Leigh Purvis and Dr. Stephen W. Schondelmeyer’s 2021 Rx Price Watch report finds that retail price increases for brand-name drugs have been rising year-over-year at more than twice the rate of inflation since 2006. Of course they have. Pharmaceutical companies generally have the monopoly power to set their prices since Congress does not regulate drug prices, and there is little competition that drives down prices in the brand prescription drug market.
Purvis and Schondelmeyer looked at 260 of the most popular prescription drugs taken by older adults. They found that pharmaceutical companies increased their prices 2.9 percent on average each year. The annual inflation rate averaged 1.3 percent.
Of course, a pharmaceutical company’s drug price increase is based on the launch price, which is generally set several times higher than the price of the same drug in other wealthy countries. On average, a brand name drug taken for a chronic condition cost $6,604 in 2020. Five years earlier, it cost around $5,100.
Older adults in the US typically use about $31,000 worth of prescription drugs each year. That figure is based on the fact that, on average, they take 4.7 prescription drugs each month. The $31,000 annual cost is more than 3.5 times higher than the cost in 2005. It is higher than the annual income of most people with Medicare, which is $29,650.
Senators Ron Wyden and Chuck Grassley have proposed limiting price increases on prescription drugs to the rate of inflation. It’s hard to know if that will work, as drugmakers might be able to change the formulation of a drug–the way it looks or is administered–and change the price accordingly. With any luck, Congress will regulate drug prices
But, had drug price increases been limited to the rate of inflation since 2006, a drug that cost $2,911 in 2006 would have cost $3,700 in 2020. Instead, it costs $6,604, $2,904 more.
People with prescription drug coverage still bear a lot of the cost of drugs in deductibles and copays. And, Medicare Part D, which covers retail prescription drugs, does not have an out-of-pocket cap on prescription drug costs. Moreover, Medicare premiums rise as prescription drug costs rise.
What’s most concerning is that millions of people with Medicare cannot afford the deductibles and copays on their drugs. They choose not to fill their prescriptions. As a result, they often die prematurely.
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