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Prescription Drugs: Why Prices Keep Rising and 5 Tips to Pay Less

Prescription drug prices have experienced massive spikes in the past year or so − in some cases by more than 8,000 percent. Price increases on drugs, such as the EpiPen and the AIDS drug Daraprim, have fueled debate over what’s causing price hikes and what can be done to make prescription medications more affordable.

A Harvard Medical School study published in August in the journal of the American Medical Association found that prescription drug prices in the United States are higher than prices in any other country, and double the cost consumers pay in several countries. In 2013, per capita spending on prescription drugs was $858, compared with an average of $400 for 19 other industrialized nations.

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The Harvard study also found that federally protected “monopoly” rights for drug companies are some of factors driving up drug prices.

Leigh Purvis, director of Health Services Research for the AARP Public Policy Institute, says that while it’s true that there are a number of complex factors at play behind the price hikes − including various market exclusivity protections and a lack of negotiating power, there’s a much simpler answer: Because they can.

“I think the best way to explain why prescription drug prices have gotten so high is that there is virtually nothing in the U.S. health care system to stop it from happening,” Purvis says.

Purvis points out that many older adults do not have the financial resources to absorb constantly escalating prescription drug costs. The median annual income for Medicare beneficiaries is less than $25,000, and one in four have less than $12,000 in savings.

The drug price issue has been in the spotlight this past year after drug companies made headlines for dramatic price increases on life-saving drugs. Heather Bresch, CEO of EpiPen maker Mylan, sparked debate when she announced the list price of EpiPen would be going up. The list price has increased from less than $100 for a two-pack in 2007 to more than $600 today.

In another high profile case last year, Turing Pharmaceuticals increased the cost of the life-saving drug Daraprim, which some cancer and AIDS patients use to treat toxoplasmosis, by 5,000 percent — from $13.50 per pill to $750.

Determing the value of prescription drugs

Generic drugs have been key to reducing drug prices in the U.S., but generic prices have been spiking, too. A House of Representatives report in 2014 found that the prices of 10 generic drugs had spiked in the previous year, with increases ranging from 420% to more than 8,200%.

One argument in defense of drug costs is that expensive drugs save money over the long term by curing diseases that would otherwise be costly to patients, according to a Boston Globe report.

The Globe reported that Massachusetts Biotechnology Council president Robert Coughlin said that paying to manage chronic diseases is an outdated model, and that health care payment models should consider that certain medications can ultimately prevent expensive surgeries and hospital stays.

Peter Maybarduk, access to medicines director for the Public Citizen Health Research Group, believes that the problem is that there are no constraints placed on what companies can charge, and that prices are not derived from research and development costs.

“Companies figure out what we will pay, and they will charge that,” Maybarduk says.

Maybarduk supports implementing policies against price hikes and limiting the extent of legal pharmaceutical monopolies to curb their abuse of the system.

Kenneth Kaitin is professor of medicine and director of the Tufts Center for the Study of Drug Development, which releases a study every 10 years on the average cost to develop a new prescription drug. According to the most recent Tufts analysis, published this year, it costs $2.6 billion to bring one successful drug to market.

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According to Kaitin, the price that consumers pay for a new drug is typically based on three factors: the drug’s perceived value to the public, competition in terms of what other drugs and treatments are available, and how much insurers will reimburse for the treatment.

Kaitin says price controls are not the solution to the drug price issue. Rather, the public needs to get a better grasp on which attributes should determine the value of a drug. And then from that equation, companies can develop an appropriate price for their products. “Basically everyone has a sense of what value is. But the question is how do you measure value?” he asks.

For example, if a person has irritable bowel syndrome and can’t get to work every day, and then they find a drug that allows them to do it, does that medication hold the same value as a drug for someone being treated for a fatal neoplasm?

“All of these things represent value, and they can represent different values to different people at different times in their lives,” Kaitin says. So it’s the measurement of value that’s the challenge, and that will require a more global discussion of how we do that.”

5 tips to save on prescription drugs

It seems the deck is stacked against average patients who take one or more prescription drugs on a regular basis. However, other than making sure you have a quality prescription drug plan with your health insurance, there are few things you can do to cut costs. Here are 5 tips from insuranceQuotes to help keep your prescription drug costs down.

1. Shop different pharmacies for the best deal

Different pharmacies can charge different prices for the same medication. So instead of always sticking with the same pharmacy, get quotes before you hand over your prescription.

2. Buy generic medication

Check with your doctor about whether you can substitute a brand-name medication for a generic, because they don’t always work the same.

3. Split pills to make them last longer

If you have to pay the same insurance co-pay for a higher-strength prescription, you can divide each pill to save money. But check with your doctor or pharmacist first, because some time-release pills must be taken whole to be effective.

4. Use a prescription drug assistance program

Use state resources to find drug assistance programs. Also, many nonprofit organizations work with drug companies to offer medication at reduced rates for those unable to pay normal prices.

5. Ask for drug samples from your doctor

Drug samples can be a great way to cut down on the medication, especially new prescriptions that may or may not have the desired result. Drug companies usually provide doctors with these samples so it's just a matter of asking your physician during your appointment.

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