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April 23, 2019

What Older Adults Should Know About Prescription Drug Prices

“Prescription drugs did not become outrageously expensive by accident," said Sen. Ron Wyden, D-Ore. "Drug prices are astronomically high because that's where pharmaceutical companies and their investors want them.” (NPR.org)

This is just one quote from meetings recently held between executives from seven giant pharmaceutical companies and the U.S. Senate’s finance committee as they discussed cost concerns about prescription medication. But one quote is enough to demonstrate how heated the conversation sometimes got and, as of yet, the executives haven’t guaranteed that they would make medications more affordable to consumers, stating that the situation is more complicated than it might seem on the surface.

 These executives place the blame for rising prices mostly on how the industry is set up. For example, pharmaceutical companies list prices for medications, but that’s not the amount actually paid to them by insurance companies. Instead, pharmaceutical companies offer rebates to insurance companies and to liaisons known as pharmacy benefit managers who negotiate discounts with employers, with companies like Express Scripts and CVS Caremark, and so forth. And pharmaceutical companies get paid the discounted amounts, not the list pricing.

Pharmaceutical executives say they can’t simply stop offering discounts and rebates. If they didn’t offer them, their products might not even get listed in what’s covered by Medicare Part D or private insurance plans.

These savings aren’t being passed on to people who need the medications, at least not consistently.

This is true, at least in part, because patients still typically pay full price for prescription medication until they meet their deductibles, which means that rebates and discounts received by a pharmacy may not benefit the end users of the medications.

Background of These Discussions

AARP shares how Rep. Elijah Cummings (D-Md.), the new chair of the House Oversight and Reform Committee, pledged to conduct one of the “most wide-ranging investigations in decades” as they delve into pricing practices of the pharmaceutical industry. He notes that companies have been:

  • “aggressively increasing prices on existing drugs”
  • “setting higher launch prices for new drugs”
  • “recording windfall profits”

The goal of the investigation is to find out why prescription drug prices are increasing so rapidly, along with how pharmaceutical companies are using their profits. The end goal is to achieve the lowest prices possible at local pharmacies.

Cummings cited analyses created by AARP that showed the following:

  • 94% of widely used brand-name drugs more than doubled in price between 2005 and 2017
  • Contrast that to average non-drug price increases in 2017 of 8.4 percent
  • This shows that prescription drug prices increased by a rate of four times that of inflation

When comparing prices of individual drugs over the past five years, pharmacy prices increased the most on these drugs, among others:

  • Crestor, used for high cholesterol management
  • Lantus and Victoza, which help people manage diabetes
  • Humira and Enbrel, used to help people with arthritis
  • Revlimid and Gleevec, which are cancer medications
  • Nexium, used for acid reflux management

American Patients First

In May 2018, the Health and Human Services (HHS) Department of the U.S. government announced a plan called “American Patients First” designed to lower pricing. You can follow how this initiative develops here, along with an overview of the first 100 days of this endeavor to lower prescription drug prices.

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