Why Are Prescription Drugs So Darn Expensive?

The problem with the price of prescriptions is not that they’re too expensive.  The problem is unrealistic expectations.  People think of drugs as just pills, many of which have been sitting on shelves in our pharmacies for decades, not costing much.  Some of them had been discovered in plant life.  Some had been invented relatively cheaply.  But the modern prescription drug, while sometimes not as effective as the older ones, is nonetheless a state-of-the-art piece of technology.  It’s design is more sophisticated and expensive than any gadget you can buy at Brookstone.  It takes an average of 5 years to design a drug and another 5 to study its safety and effectiveness.  Add 12-18 months to get FDA approval.  As of 2019, it cost an around Four Billion dollars to develop a single prescription medication.  After that, the drug company has about 20 years of patent protection to try to make their minimum profit margin. 

But you’re not just paying for one drug.  You’re also paying for the R&D of all the drugs that didn’t work out and were not approved.  You’re also paying for the massive lawsuits when drugs don’t work out after they ARE approved.  You’re also paying for people in other countries to get artificially cheaper drugs.  13 out of 15 countries in Western Europe, as well as Canada, directly regulate prescription drug prices.  The pharmaceutical company has to make up the difference somewhere and they do it in the United States.  So why shouldn’t we do the same?

Because if the U.S. were to pass price controls, pharmaceutical companies would have nowhere else to turn, and one or two things would happen:

  1. The government would be forced to relax regulation and tort law in order to let these companies cut R&D costs.  That would result in more dangerous medications. 
  2. Drug companies would simply make fewer new drugs.  Instead, they would lean more on the old generics.  There has already been some of that.  Many of the “new” drugs that they now sell are just combination pills:  They take two old drugs, glue them together, slap a new coat of paint and give it a new name.

A big part of the problem comes from Medicare and the insurance companies.  They enable many Americans to pretend that their drugs are free or almost free, while they simultaneously raise premiums and taxes.  This relieves the consumer from the important job of shopping.  Consuming without shopping raises prices in 2 ways:

  1. The consumer doesn’t ask “Do I need this drug?”  Price competition then vanishes and the drug price fails to fall to its actual value.
  2. The consumer doesn’t ask “Do I need any of these drugs?”  When we buy anything else, right down to a pack of gum, we instinctively and subconsciously conduct a cost/benefit analysis.  We ask “Is it worth the money?”  When we don’t have to do that, then demand rises artificially. 

What’s the answer to all this?  Well it helps if you have a doctor who can take the time to think before prescribing another pill, and more importantly, can spend the time to help you make an educated decision.  At Carington Health Services, because of our business model, we can spend that kind of time with you.  Then, if you think that you must have the latest, greatest chemical gadget that might make you live a little bit longer than the older drugs, you can pay for it.  You could also pass the message on to your Canadian neighbors.