The impact of prescription drug costs on health spending

I am employed by a hospital, and have health insurance through my job. The coverage is comprehensive, and the cost has an employer contribution and employee contribution. I still get confused (though I have the hospital’s own plan) about what is covered and what is not. I can only imagine how hard it must be for my patients.

The prescription plan that comes with this insurance is straight forward: $40 for brand name pharmaceuticals (for ones on the formulary), and $10-$15 for generics. There are some exceptions to this price structure, but it is fairly simple.

I recently switched pharmacies, and had prescriptions transferred to the new big chain pharmacy. One prescription is for a generic medication, the other prescription is for a brand name (old medication that has been around a long time). The new pharmacy did not yet have my insurance information so I was not surprised that when I received an email that my prescriptions were ready I did not see the copays I listed above. Instead, 30 pills of the generic medication were $68 and the branded $148.

When I went to pick up the medications, my 14 year old son was with me. He wanted to know if it was for some new rarified prescription agent as he was shocked at the cost being so high. I explained that actually those prices are low – new drugs, particularly chemotherapeutic agents could be thousands per month.

I was, however, a bit surprised at the price, so when we got home, I looked it up. The sticker price of the one that this big chain wanted to charge me $148 for 30 pills is $84.97 for 90 pills. The sticker price of the generic medication that they wanted to charge me $68 is $15 for 30 pills.

How can we possibly reign in medical costs when our pharmaceutical costs exceed that of any other nation (the excuse being funding research and development but that does not explain why we pay for the whole world’s drug supply) and further pharmacies are taking advantage of us?

I understand profit but this is seriously out of hand. Year after year drug companies enjoy higher profits than any other industry – on the order of 17% compared with 3.1% of non pharmaceutical companies on the Fortune 500 list. The pharmaceutical industry claims to be a high-risk business however business that is consistently so profitable can hardly be considered risky. This profit comes from excess prices, only paid in the United States.

Right now, prescription drug costs are only 11% of healthcare spending but it is the fastest rising sector. With an aging population that percentage is shifting. Thanks to the obesity epidemic we can expect spending on hypertension, diabetes and other complications are going to go up, with medications the mainstay of therapy. We need accountability – from insurers, pharmaceutical companies and pharmacies.

Cathleen London is a physician who blogs at Progress Notes.

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  • Matthew Mintz

    Interesting post.  However, it should have been titled “The impact of retail pharmacies on health spending.” In other words, when you looked up the cost and saw the mark up, this was not the fault of any drug company.  It was the mark up given by your retail pharmacy.  This is not a knock on retail pharmacies. They are in the community, help patients understand their prescriptions, ensure that there are no adverse reactions, and in some cases provide clinical care (minute clinics, flu shots).  However, in looking at the big picture of health care spending, one needs to also look at profits made by a single sector that is distributing 10% of the health care pie. 

    • itsonlypalliative

      regardless of the  mark up, the initial costs are TOO HIGH.

  • http://profile.yahoo.com/BRDB4JQJCWCARQUXHEBJBSGNSE arnold

    All must remember, the United States is the only country, in the world, that does not regulate the pharmaceutical industry. In fact, the pharmaceutical industry bought themselves a carve out from the ACA. Politics trumps health care, all of the time.

  • http://twitter.com/Quanta51 Quanta His

    This is the fault of Government because Gov. is enable to handle the pharmacy industry.

    • itsonlypalliative

      they are one of the largest lobbyist in the nation along with the insurance companies….
      they will ALWAYS get their ways…

  • Elizabeth Belle

    Some of the big chains have the highest drug costs without insurance. I found myself at a walk-in clinic late Saturday night, and the only place that was open to fill my prescription was Walgreens. They don’t take Express Scripts (which I have), and I was charged two and a half times as much for the prescription as what I would have paid at my usual pharmacy (I asked the pharmacy tech where I go out of curiosity). Late hours and being able to fill a prescription when you’re on a cross country vacation is great, but things like this certainly contribute to our absurd healthcare costs.