According to a 2019 poll, 24 percent of people taking prescription drugs said that it was difficult to afford their medications. The average American spends $1,200 on prescription drugs each year—more than any other country in the world.
Unfortunately, this prescription drug spending is only expected to increase. The Centers for Medicare and Medicaid Services (CMS) projects that prescription drug spending will increase by 6.1 percent each year through 2027.
Why are prescription drug costs so high in the United States? Specialty pharmaceuticals and oncology treatments have contributed in part to rising drug costs. Targeted, experimental drugs like these require a tremendous amount of research and testing to develop. Because of the resource-intensive development process, these drugs often come with a high price tag.
Some of these costly specialty drugs include immunosuppressive therapies like Humira or Stelara. Both are biologic drugs intended to treat autoimmune diseases like plaque psoriasis or arthritis. Insulin brands like Humalog and Novolog are also among the top 20 drugs by total charges.
High drug prices are largely dictated by the pharmaceutical supply chain. This supply chain contains three key players:
- Drug manufacturers
- Pharmacy benefit managers, and
How can healthcare organizations use drug cost data?
Drug cost data can be helpful for certain healthcare organizations interested in the pharmaceutical market.
For instance, medical suppliers may use this data to target regions with high drug costs. This allows medical supply companies to identify new sales opportunities and sell lower-cost drug alternatives, if available.
Pharmaceutical companies may also use drug cost data when developing a new drug or therapy. This data helps drug manufacturers see how competitors are pricing their products and may help to inform the pricing strategy for a new drug.
How are drug prices determined?
Drug manufacturers price their treatments based on the product’s estimated value. There are few regulations to govern pharmaceutical pricing. This means that the manufacturer list price could be as high as $71,306 dollars for a single treatment.
Lack of pricing regulation is one reason why insulin costs increase each year. With a high market demand and few generic competitors, insulin manufacturers can continue raising prices.
The costs Americans actually pay for prescriptions depends on many factors, including:
- Their insurance plan
- The list of drugs covered by that plan
- The size of their deductible, and
- The discount that the insurance company received from the drug manufacturer
With so many variables at play, out-of-pocket drug costs can be extremely unpredictable. Below, we’ve compiled the 25 states with the highest and the lowest total pharmaceutical charges.