According to a Chicago Tribune article, in 2010 the average Rx cost for the 50 most popular generic medications was $13.14. By 2014, that average cost rose to $62.10, which was an astonishing 373% increase (Catamaran, a Schaumburg based PBM). A Pembroke Consulting analysis of federal data shows the price pharmacies paid for generics over past year has greatly increased and that about 11 generic drugs have more than doubled in acquisition costs for pharmacies in the past year. Overall, U.S. spending on prescription drugs rose 13%, to $374 billion in 2014. This was the largest percentage increase since 2001.
Understanding Prescription Cost Increases
There are many different factors contributing to increases in costs. The increase in cost for prescriptions applies to both generics and non-generic medications. For example, pharmacies paid anywhere from 10% less to 60% more for carbamazepine, an epilepsy drug, depending upon the dose. This resulted in pharmacies increasing costs to balance out the amount they were now spending to buy the medications in the first place. Another cause for the increase in spending was due to demand for an “expensive new breakthrough hepatitis C treatment” (Business Insider, 4-14-15). Also contributing to the increased spend is demand for newer cancer and MS treatments, as well as price increases on branded medicines and the entry of a few new generic versions of big selling drugs.
Prescription drugs filled through Medicaid increased under the ACA at an overall rate of 17%. In those states with expanded Medicare eligibility under the ACA, the increase was 25%.
Some other practical factors include raw material shortages and a lack of market competition to lower prices. At times, drug manufacturers will discontinue a line because of other manufacturers, which results in pricing pressures. Manufacturers also feel pressure to specialize product lines and consolidate through M&A’s, which creates even more pricing power for remaining manufacturers.
Finally, as medicine advances and drugs become more expensive and difficult to imitate, fewer companies are willing to invest in making generic versions of brand name drugs that move off patent protection. The lack of generic drugs naturally results in higher drug prices.
Supporting Community Wellness
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