Rising Drug Prices

For years, drug prices have increased at remarkable rates, soaring to new heights that far outpaced inflation. This has caused many in North Carolina to either go without or ration lifesaving medication, which can have dire (and deadly) outcomes.


Prices Keep Rising

According to America’s Health Insurance Plans (AHIP), about a quarter of every healthcare dollar spent goes toward prescription drugs. And it’s easy to see how that’s happening.

An analysis by the Associated Press found that drug makers had raised the price of brand-name products more than 4,400 times in the first half of 2020, compared with 46 price cuts. That’s 96 increases for every reduction.

In 2020 alone, Big Pharma has already hiked drug prices on 2,100 prescription drugs. This happens year after year, and sometimes even twice a year.

AHIP reports a 652 percent price hike for the drug that treats opioid overdoses, a 596 percent increase for a popular antidepressant over a three-year span, and a 248 percent surge in Humira (the world’s most popular drug) over five years.

Big Pharma Profits Go Up

As consumer prices rise and people struggle to afford medicine, Big Pharma’s profits remain off the charts.

Researches with the Journal of the American Medical Association (JAMA) found that between 2000 and 2018, 35 big drug companies received a combined revenue of $11.5 trillion, with a gross profit of $8.6 trillion.

When looking at the money left over after all of Big Pharma’s expenses were taken out, the pure profit was almost twice as high as the 357 non-pharma companies in the S&P 500.

Among the 25 biggest pharma companies, the average profit margins were about 15 to 20 percent. For comparison, hugely successful brands like Target (4.31 percent) and Walmart (1.01 percent) had considerably thinner margins.

Prescription Drug Rebates

In response to increasing prices and record profits, Big Pharma often points to “rebates” as a way they are helping consumers. These rebates, however, pale in comparison to the cost increases associated with the drugs.According to the state’s largest insurer, Blue Cross and Blue Shield of North Carolina, over the past three years, drug manufacturers have increased costs for customers by $360 million, but only increased rebates by $130 million – pocketing $230 million of their cost increases.

In a typical year, Blue Cross NC consumers will pay $1.6 trillion in drug costs, after all rebates are applied.

Johns Hopkins found that drug prices were 3.2 to 4.1 times higher in the U.S. on average than in comparison countries, even with rebates taken into account.

Pharmacy Benefit Managers

A Pharmacy Benefit Manager (PBM) is a company that helps run prescription drug programs for payers like your insurance company. There are a couple key things that PBMs do that benefit consumers.

First, PBMs are responsible for determining what drugs a plan will cover or not, lists that the drug industry calls “formularies.”

You can think of this action as one of the checks and balances that attempts to keep Big Pharma honest. Instead of just allowing drugs backed by high-dollar marketing campaigns to be pushed through, PBMs act as a third party to ensure that medical decisions are made based on science and value.

Beyond safety and necessity, PBMs negotiate prices on behalf of consumers. Those efforts are done in advance—long before the consumer ever gets to the pharmacy counter—and are meant to keep insurance premiums and out-of-pocket costs as low as possible.

Their efforts work. PBMs save payers and patients up to 50 percent on their annual prescription drug and related medical costs compared to what they would have spent without PBMs.

Even with the great work of PBMs, drug prices remain unaffordable for many in North Carolina. They hurt people at the pharmacy counter and increase their premiums.

Lowering health care costs starts with lowering one of the most significant drivers of healthcare spending: high-cost prescription drugs.


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