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Unraveling Pharmaceutical Pricing in America

Updated: Mar 15

The United States faces a significant and persistent challenge: the pricing of prescription medications. Unlike many other developed nations, the cost of pharmaceutical drugs in the U.S. is notably higher, leading to financial strain on patients and the healthcare system as a whole. This issue has sparked intense debate and drawn the attention of policymakers, healthcare providers and the general public. 


According to a 2021 study by the RAND Corporation, a non-profit global policy think tank, prices of prescription drugs in the U.S. are 2.4 times higher than the average prices of nine other nations. It is also reported that the higher cost is largely related to brand-name drugs: they are responsible for 84% of total drug costs in the United States.


The infrastructure of developing and bringing new drugs to market is costly and time-consuming. Expenses are rooted in investments for research, clinical trials and regulatory approvals. A medication's final price is bound to reflect the complexity of this manufacturing process.


The U.S. healthcare system lacks direct price regulation for prescription drugs. Pharmaceutical companies have lots of freedom to set prices based on market demand and perceived value. The resulting costs present challenges to affordability and accessibility for some, leading to ongoing discussions about the balance between incentivizing innovation and ensuring access to essential medications. Sometimes, profit drives do wonders for innovation but counter accessibility.


In medicine, we need to find an appropriate balance. 


With the absence of direct price regulation for prescription drugs, the government negotiates with pharmaceutical companies, which can actually result in higher drug prices. Like any business, pharmaceutical companies seek to make a profit. The negotiation process between pharmaceutical companies and payers, such as insurance companies, and government programs can result in discounts or rebates, but it may also lead to higher prices as companies adjust their prices to accommodate these negotiations.

Further, companies use the drug patent system to limit competition and keep prices high. When a pharmaceutical company obtains a patent for a drug, it gains exclusive rights to manufacture and sell that drug for a specified period. During this time, they can set high prices without competition, maximizing their profits. 


There have to be reforms, including increased price transparency, changes to drug patent laws and initiatives to promote competition. This can create a more affordable and sustainable pharmaceutical pricing system. I believe that the current pharmaceutical pricing system might incentivize companies to focus on more profitable drugs rather than addressing pressing public health needs. By understanding the factors driving these high prices, we can work towards finding viable solutions to ensure access to essential medications for all Americans, rather than creating barriers to access and affordability. 


The opinions expressed in this article are those of the individual author.


Sources


Ellis, Lisa D. “The Need to Treat the Ailing U.S. Pharmaceutical Pricing System.” Harvard T.H. Chan School of Public Health, 14 March 2019, https://www.hsph.harvard.edu/ecpe/united-states-pharmaceutical-pricing/


“How Much Does the United States Spend on Prescription Drugs Compared to Other Countries?” Peter G. Peterson Foundation, 7 November 2022, https://www.pgpf.org/blog/2022/11/how-much-does-the-united-states-spend-on-prescription-drugs-compared-to-other-countries


Kreling, David H., et al. “Why Are Prescription Drug Costs Rising? (pdf).” Purdue University, https://www.purdue.edu/hhs/hdfs/fii/wp-content/uploads/2015/07/s_wifis15c01.pdf

“Prescription Drug Prices in the United States Are 2.56 Times Those in Other Countries.” RAND Corporation, 28 January 2021, https://www.rand.org/news/press/2021/01/28.html.

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