It’s no secret that prescription drugs can be expensive, and even though people need cheaper access to their medications now more than ever, prescription drug prices have raised an average of 5% so far in 2021. Increasing drug prices not only affect what consumers pay out-of-pocket for their medication, but they also drive up other healthcare costs. Let’s take a deeper look into the drug price increase of 2021.
Prescription drug prices have risen 5% this year partly because drug manufacturers adjust drug prices at the beginning of every year. In an RxSense analysis of 25,000 prescription drugs, 2,425 saw a price change from January 2021 to February 2021 with an average increase of 5%. Of those, 1,891 brand-name drugs had an average dollar increase of nearly $25.
The immunosuppressive drug Humira, which treats chronic conditions like arthritis and Crohn's disease, costs $9,829 for a month’s supply of the injectable form. The antidepressant Rexulti can cost as much as $2,700 for a 30-day supply. For postmenopausal women with osteoporosis, getting a drug to treat their condition, like Prolia, can cost $1,400.
These drugs are expensive, no doubt, but they aren’t even the drugs that have increased the most in price since the start of 2021. The most expensive drug increases in 2021 based on average wholesale price (AWP) involve the following medications:
While having health insurance may help cover the cost of expensive medications, many insured patients still have some type of copay. Many who are uninsured go without medication they need because of an inability to pay.
Prescription drug pricing is affected by many factors. The U.S. government doesn’t directly regulate the price of drugs. Drug companies set their own prices, and pharmacies and insurance companies can determine how much a consumer will end up paying out-of-pocket for a medication. Things like research and development, pharmacy benefit managers (PBMs), and generic availability of medications can all cause price fluctuations.
The development of new drugs is expensive because of the regulated nature of drug markets, because drug development is an extremely lengthy process, and because many drug projects fail. Companies researching and developing new drugs must offset the cost of the long development process and be able recoup the costs of drug failures by increasing the price of successfully launched new drugs. In the end, consumers end up paying more because of R&D.
Pharmacy benefit managers are companies that manage prescription drug benefits for self-insured employer plans, commercial healthcare plans, Medicare Part D drug plans, Medicaid, large employers, state government employee plans, and other large insurers. On behalf of these insurers, PBMs can negotiate rebates from drug makers in exchange for preferred formulary placement.
Not only can PBMs negotiate discounts and rebates, but they can also cause patients to require “prior authorization” in order to use certain drugs, and place drugs into “tiers'' (formulary) that may or may not be covered by a patient's health plan. All of these things affect the retail prices of prescription medications.
According to the Food and Drug Administration (FDA), lower generic drug prices are associated with greater competition among generic drug makers. Generic versions of brand-name medications will lower the price of prescription drugs for consumers, and research shows that one or more generic versions of a brand-name medication will drop the price even more.
The FDA found that products with one generic producer had average manufacturer prices that were about 39% lower than brand-name versions. With two generic producers, a product had an average manufacturer price that was 54% lower than the brand-name version.
Anytime a generic version of a brand-name medication is released in the market, the brand name must lower drug prices in order to maintain market share, so this also affects drug pricing.
In some cases, the cost of a prescription drug will be extremely high because the drug treats rare medical conditions that few people have. For example, the drug Zolgensma, which treats spinal muscular atrophy, costs $2.1 million for a one-time therapy. The cost of development of specialty drugs must be spread over fewer patients, which dramatically affects a patient's out-of-pocket costs.
Even though drug prices have risen this year, there are still ways you can save money on your prescriptions.