Skip to comments.Even as Prescription Drug Volume Stagnates, Prices Soar.
Posted on 04/18/2016 4:17:41 PM PDT by Lorianne
Total US spending on prescription drugs in 2015, at the manufacturers level and as measured by invoice pricing, jumped by 12.2% to $424.8 billion, after having already soared 14.2% in 2014! A two-year increase of 28%!
So youd think wed get some results for all this moolah. But no.
This $424.8 billion in prescription drug spending at invoice pricing isnt based on what Americans or their health insurers pay. According to IMS Health, which released the report, it reflects invoice pricing by drug companies to distributors. It includes neither price concessions by drug companies nor the mark-ups and additional costs before these drugs get to patients.
Another metric is net price spending. Its based on the same wholesale prices but after rebates, off-invoice discounts, and other price concessions made by manufacturers to distributors, health plans, and intermediaries. And it jumped by 8.5% to $309.5 billion
And then theres what IMS Health calls average patient cost exposure, which is what Americans pay, including copays and deductibles. Well get to that in a moment.
Spending on protected brands protected by patents increased by $28.3 billion at invoice pricing. A tiny fraction ($2.7 billion) was due to volume growth. The rest ($25.6 billion) was due to price increases.
Prices of protected brands jumped 12.4% on an invoice basis in 2015, after years of rampant and mostly double-digit price increases, amounting to a cumulative five-year surge of 72%:
The title alone tells me that this guy doesn't have a clue about economics.The title should say:
Even as Prescription Drug Volume Stagnates, Because Prices Soar.
Not on any prescription drugs and never will be. Save for an unavoidable temporary emergency event.
It could be the other way around.
Lots of companies raise prices as their volume stagnates. This can work in their favor because of inelastic demand. Doctors keep writing prescriptions as the price goes up. People don't drop cable right away if there is no alternative. As long as there are enough suckers to keep paying higher prices so that the total income is maximized, companies are not going to drop prices even if volume declines.
We have a name for that. It's called "bankruptcy".
Just went back on Hydroxyzine this past week. The “NEW” asthma drugs are crap and dont work.
The hydrox is a ton cheaper, plus it WORKS.
They have lost over 10% of their TV customers in the last 8 years and yet they are famous for the rapidity with which they raise rates.
As long as volume declines less that the price rises, which is often the case, a company can raise prices and keep making more money with less volume.
I nearly amended my comment to exclude government and regulated businesses, but then, didn’t want to waste the time. Comcast is a regulated business.
I am not on any prescription drugs. I always ask my Dr if I don’t take this will I die? As long as the answer is no I’m not doing it. So far I have avoided following his advice to take prevacid everyday and now found out it damages your kidneys.
So are prescription drugs. And other products with patent protection.
Patent protection does NOT regulate business. It protects intellectual property rights. Without patent protection there wouldn't be any new drugs.
I never knew either of my two grandfathers. Both died from what is now easily cured with a $5.00 drug prescription (though they were called "Miracle Drugs" at the time of their invention). I sure hope my some day grand children will get to see their grand father. They probably will, unless some politicians eliminate drug development by altering patent protections for new drugs.
That's true. It would also be impossible to jack up the price of a drug 5000% and expect anyone to pay this because competitors would appear making the same drug for less money.
But the government give patent holders the right to sue competitors for infringement. So patent protection does act to regulate business.
I never knew either of my two grandfathers. Both died from what is now easily cured with a $5.00 drug prescription.
I would be very interested to hear what killed your grandfathers and what that drug is. I also had a grandfather who I never knew because he died young as a result of something that could now be cured with a cheap medication. Of course recently it has been in the news that many formerly cheap prescription drugs have suddenly become very expensive.
You don't seem to understand that the price of a new drug is determined by the billion plus dollar costs of approving the drug for sale due to government regulations. The production cost of drugs is essentially zero compared with the approval costs. Drug prices are the result of this cost, not the production costs. Not allowing drug developers to recoup the development costs will mean they stop developing new drugs.
There was a drug recently in the news whose price was raised 5000%. It turns out that it was a 62 year old drug and so not under patent protection. But also the approval costs were zero. Therefore it is possible for drug prices to far exceed the amount that is necessary to recoup the costs for government approval.
You don’t impress me with your knowledge of economics.
People who live in glass houses ...
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