Prescription Pharmaceutical Industry Analysis

The rise in drug prices is causing the public to ask why this is so and why there isn’t anything being done, or what the reason could be for sky high prices. Some of the reasons include pharmaceutical companies setting their drug prices

In 2015, the pharmaceutical industry spent over 27 billion dollars on advertising. The two greatest components of this effort were promotional advertising and free medication sampling, which the pharmaceuticals invested 15.5 and 5.7 billion dollars respectively (“Persuading the Prescribers”). Promotional advertising involves direct contact with health professionals, the most common being extravagant lunch conferences held for physicians and their staff. On the other hand, sampling involves distributing free sample of medications to physicians, who then have a choice of providing these samples to patients. As a result of these methods, the industry has seen revenue around $400 billion with 90% of physicians having a relationship with a drug company (Campbell 2007). Moreover, the prices of prescriptions continue to rise; a copay of a generic drug is $11.72, preferred brand drug is $36.37 and a specialty drug is $58.37 (Coleman and Geneson 2014). Although the profits are immense in the numbers demonstrated above, it is no surprise when pharmaceutical drug companies elevate their prices even more. For instance, recently Turing Pharmaceuticals raised the price of their medication Daraprim from $13.50 to $750. Keep in mind, this medication is used for threatening parasitic infections, aids, and cancer with alternative options currently found to be inefficient (Pollack 2015). Another example of this practice involves cycloserine, a drug used to

One added reason could be the current high number of mergers in the industry. Which in the long run leads to less competition, driving the innovation down and the prices up. In the United States, there are no regulatory efforts to stop the companies for charging so much. They are one of the only nations that believes in a free market for drug pricing. They are only one of two countries that allow direct-to-consumer advertising of pharmaceuticals. As of today the United States does not import drugs from

spends more on drugs? It’s true that in the U.S., as in many wealthy OECD countries, pharmaceutical spending has been declining in real terms. For some countries, this trend is explained by cuts in government spending in the wake of the Great Recession. In the U.S., much of this decline is explained by the fact that patents on a number of top drugs have expired, meaning they can be replaced by cheaper generics. This effect is expected to last another two or three years; after that, future trends in spending are harder to predict.

In 2016, the health care industry saw prices rise. Many drugs continue to go up in price and even generic brands were up nine percent in 2014. This is largely due to inflation and companies trying to figure out where to price their drugs. Many companies have also merged with other health care companies which have also caused this increase.

In recent years, prescription drugs spending has been one of the most rapid rising components in the healthcare industry. In 2008, prescription drugs spending

However, prescriptions drugs has seen a steady cost increase. Not only in out of pocket care but also total health expenditures. In 2015 fourty-two percent of prescribed drug spending is expected to have been financed by the public sector in comparison twenty-two percent is covered out of pocket by Canadians. Fortunately in recent years the trend of prescription drug spending has slowed. The lower growth rate is in part to patent expirations and implementations of generic pricing policies.

The rise in costs of prescription medicines affects all sectors of the health care industry, including private insurers, public programs, and patients. Spending on prescription drugs continues to be an important health care concern, particularly in light of rising pharmaceutical costs, the aging population, and increased use of costly specialty drugs. In recent history, increases in prescription drug costs have outpaced other categories of health care spending, rising rapidly throughout the latter half of the 1990s and early 2000s. (Kaiseredu.org, 2012).

Prescription drug prices rose three times faster than inflation in the decade between 1981 and 1991, making the pharmaceutical industry the nation's most profitable business. Prescription drugs even exceeded the rapidly rising inflation rate for all other medical services. They now represent at least 10% of all the medical

* Monopoly Power. Pharmacists often face questions from patients regarding how prices of medications are determined and why, in some cases, they are so expensive. Unlike markets for other goods, in the pharmaceutical marketplace there are a limited number of manufacturers and the medication being sold are not identical, but rather are differentiated. There is a guarantee via patent protection that no potential competitor may manufacture an identical drug and sell it at a lower price in the short run. As a result, the branded manufacturer is able to make profits. Since there is only one seller, the monopolist determines the price of the medicine. This establishes the monopolist as a price setter, permitting prices above the perfectly competitive price by controlling the quantity of medication produced in the marketplace. This is in stark contrast to being a price taker, and accepting a price established within a perfectly competitive marketplace. The end result is that prices are higher under these market conditions than they would be in a purely competitive marketplace.

A lot of people, particularly the patients who need them, are beginning to wonder why American drug prices are so high. It makes sense why the pharmaceutical companies are selling at the prices they do: they are a business; and they want to, above all else, make a profit. But the real question is: what are all of the

have soared in recent years, with the price of a single medicine often exceeding an

The high cost of Prescription Drugs is one of the significant issues in the USA for a long time and is rising much faster than the consumer inflation rate. The consumers pay two to three times more than the average cost of medications in the United States. A study by Kessekheim, Avron, and Sarpatwari (2016) shows that the major factors that affect the prices of the medications include are the manufacturer's exclusivity during the time of patents and rights to set the price of the medications. Apart from this corporate greed delayed the availability of generic drugs after the exclusivity period of the medications. Governments in most of the developed countries like Canada, UK, and Germany negotiates the price of the medications with the pharmaceuticals

Americans spend more money on prescription drugs than anyone else in other developed countries. The reason is that the drug companies have almost complete control over the price regulation, due to the law passed by Congress that neglected Medicare the ability to be able to negotiate the prices of the drugs, and another generous patent law that allow them to have a long-lasting monopoly. In a recent case, CEO Martin Shkreli hiked the price of a drug that is used to treat life-threatening parasitic infection, a tablet that used to cost $13.50 went up to $750 - an increase of 5,500%. The reason that drug companies give for having such high prices, is that they need to have large profits on the products to be able to continue testing, investigating, producing and to developing, the company stated that a new drug costs about $2.6 billion to develop.

Routine price increases by bigger players may draw less attention, but they add up. Sales for the top 10 drugs went up 44 percent to $54 million in 2014, from 2011, even though prescriptions for the medications dropped 22 percent, according to IMS Health data.