Practice Management

Hospitalists can help alleviate rising drug costs

Four key actions providers can take


Because of the increasing costs of prescription drugs and medical therapies, many patients are unable to afford the treatment they need that could improve their health or even save their lives. In the United States, drug manufacturers can set their own prices – a policy that has resulted in overall medicine costs being far higher than in other places around the globe. Increasingly, insurers are passing the costs along to patients through higher deductibles, and pharmaceutical companies are making record profits.

Dr. Madhukar Kasarla hospitalist with Apogee Physicians at Parkway Surgical and Cardiovascular Hospital in Fort Worth, Texas.

Dr. Madhukar Kasarla

Something needs to change in order to achieve the right balance between maintaining pharmaceutical innovation and ensuring patients have proper access to treatments they need. Waiting for legislation, regulation, or the courts is not an effective short-term solution. Instead, hospitalists can take immediate actions to help by alleviating the costs for as many patients possible.

Historical context

Many might be wondering how prescription costs became so imbalanced in the first place. Here are a few important factors that played a role in the dramatic price increase of pharmaceuticals:

Entrance of generic drugs: Around 2012 the entrance of generic drugs caused major unexpected competition in the medical industry. During this time, many insurers were promoting the generic drugs and not allowing brand names to be covered when a generic substitute was available.

“Orphan drugs” and manufacturer pricing: In 2014, 33 new brand-name drugs were launched in the United States, and only 8 had a direct price competitor at the time they were introduced. In addition, manufacturers were free to set their prices. Over the past decade, introductory prices for brand name drugs have reached unprecedented levels. Furthermore, manufacturers use the patent protections to increase their prices every year, even when no significant improvements have been made to the drug.

Expiring patents: According to research, there are 182 drugs that no longer have patent protection or any associated generics available. This creates opportunities for manufacturers to maintain patent-era pricing or even engage in price gouging.

Lack of robust competition: Several high-priced blockbuster drugs hit the market to treat serious diseases, most of which do not have generic brand substitutes, which leaves only one option for patients – and it’s usually not affordable. According to research, more than 500 drugs have only one marketed generic. In addition, manufacturer mergers and acquisitions have occurred, which has led to a more concentrated and less competitive market for pricing.

Stricter Food and Drug Administration policies: American consumers have access to the safest and most advanced pharmaceutical system in the world, which requires several trials and testing before the drug can be approved and brought to the market. Despite the benefits of these strict procedures, the downside means higher costs for the brand and manufacturer that they will want to recoup through the price of the drug on the market.

Number of new drugs allowed to enter the market: New drugs that enter the market in the United States do so more quickly than in most other countries. Research shows the U.S. pharmaceutical market contributes to 45% of the global pharmaceutical market. The $76 billion in research and development that pharmaceutical companies claim overlooks the ways that U.S. employers and taxpayers pay for at least 44% through tax subsidies and credits. What makes it worse is that research shows most corporate research and development is directed at minimally innovative new drugs, using the system to secure patents and charge monopoly prices.

Compared with other high-income countries, the United States spends the most per capita on prescription drugs. While insured U.S. patients often pay little or nothing for generic prescriptions, they can be billed tens of thousands of dollars for certain high-priced medicines. The United States has the highest rate of insured patients skipping or not filling prescriptions because of cost. For example, the price of EpiPens, a drug delivery system that is crucial for persons experiencing life-threatening allergic reactions, has increased more than $500 in just 9 years.


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