Often when Americans go shopping, the cost of an item is typically at the forefront of their minds. After looking at the price tag, the “can I actually afford this” quandary arises, whether they’re evaluating the need for a box of cereal or a luxury handbag. Conversely, when it comes to healthcare services and prescription drugs, cost will be less of a deciding factor. Often times, the issue of price may not even be brought up until the very end of the transaction, or even upon receiving the service or medication. This cost conundrum prompts us to question why there is price transparency on everyday goods, but not on life-saving medications?
Here is the good news: the public’s awareness of this cost conundrum has increased over the past few years. A recent poll conducted by the Kaiser Family Foundation found that 77% of Americans say prescription costs are unreasonable, up from last year’s 72%. This uptick in public awareness has created support for actions in increasing price transparency for the prescription drug market. We know that it costs money to develop and mass-produce a drug, but is that it? The question still remains: what is built into the high cost of these prescription drugs?
The most obvious factor is one that is seen on a daily basis: advertising. From TV and print ads, coupons, and assistance programs, 9 out of 10 Big Pharma companies spend more on advertising and marketing than research & development, which means 67 cents of every dollar earned goes into advertising and marketing. The U.S. pharmaceutical industry has spent $4.5 billion on direct to consumer advertising, which is the only country in the world besides New Zealand that is allowed to target consumers directly.
In addition, statutory protections for pharmaceutical manufacturers contribute significantly to rising drug costs. One example that helps increase profits is a patent law that gives manufacturers up to a 20-year window to sell their drugs on the market without open competition. This “payoff window” or pay to delay, gives the manufacturer leeway for assuming the risk associated with developing a drug. This prevents generics from entering the marketplace, thus eliminating competition, which would in turn drive costs down. The Federal Trade Commission estimates that Americans spend $3.5 billion more per year on brand-name drugs than generics.
The third element in the hidden cost formula is lobbying. There are 1,266 registered lobbyists in the U.S. that represent pharmaceutical companies, and they spent over $2.3 billion in the last decade. This sum is larger than oil and defense lobbyist spending combined. Each pharmaceutical company spent somewhere between 4 million to 11 million dollars in lobbying. With increasingly powerful lobbying practices, the pharmaceutical industry was able to effectively lobby against the enactment of a Medicare Part D drug negotiation authority as part of the Medicare Prescription Drug, Improvement, and Modernization Act in 2003. This inhibited Medicare to negotiate prices. The practice of large-scale drug negotiation, especially by a government entity, is commonplace in most other industrialized nations, and seen by many as necessary to help consumers obtain accurate and reasonable prescription drugs.
These components add up and all trickle down to the medication price for pharmacies and for the consumer – a 97% increase in how much the average American spent on prescriptions from 1999 to 2009. There is an increase in consciousness in the demand for prescription medication price transparency, and iMedicare is on the forefront of shedding light onto this shadowy landscape. Everyday iMedicare equips community pharmacists with the necessary tools that provide information on Medicare plans, ultimately helping their patients via plan comparisons, which can reduce prescription drug costs for every patient.