What drives up prescription drug costs?

Prescription drug costs are driven by several factors highlighted by experts:

1. High Development Costs: Creating new drugs involves significant investment, often ranging from $750 million to several billion dollars. This high cost results from the need for extensive clinical trials and regulatory compliance across different regions 1.

2. Monopolies and Market Power: Pharmaceutical companies often hold monopolies, either through delayed entry of generics or new drug introductions that make older drugs obsolete. This market power allows them to maintain high prices 2.

3. Pharmacy Benefit Managers (PBMs): These intermediaries between drug manufacturers and insurance companies are said to inflate drug prices. PBMs negotiate prices and rebates, adding complexity and costs to the supply chain, which are often passed on to consumers 3 4.

   • 

     1

     High Costs of Cancer Drugs

     00:15:55
   • 

     2

     High Drug Costs

     00:27:38
   • 

     3

     Prescription Price Politics

     00:17:13
   • 

     4

     Disrupting Drug Pricing

     00:17:09
   • 

     5

     The High Price of Pharmaceuticals

     00:43:40
   • 

     6

     Drug Pricing Complexity

     00:44:39

4. Lack of Price Value Correlation: In the U.S., drug approval is based on safety and efficacy without considering the value offered. Other countries incorporate value assessments, which can influence drug pricing to better reflect the benefit provided 5.

5. Consumer Willingness to Pay: Especially in critical health scenarios, patients and families are willing to pay high prices for drugs, even with marginal benefits. This demand can sustain high prices as they prioritize the best possible treatment without considering cost 2.

6. Regulatory and Systemic Issues: The drug pricing system is complicated by numerous regulatory barriers and the opaque nature of pricing mechanisms. This lack of transparency hampers effective price competition and consumer understanding of real costs 6.

These elements collectively contribute to the high and rising costs of prescription drugs.