices through discounts to one another and rebates to patients.
What are some of the reasons why prescription drugs are so lucrative, so widespread?
Lobbying
Ever since the passage of the Medicare Part D prescription drug benefit, pharmaceutical companies have invested heavily in lobbying. No industry group spends more on lobbying — by a long shot. The insurance industry came in a distant second at $158 million on lobbying last year.
NOPE/LOPE
About a third of all retail prescriptions come at no cost to the patient. Another half have a low out of pocket expense of under $10. In recent years, the average out-of-pocket cost has fallen from about $10 to a bit over $8.
But just because the pressure has eased on average doesn't mean the financial burden isn't intense for the relative few. A small number of people and prescriptions accounted for a huge share of the estimated total out-of-pocket costs of $57.8 billion in 2017.
“Taxing”
Even if most individuals are cushioned from rising drug prices, taxpayers, through the federal government, are not. Spending skyrocketed after the Medicare Part D prescription drug benefit took effect in 2006 and has continued to rise rapidly since.
The Shell Game
One of the reasons the prescription drug market poses a challenge to lawmakers is because it has many moving parts. On the payer side, there are patients, the government and employers. On the receiving end are drugmakers, wholesalers, health care plans, pharmacies and pharmacy benefit managers, which are firms that negotiate prices on behalf of payers.
The money moves around a lot. One policy analyst modeled the flow among all the players to estimate how much money ended up with each one. For 2016, the drugmakers were the top gainers, with $204 billion (on the retail side), but the pharmacies also did well with about a quarter of the total.
U.S. Profit
A New York-based health policy group, compared a basket of common retail drugs in the United States and several other countries. It calculated the cost in Canada, the United Kingdom, France, Germany, Switzerland and Australia. Germany was the closest match to the American price tag, but Canada, the U.K. and Australia were all about half the cost. Other studies reached the same general result. U.S. spending was about twice as high as the average elsewhere.
Broadly, the United States spends more on drugs because prices for many drugs are higher, and patients, usually on the advice of a doctor, take newer, high-cost drugs.
Source: https://www.news-medical.net/news/20190508/The-money-and-politics-of-prescription-drugs-What-you-need-to-know.aspx