It’s no secret that one of the most expensive parts of paying for healthcare is simply paying for medication. Over time, the medications available to treat various illnesses and conditions have continued to advance. Unfortunately, those advancements in the medicine’s effectiveness have been correlated with advancements in costs.
If you need prescription drugs to treat your condition, then you may be wondering why this is the case. If so, you’re in the right place. In this article, we’re going to take a look at why the rising cost of prescription drugs is such a big trend right now.
Evidence for Rising Drug Prices
Before we start talking about the reasons that answer the question of why are prescription drug costs rising rapidly, let’s first scientifically prove that the prices are indeed rising. There’s no better way to do this than with researched statistics.
The US Centers for Medicare and Medicaid Services did a study that answered this question. They looked at the average drug spending per capita in 2007. That cost worked out to $783 per capita. Fast forward 10 years to 2017 and American households are now spending $1025 per capita.
This significantly outpaces the 18.3% inflation experienced over the same period (which would translate to an equivalent value of $924 per capita).
What’s more, experts have created models that indicate that drug spend will increase to $1635 per capita in just another ten years. This again far outpaces inflation models for the same time period.
What Causes the Rising Cost of Prescription Drugs?
There are several factors that cause the rise in these prescription drug prices.
The first factor also happens to answer the question of why are prescription drugs more expensive in the US. The high barrier to entry to the market created by governmental regulation means that there is little to no competition for many of the most significant drug manufacturers. These pharmaceutical companies are able to occupy and monopolize a certain segment of the pharmacy market.
This in turn enables them to charge premiums for their product. Patients can’t seek the same drug elsewhere.
Another factor that points to the rise in drug prices is the cost of manufacturing them. Simply put, pharmaceutical companies are pushing the boundaries of what one can do with medication every day. Thus, billions of dollars worth of research is poured into nearly ever drug that is put on the market.
Combine this with the costs of testing the drug en masse and getting approval from the FDA, and you’ve got a recipe for high manufacturing costs. Companies need to make this money back somehow in order to be profitable in the face of these increasing costs.
Rising Prescription Drug Prices
There you have it — now that you know what causes the rising cost of prescription drugs, you should be far better informed as to how prescription drug companies operate.
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