Why the Prices of Prescription Drugs is Increasing and How to Stop It

by Navya Chamiraju


What you can do:

  • Become a volunteer for the National Patient Advocate Foundation or self-educate using the resources on their website https://www.npaf.org/
  • Choose generic medications over privatized medication to fund the government over private companies. 
  • Contact the Public Citizen’s Access to Medicines Program to get information about contacting your representative to establish a prescription drug affordability review board and maximize participation in the 340B Drug Pricing Program https://www.citizen.org/wp-content/uploads/improving-access-to-affordable-meds-toolkit.pdf

Patients cut their pills in half. They skip doses. People with diabetes don’t take the required amount of insulin, and let their blood sugars spike dangerously before they take an injection, all because they can’t afford it. People in terrible pain from arthritis don’t take the full dose of medication to treat their disease, because they can’t afford it. People are angry. They’re hurting, and they don’t understand how this could be happening to them in the United States of America [1].

The drug prices in the U.S. are abnormally high compared to other countries [1]. Our nation’s healthcare system pays the highest amount for drugs in the world, with 17 percent of our healthcare spending going towards prescription drugs. This percentage is likely to increase over the next ten years as drug costs are expected to exceed the costs of other services such as doctor visits and hospital care. However, this increase of prices does not line up with an increase in the quality of care experienced.

It became easier to hike the costs of drugs after The Bayh-Dole Act was signed into law in 1980. The Bayh-Dole Act allows academic institutions to own drug patents even if they were discovered with taxpayers’ money [3]. While not intended to control drug prices, this law has played a role in reducing the rate of pharmaceutical innovation in the United States. This law also led to a royalty tax on the drugs, increasing the overall price of drugs [1]. Federal law covers the cost of drug discoveries but privatizes the profit as there are no laws limiting the maximum price companies can charge the public or the maximum profits they can make. It takes about 10-12 years to develop a new drug, and so for that timespan, the patented company has a monopoly on the market. Plus, the same companies alter the drug slightly to extend their patent. This tactic called evergreening leads to companies being able to keep their high prices for extended periods of time. However, The Federal Trade Commission could more aggressively enforce antitrust laws, which would lead to a decrease in evergreening and other tactics that allow companies to make excessive profits.

One of the biggest reasons drugs are priced so high is the delayed arrival of generics, which are drugs that follow the same formula and components as mentioned in the patent, according to David Mitchell at Patients for Affordable Drugs. More recently, regulations have been put in place to speed up the FDA drug review process, which can save companies millions of dollars and make a difference in speeding generics to market (4). One of the acts passed is called the CREATES Act, which will stop this gaming of the system by certain drug makers, which is interfering with generics coming to market. The law, which was actually enacted in December 2019 as part of the Further Consolidated Appropriations Act of 2020, gives a new pathway to drug developers, as it lets them obtain samples of brand products that further support their patent applications. This law helps the patent earning process go faster for most products.

Another policy that was meant to further lower drug prices was established by the Affordable Care Act. It was created to conduct studies comparing two or more existing treatments using experimental drugs to make sure a monopoly doesn’t occur. However, no group has completed a single such study after five years and the commitment of over a billion dollars [2]. Usually, managers in pharmacies use this comparative research to receive rebates from drug managers, but due to no transparency in drug pricing, most companies keep a great share of the profits to themselves, meaning the prices of drugs don’t decline.

These high prices have led to a lot of stress in the general population. To compensate for this worry, some states have passed laws prohibiting price gouging, requiring notice for price hikes, and increasing price transparency.There are even private companies interested in reforming the healthcare system. There was a grant from the Commonwealth fund to a firm to report on the reasons behind a rise in drug prices and possible solutions.  This is a prime example of a private company using its money to find the source of the issue and discover which policies cause the most spike to prices in order to create reform.

The solutions that exist now for combatting increasing drug prices have not worked due to failure of execution. For this reason, there are many think tanks and other groups of people coming up with solutions to tackle the issue. The hike in drug prices is a result of the inefficiency of the healthcare system, as the U.S. spends the most money on healthcare, and yet experiences very poor results. This inefficiency was a main reason for the poor quality seen in the healthcare system, and it will take a lot of repair to work towards affordable prescription drug prices.


Works Cited:

Photo credit: https://knowledge.wharton.upenn.edu/article/will-increased-competition-actually-lower-drug-prices/