Tracking the Price Hike: Why Do Prescription Medication Prices Rise So Fast?
It is all but old news at this stage that drugs in the U.S. are expensive, often prohibitively so. Regardless of the broad political consensus that prices are too high, the American government’s hands-off approach when it comes to the marketing of prescription (and over the counter) medication to the domestic market leads to exorbitantly high prices that many American consumers simply cannot afford. Looking for cheaper meds, consumers turn to foreign imports, usually from Canadian online pharmacies, where it has become remarkably easy, safe, and secure to get the same medication for as much as 70% cheaper than in the U.S. That has been the situation for some time now, and it is unlikely to surprise anybody. But something that perhaps gets less attention is the rate at which the already-steep medication prices continue to rise. This too is staggering – and a cause for real concern among American consumers already dismayed at prices as they stand. Towards the end of 2020, the American pharmaceutical information watchdog GoodRX published a report with a suitably disheartening title – “Prices for Prescription Drugs Rise Faster Than Any Other Medical Good or Service.” Ramping Up the Cost The perceived wisdom regarding the behavior of a healthy free market economy would dictate that prices rise in accordance with the natural economic forces that would inevitably control them – inflation, wages and so on. But when it comes to the pricing of American pharmaceutical products, you can abandon that idea entirely. The rise is far in advance of what would be expected as a result of any of these factors. GoodRX’s report found that, since 2014, prescription drug prices have increased by 33%. This increase of a third is well in advance of the price rises observed for things like inpatient hospital services, nursing home care, and dental services (all things which also increased by a significant amount). Into 2021, approximately seventy different pharmaceutical companies hiked the price on prescription drugs, and in doing so indicated that this trend seems set to continue. A spokesperson for the company Pfizer told Reuters that the company had adjusted the prices of all drugs across its portfolio by around 1.3%, making a point of stressing that this is in line with inflation. An increase of 1.3% over the course of a year is indeed in line with inflation, but this statement masks the fact that the price increases across timescales of more than one year have been well in advance of it. For example, the increases Pfizer made in 2020 on around sixty of its most popular drugs was around 5%. And let us not forget the damning figure that has seen a whopping 33% increase over the six years from 2014 to 2020. Some price rises may be in line with inflation this year, but inflation has a lot of catching up to do! Why Is It Happening? The reason price increases in the U.S. are so drastic is a familiar one. In the U.S., the government simply allows pharmaceutical companies to set their own prices, and they do so with the justification that high prices are necessary to fund research into new drugs. In Canada, where many American consumers buy from online pharmacies such as Canada Pharmacy and get their drugs as much as 70% cheaper, the government actively caps prices. Faced with losing the entire Canadian market, pharmaceutical companies accept these caps. It seems unlikely that America will see any kind of similar policy. But as the prices skyrocket, the feeling that something needs to be done becomes palpable.