Why are medications so expensive in the U.S.?

A recent in-depth report from Medscape took a look at the complex history and causes of skyrocketing drug prices in the United States.

A recent report from the Institute of Medicine found that from 1965 to 2013, the cost of cancer drug therapy increased from $100 to $10,000. The report also noted that Medicare spending on drugs has risen rapidly-from $400 million in 1992 to $7 billion by 1999, and then by another $1 billion in 2000, followed by an additional 26 percent increase from 2001 to 2002. According the report, the increased spending was attributed to the increased volume of new and more expensive medications that replaced older therapies.

Report: U.S. healthcare costs significantly higher than other countries

Cancer drugs have been in the headlines for their pricetags-many costing over $100,000 a year. But other diseases and conditions, like hepatitis C, cystic fibrosis, and multiple sclerosis (MS), are also seeing drug costs rapidly increasing into the six-figure range. For example, the latest drug approved by the FDA to treat MS, Plegridy (peginterferon β-1a, Biogen), is listed at $62,036 for a year’s worth of treatment (although the company offers a program to help with the cost, stating that many patients are eligible for the $0 Copay Program). Lifelong treatment is generally required for MS. In comparison, according to the U.S. Census Bureau, the median household income in the U.S. is $52,046.

Next: Rising costs of ophthalmic drugs

Rising costs of ophthalmic drugs

Eyecare practitioners and their patients are feeling the sting of rising drug costs, too.

“I can’t count the number of calls I’ve received from patients after presenting a prescription I’d written to their pharmacy and subsequently having sticker shock,” says Optometry Times Chief Optometric Editor Ernie Bowling, OD, FAAO. “The response usually goes along the lines of ‘Do you know how much that prescription you wrote me costs, you bald-headed quack?’”

Leslie O’Dell, OD, FAAO, director of the Dry Eye Treatment Center at the May Eye Care Center in Hanover, PA, says rising drug costs and fewer available generic options have impacted how she treats her patients.

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“For example, Lotemax (loteprednol, Bausch + Lomb) used to be a solution, and now they’ve made it into a gel. You can’t get the solution anymore,” she says. “The gel is really expensive for patients and there’s not really a good generic, so they’re forced to buy it.

“It really limits what I can do. The patients go to the pharmacy to pick it up, and then they call you and say ‘I’m not paying for this. What else can you do?’ But there’s really not that many ‘Plan Bs’ for those kinds of patients.”

According to Bausch + Lomb, Lotemax Suspension is available in the U.S. via wholesalers.

“The price that Bausch + Lomb charges wholesalers for Lotemax Gel, called the wholesale acquisition price or WAC, is actually lower for the new product than for Lotemax Suspension,” says Kristy Marks, PR, product manager at B+L. “The variation in cost to the patient of Lotemax Gel is entirely due to differences in managed care plans. We find that most patients have coverage for the product with broad coverage for commercial and Medicare patients. In addition, for commercial plans, we offer many patients co-pay assistance in the form of coupons for any out-of-pocket expense for Lotemax Gel above $30.”

Dr. Bowling recommends the website and app GoodRx (available on iOS and Android devices) which compares prices for all FDA-approved prescription drugs at pharmacies across the country. GoodRx also finds pharmacy coupons, manufacturer discounts, generic options, and more tools to help your patients save money on prescriptions.

Two sides of the argument

The Medscape report points out that some may argue that these drugs are of significant value to society, providing treatments for diseases for which there were none in the past. A drug can take more than 10 years to develop through complicated and expensive process that doesn’t always result in the drug making it to the market.

In fact, Optometry Times sister publication Formulary Watch reported that the costs of developing new prescription drugs skyrocketed 145 percent since 2003.

But the report also notes that critics say pharmaceutical companies spend the majority of their money on marketing and administration, while research and development account for only a small portion.

Next: U.S. spends more than other countries

U.S. spends more than other countries

But, as Optometry Times reported last year, the U.S. is still spending much more on prescription medications than other countries.

For example, for Enbrel (etanercept, Amgen), used to treat autoimmune diseases, the U.S. spends an average of $2,225, while Switzerland spends $1,017 on average. For Humira (adalimumab, AbbVie), used to treat rheumatoid arthritis, the U.S. spends an average of $2,246, compared to $881 in Switzerland. For Celebrex (celecoxib, Pfizer), used to treat pain, the U.S. spends an average of $225, compared to just $51 in Canada. And for Nexium (esomeprazole, AstraZeneca), used to treat acid reflux, the U.S. spends an average of $215-over nine times what the Netherlands spends on average.

The Medscape report says one of the major reason for the pricing disparity is that the U.S. does not have a central or universal healthcare system or agency that regulates across the board cost. Many other countries, like the ones mentioned above, negotiate prices with pharmaceutical companies. Of course, that often means that certain drugs may not be offered in a country due to price.