A Hot Topic

Prescription drug costs were a volatile presidential campaign topic. The issues have not changed, and concerns continue to be raised as consumers keep asking:Why are drug costs soaring?

A recently released government report says that prescription drug prices are escalating at more than 12.5 percent, and they aren't going to stop any time soon. In fact, prescription drug prices are rising three times as fast as overall health care costs, and most every American is affected.

Americans who have prescription-drug plans also are paying for rising drug costs as they see their co-payments going up, deductibles increasing, higher premiums or cut back on benefits.

Why are prescription drugs so expensive?

Well, we are partly to blame for the rising cost, but a good advertising campaign may be another reason.

Prime time television commercials urge consumers to ask their doctors for one "brand name" drug or another. If the advertising seems to be everywhere, well, it is. Drug makers spend more than $2 billion dollars every year to make sure you see their product.

Apparently it's working.

Two examples: The success of Celebrex and Prilosec.

Consumers who might have a headache--and who doesn't in today's quick-paced society--could just as easily ask for Celebrex. And, if a consumer has stomach indigestion, the cure of the day might be Prilosec.

A recent television news magazine program examined the high price and request for name brand drugs only to find that General Motors validated the strong advertising campaigns.

Officials at the auto maker believe advertising campaigns drive patients to ask for drugs they may not need. And, if consumers need evidence whether or not this might be true; it may well be.

A survey by <I>Prevention Magazine<I> found that 91 percent of Americans have seen the advertisement, 32 percent have talked to their doctor about a specific brand name drug, and 71 percent of those who asked for the drug, were able to walk out of the doctor's office with prescription in hand.

This affects the prescription medication market in financial ways because brand name drugs are expensive.

A one month's supply of arthritis medication Celebrex averages $80, while Prilosec can cost close to $100 for a one month's supply. Patients with medical coverage, however, might be immune to the high prices because insurance companies pick up the majority of the tab. There are, however, plenty of people without prescription drug coverage, who are unable to absorb the high cost of brand-name drugs.

According to the Consumers Union, there are 25.6 million people who spend money on prescription drugs, but do not have insurance coverage. They spend an average of $320 on

The price that drug companies ultimately receive is determined by the buyer, whose purchasing power is increasing--and through a competitive process, which is intensifying.
out-of-pocket expenses. The union also report that there are 13.5 million people who buy prescription drugs but do not have insurance coverage. Out-of-pocket expenses for these people is nearly double, at $590 per year.

If all this information isn't enough, the price of prescription drugs have a direct effect on the economy. Labor Department economists reported that the Consumer Price Index, the governments closely watched inflation gauge, rose 0.3 percent in February. Chief among the reasons was the increase in prescription drug prices. Future price hikes are worrisome to economics at the Labor Department.

Why are Prices so High?

The success of drug companies depends largely on cutting-edge science into breakthrough technology.

"Our scientists say that this is our most productive time ever. We have launched 16 new medicines in just the past six years," said Raymond V. Gilmartin, chairman, president and CEO of Merck & Co. Inc. "We have more new research programs in early development than ever before in Merck's history. Advances in technology are helping us find ways to save and extend life, and to improve the quality and convenience of day-to-day living: a pill for osteoporosis that can be taken once a week instead of every day; a chewable tablet that can help reduce the need for inhalers or nebulizers in asthmatic children."

Medicines cost so much, according to Gilmartin, because companies are a knowledge-based industry, and like any other knowledge-based industry--such as software--the price of a medicine is not based just on the variable cost of ingredients, but also on the high fixed costs of the research and discovery process. Gilmartin also said the price that drug companies ultimately receive is determined by the buyer, whose purchasing power is increasing -- and through a competitive process, which is intensifying.

Price comparisons vary country to country, but Gilmartin said that fails to tell the complete story. He said the story fails to mention the benefits of U.S. price discounting and overlooks the anti-innovation impacts of foreign government price controls. He also said they distort the picture by leaving out the pro-consumer benefits of cheaper U.S. generics.

"Drug costs are rising, but not as much from increased prices as from increased use: more people taking more and better medicines," Gilmartin said. "Advances in drug discovery are easing the burdens of heart disease, breast cancer, diabetes and depression.

"Newer medicines are keeping asthma patients out of hospital emergency rooms, preventing fractures in people with osteoporosis, prolonging the lives of people with debilitating heart failure and reducing heart attacks in people with high cholesterol.

"We also are in a high-risk industry where most products do not survive the development process, many more do not recover their costs of R&D (research and development), and virtually all other face strong competition within months of their launch. Studies by leading economists find that the returns the industry earns are appropriate given the high risks of research," Gilmartin said.

Saving Money on Prescription Medicines

No matter what situation you find yourself in, there are ways to cut costs. The easiest way to pare your costs is to do price comparisons at local, online/mail order pharmacies and even discount drug clubs, for medicines you will need long term.

Perhaps the easiest way to start is by having a discussion about cost savings with your pharmacist and doctor. Review with both people all the drugs and supplements that you are taking,

Advances in drug discovery are easing the burdens of heart disease, breast cancer, diabetes and depression.
and ask for advice from both practitioners about less-expensive alternatives. You may want to start with your pharmacist, then talk to your doctor at your regularly scheduled appointment.

Your doctor's review should focus on whether or not all the medications are still necessary. In the interest of saving money, ask both the pharmacist and physician for their suggestion on ways to cut costs.

It is possible that the price of drugs will fall. Merck & Co. Inc. announced that effective immediately, it is lowering the prices in developing countries for Crixivan (indinavir sulfate) and Stocrin (efavirenz)--the company's two antiretroviral medicines for the treatment of HIV infection. Merck claims they will not profit from the sale of these medicines in the developing world.

The new prices are $600 per patient per year for Crixivan and $500 per patient per year for Stocrin in developing countries. This is the first time that a member of the class of protease inhibitors has been offered to developing countries at such a low price.

"Our goal is to spur efforts to accelerate access to these life-saving medications in those developing countries where the HIV/AIDS epidemic has taken such a widespread and devastating toll on the lives of those living with HIV, their families and their communities," Gilmartin said.

Is a Cheaper Formulation Available?

Sometimes inexpensive versions work just as well as high-priced drugs. (That is where generic brands play a key role though the inactive ingredients such as binders and colors, generic medication always contains the same active ingredients as the priciest counterpart.) Typically, a person could save as much as 50 percent

There are exceptions to the rule because drugs used to thin blood, medication for heart rhythms and those used to control epilepsy should not be interchanged because even tiny differences in absorption can be risky.

For other medications, however, if a generic is not available, there may be cheaper, similarly acting medication can be just as effective. Generally speaking, these drugs are older and well-established and have been on the market for some time.

Finding the lowest price for medication could be as simple as dialing the telephone and asking various pharmacies what they charge for the drugs. Call the drug stores, supermarkets and mass merchandisers such as Kmart or Wal-Mart. Once you've found the lowest price, go back to your neighborhood pharmacy and ask the pharmacist to match the price.

"Because of the competitive nature of the industry, many drugstores would rather match the lowest price than lose a customer," said Phil Schneider, a spokesman for the National Association of Chain Drug Stores.

Corporate policy for mass retailers such as Kmart and Wal-Mart is to match the lowest price available in the region. Kmart even says they will match Internet and mail-order pricing.

There are, of course, the possibilities of free samples. If what you need is the latest antibiotic for a serious infection, ask your doctor for a free sample. Drug companies often give doctors samples, but if what you need is a long-term medication, you may consider an older drug or a generic.

A simple way of saving medication costs could be to ask your doctor for a double dose, then split the pill when you get home. For instance, if you only need 10 mg of any particular drug, ask for the 20 mg version, then cut the pill in half, reducing your costs by 50 percent. Not all pills can be split in half without compromising their effectiveness.

The pharmacy landscape signals higher costs yet to come. Access to more information stimulates every-greater demand for access to prescription medications, but growing consumption raises important questions about the correct use. That is why a physician's consultation in concert with the opinion of the pharmacist could make or break the way medications are dispensed for each individual.

This article originally appeared in the May 2001 issue of HME Business.

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