U.S. PIRG's New Report Finds That Rising Drug Costs Are Forcing Americans To Spend More For Less

March 18, 2019

 

For the well-off the United States has the best health care in the world, with some of the most advanced techniques, medicines, and procedures. But the rising costs of prescription drugs are making this care unaffordable for many Americans, and access is suffering as a result. A recent report from U.S. PIRG finds that increasingly expensive drugs are forcing Americans to spend more on health care and frequently get poor quality care despite all the extra money spent.

 

Drug costs represent about 10% of total healthcare spending in the United States. However, that understates the current problem; one in four Americans who take prescription drugs say that they struggle to afford them. And unaffordable drugs hurt health outcomes in a a couple of ways. First, if the drug is so expensive that people cannot buy it, it will do them no good. Drugs don't work if consumers can't afford them.

 

Second, studies show that high drug costs also cause consumers to behave in risky ways that could harm their health. If drugs are very costly, patients may cut their pills in half and only take half their recommended dosage in order to save money, which is bad for their health. They may also ration their medicine, or be unable to pay for other needed expenses like adequate food or housing.

 

The report also found huge variations in drug prices, depending on the location or pharmacy. U.S. PIRG looked at the cash prices for twelve common drugs at over 250 pharmacies in eleven states. Among their findings: consumers could save a lot of money by shopping around (anywhere from $102 to $4,500 per year), switching from brand name drugs to generic drugs saved consumers a lot of money, and large chain pharmacies usually have higher prices than small independent pharmacies.

 

America's drug pricing supply chain is opaque, needlessly complicated, and fundamentally broken. The report observes that "Manufacturers set high list prices and further complicate the picture with a maze of coupons and rebates to supposedly offset those costs. A broken patent system grants exclusive control to drugs for far too long, leading to further abuse. Middlemen, known as Pharmacy Benefit Managers (PBMs), handle drug coverage for most insurers, but sometimes pocket the savings instead of passing them on to patients or the public and private insurers. Moreover, they practice “spread pricing,” adding cost but no value to health care treatments." And consumers pay the price, either through higher premiums or more often through higher drug prices.

 

What are the solutions? The report has a bunch of recommendations: 1) stop patent abuses that delay generic drugs from coming to market. 2) Reform the patent system. 3) Allow importation of cheaper prescription drugs from other countries with FDA approval. 4) Sweeping price transparency throughout the entire drug supply chain. 5) Protection against excessive price gouging, at the state and federal level, and give the government the power to stop outrageous price increases. 6) Fix incentives that lead to higher costs and more expensive drugs.

 

All of these proposals are excellent reforms. We would add two more: 1) regulate PBMs to end their abuses and ensure they actually lower drug costs, and 2) give Medicare the ability to use its immense bargaining power to negotiate lower drug costs. U.S. PIRG's report on the costs of rising drug prices should spur state and federal legislators to pass these proposals and ensure competition and affordable medicines for everyone.

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