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Based on the majority of published articles recently it would seem that the cost of prescription medications is skyrocketing. An article in the NYT mentioned that prescription drug pricing rose four times faster than inflation, and another article in Politico stated that prices have risen by 10.5% in the past year.
The reality is that there has been a remarkable decline in prescription drug pricing. The latest data from the Bureau of Labor Statistics (BLS)/Consumer Price Index for Prescription Drugs shows that prices have been declining.
The news stories rely on studies that claim that the list price of brand name drugs have increased. PBM’s (pharmacy benefit managers) never pay list price. PBM’s are used by commercial insurers and Medicare, they are the gatekeepers, and they insist on steep discounts and rebates that substantially lower prices. Another issue with these studies is basing their conclusions on brand name medication pricing when just over 90% of all prescriptions are generic.
BLS data is easily verified by simply reviewing the numbers submitted by large PBM’s such as Express Scripts which has 80 million members. They report that drug prices fell by .04% recently, and 1.4% for Medicare clients. The main reason for the price declines is that approval for generic medications has become easier the last two years thanks to a reduction in federal regulations, which boosts competition and reduces prices. Cost reductions of .04% and 1.4% may not sound like much until one considers the billions spent each year on medicine.
Prescription medications are not responsible for overall high health care costs. The Department of Health and Human Services (HHS) states that prescription medications represent 12% of health care spending each year, including medications dispensed in hospitals and doctors’ offices. In Japan it is 19%.
Medicines help to keep patients out of the hospital, where costs are out of control. An overnight stay now averages $5200. Thanks to cholesterol and blood pressure medications, in-patient stays for heart disease has dropped by 41% in the last 20 years.
Misinformation about drugs will limit innovation, resulting in a less healthy population.