View source for Medicine:Medication costs

'''Medication costs''', also known as '''drug costs''' are a common health care cost for many people and health care systems. '''Prescription costs''' are the costs to the end consumer. Medication costs are influenced by multiple factors such as patents, stakeholder influence, and marketing expenses. A number of countries including Canada, parts of Europe, and Brazil use external reference pricing as a means to compare drug prices and to determine a base price for a particular medication.{{citation needed|date=October 2021}} Other countries use [[Medicine:Pharmacoeconomics|pharmacoeconomics]], which looks at the cost/benefit of a product in terms of [[Philosophy:Quality of life|quality of life]], alternative treatments (drug and non-drug), and cost reduction or avoidance in other parts of the health care system (for example, a drug may reduce the need for a surgical intervention, thereby saving money). Structures like the UK's National Institute for Health and Clinical Excellence and to a lesser extent Canada's Common Drug Review (a division of the Canadian Agency for Drugs and Technologies in Health) evaluate products in this way.

Medication costs can be listed in a number of ways including cost per [[Medicine:Defined daily dose|defined daily dose]], cost per specific period of time, cost per [[Medicine:Prescribed daily dose|prescribed daily dose]], and cost proportional to gross national product.<ref>{{cite web |title=Introduction to Drug Utilization Research: Chapter 2: Types of drug use information: 2.6 Drug costs |url=https://apps.who.int/medicinedocs/en/d/Js4876e/3.6.html |archive-url=https://web.archive.org/web/20100528001243/http://apps.who.int/medicinedocs/en/d/Js4876e/3.6.html |url-status=dead |archive-date=28 May 2010 |website=apps.who.int |accessdate=26 November 2019}}</ref>

A November 2020 study found that more than 1.1 million senior citizens in the U.S. Medicare program are expected to die prematurely over the next decade because they will be unable to afford their prescription medications, requiring an additional $17.7 billion to be spent annually on avoidable medical costs due to health complications.<ref name="westhealth" />

==Definition==
Medication costs can be the selling price from the manufacturer, that price together with shipping, the wholesale price, the retail price, and the dispensed price.<ref>{{cite book |title=Measuring medicine prices, availability, affordability and price components |date=2008 |publisher=World Health Organization |page=12 |edition=2 |url=https://www.who.int/medicines/areas/access/OMS_Medicine_prices.pdf?ua=1}}</ref>

The dispensed price or prescription cost is defined as a cost which the patient has to pay to get medicines or treatments which are written as directions on prescription by a prescribers.<ref>{{Cite web|url=https://dictionary.cambridge.org/us/dictionary/english/prescription|title=PRESCRIPTION {{!}} definition in the Cambridge English Dictionary|website=dictionary.cambridge.org|access-date=2019-10-23}}</ref> The cost is generally influenced by a financial relationship between pharmaceutical manufacturers, wholesale distributors and pharmacies.<ref name=":4">{{Cite web|url=https://www.kff.org/other/report/follow-the-pill-understanding-the-u-s/|title=Follow The Pill: Understanding the U.S. Commercial Pharmaceutical Supply Chain|date=2005-02-28|website=The Henry J. Kaiser Family Foundation|access-date=2019-10-23}}</ref> In addition to the financial relationship, each nation has different systems to control the cost of prescriptions. In the United States, a pharmacy benefit manager, a third-party organization, such as private insurances or government-run health insurances will implement cost containment programs, such as establishing a formulary, to contain the cost.<ref name=":4" /><ref>{{Cite news|url=https://www.wsj.com/articles/SB10001424053111903554904576460322664055328|title=What is a 'Pharmacy Benefit Manager?'|last=Gryta|first=Thomas|date=2011-07-21|work=Wall Street Journal|access-date=2019-10-23|issn=0099-9660}}</ref>&nbsp; In the United Kingdom, the government negotiates an overall cap on drugs bill growth with the pharmaceutical industry. In addition a government agency, the National Institute of Health and Care Excellence (NICE) assesses cost effectiveness of individual prescription drugs pricing.<ref>{{Cite web|url=https://www.pharmaceutical-technology.com/features/cost-control-drug-pricing-policies-around-world/|title=Cost control: drug pricing policies around the world|date=12 February 2018 |access-date=2019-10-23}}</ref> The National Health Service also may negotiate direct with individual pharmaceutical companies for certain specialised medicines, as well as running competitive procurements for generic drugs and for patented medicines where there is more than one drug available for a condition.<ref>{{Cite web|title=NHS England partners with Gilead, Merck, AbbVie in billion-pound hepatitis C eradication push|url=https://www.fiercepharma.com/pharma/nhs-england-picks-gilead-for-massive-hep-c-contract|access-date=2021-04-18|website=FiercePharma|date=29 April 2019 |language=en}}</ref> Prescription costs are a regular health care cost for the sick and may mean economic hardship for the underprivileged.<ref name="NYT-20151219">{{cite news |author=The Editorial Board |title=No Justification for High Drug Prices |url=https://www.nytimes.com/2015/12/20/opinion/sunday/no-justification-for-high-drug-prices.html |date=19 December 2015 |work={{wipe|New York Times}} |access-date=20 December 2015 }}</ref>
With healthcare insurance, the patient in the U.S. pays a co-pay (the amount the patient must pay for each drug or medical visit), a deductible (the amount the patient has to pay before the insurance starts sharing the cost) and co-insurance (the amount the patient has to pay after deductible) for prescription costs. After reaching the out of pocket maximum, the insurance company will pay 100% of the prescription cost. The amount the patient has to pay depends on the healthcare insurance plan the patient has.

As of 2017, prescription costs range from just more than 15% in high income countries to 25% in lower-middle income countries and low income countries.<ref>{{cite journal | vauthors = Wirtz VJ, Hogerzeil HV, Gray AL, Bigdeli M, de Joncheere CP, Ewen MA, Gyansa-Lutterodt M, Jing S, Luiza VL, Mbindyo RM, Möller H, Moucheraud C, Pécoul B, Rägo L, Rashidian A, Ross-Degnan D, Stephens PN, Teerawattananon Y, 't Hoen EF, Wagner AK, Yadav P, Reich MR | display-authors = 6 | title = Essential medicines for universal health coverage | journal = Lancet | volume = 389 | issue = 10067 | pages = 403–476 | date = January 2017 | pmid = 27832874 | doi = 10.1016/S0140-6736(16)31599-9 | pmc = 7159295 }}</ref>{{rp|418}}

== Factors ==
{| class="wikitable" style = "float: right; margin-left:15px; text-align:center"
|+Drug costs in different countries
<ref name=prices-world-2013>{{cite web |author1=International Federation of Health Plans |title=2013 Comparative Price Report Variation in Medical and Hospital Prices by Country |url=http://static1.squarespace.com/static/518a3cfee4b0a77d03a62c98/t/534fc9ebe4b05a88e5fbab70/1397737963288/2013+iFHP+FINAL+4+14+14.pdf |archive-url=https://web.archive.org/web/20171022020959/http://static1.squarespace.com/static/518a3cfee4b0a77d03a62c98/t/534fc9ebe4b05a88e5fbab70/1397737963288/2013+iFHP+FINAL+4+14+14.pdf |archive-date=2017-10-22}}</ref>
!Drug
!US
!Canada
!UK
!Spain
!Netherlands
|-
|[[Biology:Etanercept|Etanercept]]
|$2,225
|$1,646
|$1,117
|$1,386
|$1,509
|-
|[[Biology:Celecoxib|Celecoxib]]
|$225
|$51
|$112
|$164
|$112
|-
|Glatiramer
|$3,903
|$1,400
|$862
|$1,191
|$1,190
|-
|[[Chemistry:Duloxetine|Duloxetine]]
|$194
|$110
|$46
|$71
|$52
|-
|[[Chemistry:Adalimumab|Adalimumab]]
|$2,246
|$1,950
|$1,102
|$1,498
|$1,498
|-
|[[Chemistry:Esomeprazole|Esomeprazole]]
|$215
|$30
|$42
|$58
|$23
|}
Pricing any pharmaceutical drug for sale to the general public is daunting. Per Forbes, setting a high ceiling price for a new drug could be problematic as physicians could shy away from prescribing the drug, because the cost could be too great for the benefit.<ref name=":1">{{Cite web|url=https://www.forbes.com/sites/johnlamattina/2012/09/10/on-the-pricing-of-new-drugs/#7257eeb14b8e|title=What Is The Rationale For The Pricing Of New Drugs?|last=LaMattina|first=John|website=Forbes|access-date=2016-03-15}}</ref> Setting too low of a price could imply inferiority, that the drug is too "weak" for the market.<ref name=":1" /> There are many different pricing strategies and factors that go into the research and evaluation of a future drug's price with whole departments within US pharmaceutical companies like [[Company:Pfizer|Pfizer]] devoted to cost analysis.

This chart shows discrepancies in drug pricing in different countries.

=== Marketing expenses ===
A study has placed the amount spent on drug marketing at 2-19 times that on drug research.<ref>[http://www.huffingtonpost.com/2012/08/09/pharmaceutical-companies-marketing_n_1760380.html Pharmaceutical Companies Spent 19 Times More On Self-Promotion Than Basic Research: Report] The Huffington Post, 2012</ref>

=== Research and development ===
Much research, needed to create drugs is done by the [[Social:Public sector|public sector]].<ref>{{Cite journal|url=https://www.nejm.org/doi/full/10.1056/nejmsa1008268|doi=10.1056/nejmsa1008268|title=The Role of Public-Sector Research in the Discovery of Drugs and Vaccines|year=2011|last1=Stevens|first1=Ashley J.|last2=Jensen|first2=Jonathan J.|last3=Wyller|first3=Katrine|last4=Kilgore|first4=Patrick C.|last5=Chatterjee|first5=Sabarni|last6=Rohrbaugh|first6=Mark L.|journal=New England Journal of Medicine|volume=364|issue=6|pages=535–541|pmid=21306239}}</ref><ref>{{Cite journal|url = https://www.healthaffairs.org/doi/full/10.1377/hlthaff.2009.0917|doi = 10.1377/hlthaff.2009.0917|title = What Are the Respective Roles of the Public and Private Sectors in Pharmaceutical Innovation?|year = 2011|last1 = Sampat|first1 = Bhaven N.|last2 = Lichtenberg|first2 = Frank R.|journal = Health Affairs|volume = 30|issue = 2|pages = 332–339|pmid = 21289355|s2cid = 207379315|access-date = 14 November 2020|archive-date = 16 November 2020|archive-url = https://web.archive.org/web/20201116231727/https://www.healthaffairs.org/doi/full/10.1377/hlthaff.2009.0917|url-status = dead}}</ref> In addition, pharmaceutical companies also do much research prior to producing medications. The table shows research and development statistics for pharmaceutical companies as of 2013 per Astra Zeneca.<ref>{{Cite web|url=http://www.phuse.eu/download.aspx?type=cms&docID=5334|title=Quantitative Decision-Makingin Drug Development|last=Al-Huniti|first=Nidal|date=June 20, 2013|pages=23|publisher=AstraZeneca|access-date=March 13, 2016}}</ref>{{page needed|date=June 2016}}
{| class="wikitable"
!Pharmaceutical company
!Number of drugs approved
!Average R&D spending per drug (in $ Millions)
!Total R&D spending from 1997 to 2011 (in $ Millions)
|-
|[[Company:AstraZeneca|AstraZeneca]]
|5
|$11,790.93
|$58,955
|-
|[[Company:GlaxoSmithKline|GlaxoSmithKline]]
|10
|$8,170.81
|$81,708
|-
|[[Company:Sanofi|Sanofi]]
|8
|$7,909.26
|$63,274
|-
|[[Company:Hoffmann-La Roche|Roche Holding]]
|11
|$7,803.77
|$85,841
|-
|[[Company:Pfizer|Pfizer]]
|14
|$7,727.03
|$108,178
|-
|Johnson & Johnson
|15
|$5,885.65
|$88,285
|-
|[[Company:Eli Lilly and Company|Eli Lilly & Co.]]
|11
|$4,577.04
|$50,347
|-
|[[Organization:Abbott Laboratories|Abbott Laboratories]]
|8
|$4,496.21
|$35,970
|-
|Merck & Co Inc.
|16
|$4,209.99
|$67,360
|-
|[[Company:Bristol-Myers Squibb|Bristol-Meyers Squibb Co.]]
|11
|$4,152.26
|$45,675
|-
|[[Company:Novartis|Novartis]]
|21
|$3,983.13
|$83,646
|-
|[[Company:Amgen|Amgen Inc.]]
|9
|$3,692.14
|$33,229
|}

Severin Schwan, the CEO of the Swiss company Roche, reported in 2012 that Roche's research and development costs in 2014 amounted to $8.4 billion, a quarter of the entire [[Organization:National Institutes of Health|National Institutes of Health]] budget.<ref name=":1" /> Given the profit-driven nature of pharmaceutical companies and their research and development expenses, companies use their research and development expenses as a starting point to determine appropriate yet profitable prices.<ref>{{Cite book|url=https://www.ncbi.nlm.nih.gov/books/NBK234300/|title=The Economics of Pharmaceutical Research and Development: An Industry Perspective|last1=Medicine|first1=Institute of Medicine (US) Committee on Technological Innovation in|last2=Gelijns|first2=Annetine C.|last3=Halm|first3=Ethan A.|date=1991|publisher=National Academies Press (US)|language=en}}</ref>

Pharmaceutical companies spend a large amount on research and development before a drug is released to the market and costs can be further divided into three major fields: the discovery into the drug's specific medical field, clinical trials, and failed drugs.<ref>{{Cite web|url=http://www.genengnews.com/keywordsandtools/print/3/33641/|title=What Is the Real Drug Development Cost for Very Small Biotech Companies?|last=Klotz|first=Lynn|date=January 16, 2014|website=Genetic Engineering & Biotechnology News|publisher=|access-date=March 15, 2016}}</ref>

==== Discovery ====
The process of drug discovery can involve scientists determining the germs, viruses, and bacteria that cause a specific disease or illness.<ref name=":2">{{Cite web|url=http://www.ca-biomed.org/pdf/media-kit/fact-sheets/CBRADrugDevelop.pdf|title=New Drug Development Process|date=|website=California Biomedical Research Association|publisher=|access-date=March 15, 2016|archive-url=https://web.archive.org/web/20160314061028/http://www.ca-biomed.org/pdf/media-kit/fact-sheets/cbradrugdevelop.pdf|archive-date=14 March 2016|url-status=dead}}</ref> The time frame can range from 3–20 years and costs can range between several million to tens of millions of dollars. Research teams attempt to break down disease components to find abnormal events/processes taking place in the body.<ref name=":2" /> Only then do scientists work on developing chemical compounds to treat these abnormalities with the aid of computer models.<ref name=":2" />

After "discovery" and a creation of a chemical compound, pharmaceutical companies move forward with the Investigational New Drug (IND) Application from the [[Organization:Food and Drug Administration|FDA]].<ref name=":2" /> After the investigation into the drug and given approval, pharmaceutical companies can move into pre-clinical trials and clinical trials.<ref name=":2" />

==== Trials ====
[[Medicine:Drug development|Drug development]] and pre-clinical trials focus on non-human subjects and work on animals such as rats.

The [[Organization:Food and Drug Administration|Food and Drug Administration]] requires at least 3 phases of clinical trials that assess the side effects and the effectiveness of the drug. An analysis of trial costs of approved drugs by the FDA from 2015 to 2016 found that out of 138 clinical trials, 59 new therapeutic agents were approved by the FDA. These trials have a median estimated cost of $19 million US dollars.<ref>{{cite journal | vauthors = Moore TJ, Zhang H, Anderson G, Alexander GC | title = Estimated Costs of Pivotal Trials for Novel Therapeutic Agents Approved by the US Food and Drug Administration, 2015-2016 | journal = JAMA Internal Medicine | volume = 178 | issue = 11 | pages = 1451–1457 | date = November 2018 | pmid = 30264133 | pmc = 6248200 | doi = 10.1001/jamainternmed.2018.3931 }}</ref>

* Phase 1 lasts several months and aims to assess the safety and dosage of the drug. The purpose is to determine how the drug affects the body.<ref name=":0">{{Cite journal|last=Commissioner|first=Office of the|date=2019-04-18|title=Step 3: Clinical Research|url=https://www.fda.gov/patients/drug-development-process/step-3-clinical-research|journal=FDA}}</ref>
* Phase 2 lasts several months to two years and aims to assess the efficacy and side effect profile of the drug.<ref name=":0" />
* Phase 3 lasts 1 to 4 years and aims to continue assessing and monitoring the efficacy and side effects of the drug. Phase 3 aims to determine the risks and benefits of a drug to its intended patient population.<ref name=":0" />
* Phase 4 trials occur after the drug is approved by the FDA and aims to continue monitoring safety and efficacy of the drug.<ref name=":0" />

Of these phases, the phase 3 is the most costly process of drug development.<ref>{{Cite web|url=https://www.fdareview.org/issues/the-drug-development-and-approval-process/|title=The Drug Development and Approval Process {{!}} FDAReview.org|language=en-US|access-date=2019-10-31}}</ref> A single phase 3 trial can cost upwards of $100 million.<ref name=":3">{{Cite web|url=https://www.forbes.com/sites/matthewherper/2012/02/10/the-truly-staggering-cost-of-inventing-new-drugs/#19426c5b4477|title=The Truly Staggering Cost Of Inventing New Drugs|last=Herper|first=Matthew|website=Forbes|access-date=2016-03-15}}</ref> It accounts for about 90 percent of the cost to pharmaceutical companies to develop a medication.<ref>{{Cite web|url=https://www.manhattan-institute.org/html/stifling-new-cures-true-cost-lengthy-clinical-drug-trials-6013.html|title=Stifling New Cures: The True Cost of Lengthy Clinical Drug Trials|date=2015-08-24|website=Manhattan Institute|language=en|access-date=2019-11-07}}</ref>

==== Failed drugs ====
The processes of "discovery" and clinical trials amounts to approximately 12 years from research lab to the patient, in which about 10% of all drugs that start pre-clinical trials ever make it to actual human testing.<ref name=":2" /> Each pharmaceutical company (who have hundreds of drugs moving in and out of these phases) will never recuperate the costs of "failed drugs". Thus, profits made from one drug need to cover the costs of previous "failed drugs". The cost of failure in R&D constitutes about 60% of all development costs. It emphasizes the importance of success rates as a key driver of R&D productivity. The average costs for studies are estimated at $30 million, $70 million, and $310 million for Phase I, II, and III, respectively.<ref>{{Cite journal |last1=Fernando |first1=Kathy |last2=Menon |first2=Sandeep |last3=Jansen |first3=Kathrin |last4=Naik |first4=Prakash |last5=Nucci |first5=Gianluca |last6=Roberts |first6=John |last7=Wu |first7=Shuang Sarah |last8=Dolsten |first8=Mikael |date=2022-03-01 |title=Achieving end-to-end success in the clinic: Pfizer's learnings on R&D productivity |journal=Drug Discovery Today |volume=27 |issue=3 |pages=697–704 |doi=10.1016/j.drudis.2021.12.010 |issn=1359-6446 |pmc=8719639 |pmid=34922020}}</ref>

==== Relationship ====
[[File:Research and Development Investments vs Log-Adjusted Treatment Costs at Launch Based on List Prices and Net Prices.png|thumb|Research and development investments vs log-adjusted treatment costs at launch based on list prices and net prices<ref name="10.1001/jamanetworkopen.2022.18623"/>]]
Overall, research and development expenses relating to a pharmaceutical drug amount to the billions. For example, it was reported that [[Company:AstraZeneca|AstraZeneca]] spent upwards on average of $11 billion per drug for research and developmental purposes.<ref name=":3" /> The average of $11 billion only comprises the "discovery" costs, pre-clinical and clinical trial costs, and other expenses.{{citation needed|date=June 2016}} With the addition of "failed drug" costs, the $11 billion easily amounts to over $20 billion in expenses.{{citation needed|date=June 2016}} Therefore, an appropriate figure like $60 billion would be approximate sales figure that a pharmaceutical company like [[Company:AstraZeneca|AstraZeneca]] would aim to generate to cover these costs and make a profit at the same time.{{citation needed|date=June 2016}}

Total research and development costs provide pharmaceutical companies a ballpark estimation of total expenses. This is important in setting projected profit goals for a particular drug and thus, is one of the most necessary steps pharmaceutical companies take in pricing a particular drug.{{citation needed|date=June 2016}}

A 2022 study invalidated the common [[Philosophy:Argument|argument]] {{tooltip|as is|they conclude that "drug companies should make further data available if they want to use this argument to justify high prices"}} for high medication costs that research and development investments are reflected in and necessitate the treatment costs, finding no correlation for investments in drugs (for cases where transparency was sufficient) and their costs.<ref>{{cite news |title=Big pharma says drug prices reflect R&D cost. Researchers call BS |url=https://arstechnica.com/science/2022/10/big-pharma-says-drug-prices-reflect-rd-cost-researchers-call-bs/ |access-date=21 October 2022 |work=Ars Technica |date=14 October 2022 |language=en-us}}</ref><ref name="10.1001/jamanetworkopen.2022.18623">{{cite journal |last1=Wouters |first1=Olivier J. |last2=Berenbrok |first2=Lucas A. |last3=He |first3=Meiqi |last4=Li |first4=Yihan |last5=Hernandez |first5=Inmaculada |title=Association of Research and Development Investments With Treatment Costs for New Drugs Approved From 2009 to 2018 |journal=JAMA Network Open |date=26 September 2022 |volume=5 |issue=9 |pages=e2218623 |doi=10.1001/jamanetworkopen.2022.18623 |pmid=36156148 |pmc=9513642 |issn=2574-3805|doi-access=free}}</ref>

===Stakeholders===
Patients and doctors can also have some input in pricing, though indirectly. Customers in the United States have been protesting the high prices for recent "miracle" drugs like Daraprim and Harvoni, both of which attempt to cure or treat major diseases (HIV/AIDS and [[Medicine:Hepatitis C|hepatitis C]]).<ref>{{Cite web|url=http://time.com/3731359/the-unintended-side-effect-of-lower-drug-prices/|title=The Unintended Side Effect of Lower Drug Prices|last=Sanghoee|first=Sanjay|website=TIME.com|date=4 March 2015 |access-date=March 15, 2016}}</ref> Public outcry has worked in many cases to control and even decide the pricing for some drugs. For example, there was severe backlash over Daraprim, a drug that treats toxoplasmosis.<ref name=":5">{{Cite web|url=http://www.cbc.ca/news/health/turing-clinton-prescription-drugs-1.3238202|title=CEO says he'll lower price of drug after public outcry over 5,000% price hike|date=September 23, 2015|website=www.CBC.ca|access-date=March 16, 2016}}</ref> Turing Pharmaceuticals under the leadership of Martin Shkreli raised the price of the drug 5,500% from $13.50 to $750 per pill.<ref name=":5" /> After denouncement from 2016 presidential candidates Hillary Clinton and Bernie Sanders, Martin Shkreli said he would reduce the price but later decided not to.<ref name=":5" />

With the recent trend of price gouging, legislators have introduced reform to curb these hikes, effectively controlling the pricing of drugs in the United States. Hillary Clinton announced a proposal to help patients with chronic and severe health conditions by placing a nationwide monthly cap of $250 on prescription out-of-pocket drugs.<ref name=":5" />

Research for a drug that is curing something no one has ever cured before will cost much more than research for the medicine of a very common disease that has known treatments.{{citation needed|date=June 2016}} Also, there would be more patients for a more common ailment so that prices would be lower.{{citation needed|date=June 2016}} Soliris only treats two extremely rare diseases, so the number of consumers is low, making it an [[Chemistry:Orphan drug|orphan drug]]. Soliris still makes money because of its high price of over $400,000 per year per patient.<ref name=":1" /> The benefit of this drug is immense because it cures very rare diseases that would cost much more money to treat otherwise, which saves insurance companies and health agencies millions of dollars. Hence, insurance companies and health agencies are willing to pay these prices.{{citation needed|date=June 2016}}

===Public policy===
Policy makers in some countries have placed controls on the amount pharmaceutical companies can raise the price of drugs. In 2017, Democratic party leaders proposed the creation of a new federal agency to investigate and perhaps fine drug manufacturers who make unjustified price increases. Pharmaceutical companies would be required to submit a justification for a drug with a “significant price increase” within at least 30 days of implementation. Under the terms of the proposal, Mylan's well-publicized price increase for its EpiPen product would fall below the criteria for a significant price increase, while the 5000% overnight increase of Turing Pharmaceuticals Daraprim (pyrimethamine) would be subject to regulatory action.<ref>{{cite news|last1=Gingery|first1=Derrick|title=Dems' 'Better Deal' Would Create Drug Price Gouging 'Enforcer'|url=https://pink.pharmamedtechbi.com/PS121171/Dems-Better-Deal-Would-Create-Drug-Price-Gouging-Enforcer|access-date=27 July 2017|publisher=[[Company:OTC Markets Group|OTC Markets Group]]|date=24 July 2017}}</ref>

=== Patents and monopoly rights ===

One of the most important factors that determine the cost of a drug is the availability of competing drugs and treatments.  Having two or more manufacturers producing drugs for the same disease tends to reduce costs.<ref name=":1" />

[[Social:Patent|Patent]] laws give pharmaceutical companies the exclusive right to market a drug for a period of time, allowing them to extract a high [[Finance:Monopoly price|monopoly price]].<ref name=":7">{{Cite journal|last1=Brennan|first1=Hannah|last2=Kapczynski|first2=Amy|last3=Monahan|first3=Christine H.|last4=Rizvi|first4=Zain|date=2017-04-02|title=A Prescription for Excessive Drug Pricing: Leveraging Government Patent Use for Health|url=https://digitalcommons.law.yale.edu/yjolt/vol18/iss1/7|journal=Yale Journal of Law and Technology|volume=18|issue=1}}</ref> For example, U.S. patent law grants a monopoly for 20 years after filing.  After that period, the same product from different manufacturers - known as [[Social:Generic drug|generic drug]]s - can be sold, usually resulting in a substantial price reduction and possible shift in market share. Two patents that are commonly used are process patents and drug product patents.<ref>{{Cite report |url=https://www.nber.org/papers/w11321 |title=Patents, Price Controls, and Access to New Drugs: How Policy Affects Global Market Entry |last=Lanjouw |first=Jean O. |date=May 2005 |publisher=National Bureau of Economic Research Working Paper 11321 |doi=10.3386/w11321 |location=Cambridge, Massachusetts |doi-access=free}}</ref> Process patents only provide developers intellectual claim to the methods in which the product was manufactured, so a competitor can make the same drug by a different method without violating the patent.

In some cases, a new treatment is more effective than an older treatment, or a given drug may work better than competitors for only some patients.  The availability of an imperfect substitution erodes prices to a lesser degree than would a perfect substitute.

Some countries grant additional protections from competition for a limited period, such as [[Social:Test data exclusivity|test data exclusivity]] or [[Social:Supplementary protection certificate|supplementary protection certificate]]s.  Additional incentives are available in some jurisdictions for manufacturers of [[Chemistry:Orphan drug|orphan drug]]s for rare diseases, including extended monopoly protection, tax credits, waived fees, and relaxed approval processes due to the small number of affected patients.

===Transparency===
The process of creating drugs to testing them to selling them is a long process.<ref name=":6">{{Cite journal |last=Levy, Rosenberg, Vanness |first=Joseph, Marjorie, David |date=2018 |title=A Transparent and Consistent Approach to Assess US Outpatient Drug Costs for Use in Cost-Effectiveness Analyses |journal=Value in Health |volume=21 |issue=6 |pages=677–684 |doi=10.1016/j.jval.2017.06.013 |pmid=29909872 |pmc=6394851 }}</ref> Aside from the costs for research and trials, many consumers are unaware of the process of the drug supply chain. There are many middlemen and companies that buy and sell the drugs. This includes "drug manufacturers, drug wholesalers, pharmacies, and payers."<ref name=":6" /> [[Medicine:Pharmaceutical industry|Big Pharma]]'s influence in the policies and regulations regarding drug patents and prescription costs, protects pharmaceutical companies from having to be transparent about where the money goes and who those high prices benefit, including Pharmacy Benefit Managers.<ref>{{Cite web |last=staff |first=staff |date=2023 |title=Governor Ron DeSantis Unveils Comprehensive Legislation to Increase Big Pharma Transparency and Accountability and Lower Prescription Drug Prices |url=https://www.flgov.com/2023/01/12/governor-ron-desantis-unveils-comprehensive-legislation-to-increase-big-pharma-transparency-and-accountability-and-lower-prescription-drug-prices/ |website=Ron DeSantis}}</ref>  Transparency between drug manufacturers and sellers increases accountability between producers and consumers and allows for patients to know more about what they are paying for. Prescription Drug Price Locators allow for patients to learn of more cost-effective sellers and find discounts that will benefit them.

In an effort by the U.S. Department of Health and Human Services (HHS) to regulate drug price transparency in television advertising in 2019, the HHS saw a resistance to change against legislation.<ref name=":8">{{Cite news |date=10 July 2019 |title=Federal Judge Strikes Down New Drug Price Transparency Rule |work=HealthPayerIntelligence |url=https://healthpayerintelligence.com/news/federal-judge-strikes-down-new-drug-price-transparency-rule |access-date=27 November 2019}}</ref> Although what the HHS sought to change was a step in the right direction for drug price transparency, Federal Judge Amit P. Mehta ruled in favor of the pharmaceutical industry. The ruling was based on the inability to give the HHS such power to enact such legislations.<ref name=":8" /> Policymakers have a lot to take into account when regarding the issue of transparency, as there are many middlemen involved in the selling and buying of prescription drugs.

==Effects on consumers==
When the price of medicine goes up the [[Philosophy:Quality of life|quality of life]] of consumers who need the medicine decreases.<ref name="Skinner 2016">{{cite web|last1=Skinner|first1=Ginger|title=As Drug Prices Increase, Quality of Life Goes Down|url=http://www.consumerreports.org/drugs/as-drug-prices-increase-quality-of-life-goes-down/|website=Consumer Reports|access-date=8 March 2017|date=21 June 2016}}</ref><ref>{{cite news|last1=Walker|first1=Joseph|title=Patients Struggle With High Drug Prices|url=https://www.wsj.com/articles/patients-struggle-with-high-drug-prices-1451557981|access-date=8 March 2017|work=Wall Street Journal|date=31 December 2015}}</ref> Consumers who have increased costs for medicine are more likely to change their lifestyle to spend less money on groceries, entertainment, and routine family needs.<ref name="Skinner 2016"/> They are more likely to go into debt or postpone paying their existing debts.<ref name="Skinner 2016"/> High drug prices can prevent people from saving for retirement.<ref name="Skinner 2016"/> It is not uncommon for typical people to have challenges paying medical bills.<ref name="Skinner 2016"/> Some people fail to get the medical care they need due to lack of money to pay for it.<ref name="Skinner 2016"/> In low and middle income countries up to 90% of people pay for medications out of pocket.<ref name=WHO2008Price>{{cite book |title=Measuring medicine prices, availability, affordability and price components |date=2008 |publisher=World Health Organization |page=1|url=https://www.who.int/medicines/areas/access/OMS_Medicine_prices.pdf?ua=1}}</ref> A November 2020 study by the West Health Policy Center stated that more than 1.1 million senior citizens in the U.S. Medicare program are expected to die prematurely over the next decade because they will be unable to afford their prescription medications, requiring an additional $17.7 billion to be spent annually on avoidable medical costs due to health complications.<ref name="westhealth">{{Cite web |title=High Drug Prices and Patient Costs: Millions of Lives and Billions of Dollars Lost |date=November 18, 2020 |publisher=West Health Council for Informed Drug Spending Analysis |url=https://www.cidsa.org/publications/xcenda-summary |access-date=2023-02-20 |website=www.cidsa.org}}</ref>

The effects of high prescription costs on consumers also affects their long-term health and overall life expectancy. When properly used, a medication can benefit a patient and cure their disease. When a patient cannot afford to pay for their medication, they lose out on the optimal benefits of proper and adequate dosages.<ref name=":9">{{Cite journal |last1=Watanabe |first1=Jonathan H. |last2=McInnis |first2=Terry |last3=Hirsch |first3=Jan D. |date=26 March 2018 |title=Cost of Prescription Drug-Related Morbidity and Mortality |url=https://journals.sagepub.com/doi/10.1177/1060028018765159 |journal=  Annals of Pharmacotherapy|volume=52 |issue=9 |pages=829–837 |doi=10.1177/1060028018765159 |pmid=29577766 |s2cid=4321240 |via=national Library of Medicine}}</ref> High prescription costs don't just affect patients in the short run, but also deteriorates their overall quality of life, as they are exposed to chronic illnesses that could have been prevented by that first prescription.<ref name=":9" /> Evidence from studies indicates that [[Chemistry:Insulin (medication)|insulin]] therapy as a treatment for patients with high glucose levels that are not yet diabetic, leads to a decrease in insulin resistance, which benefits patients.<ref>{{Cite journal |last=Riddle |first=Matthew C. |date=2002 |title=The underuse of insulin therapy in North America |url=https://onlinelibrary.wiley.com/doi/10.1002/dmrr.277 |journal=Diabetes/Metabolism Research and Reviews |volume=18 |issue=S3 |pages=S42–S49 |doi=10.1002/dmrr.277 |pmid=12324985 |s2cid=41005514 |via=Wiley online library}}</ref>

== References ==

=== Common measures taken to reduce costs ===
Consumers commonly respond to high or increasing drug prices by doing what they can to save drug costs. The most commonly recommended course of action for consumers who seek to lower their drug costs is for them to tell their own doctor and pharmacist that they need to save money and then ask for advice.<ref name="Consumer Reports June 2016">{{cite web|author1=Consumer Reports|title=The Way To Save On Your Prescription Drugs: Speak Up|url=https://www.youtube.com/watch?v=OXyrXS6_b-k |archive-url=https://ghostarchive.org/varchive/youtube/20211221/OXyrXS6_b-k |archive-date=2021-12-21 |url-status=live|website=www.consumerreports.org|access-date=8 March 2017|date=21 June 2016}}{{cbignore}}</ref> Doctors and pharmacists are professionals who know their fields and are the most likely source of information about options for reducing cost.<ref name="Consumer Reports June 2016"/>

Depending on the country and health policies implemented, there are also options to search for the most convenient and affordable health insurance plans without having to consult a healthcare provider or obtain insurance through the employer. However, those who seek to purchase insurance individually through the individual market are most likely to be underinsured and therefore could potentially have a higher prescription cost.<ref>{{Cite journal|url=https://www.commonwealthfund.org/publications/issue-briefs/2019/feb/health-insurance-coverage-eight-years-after-aca|title=Health Insurance Coverage Eight Years After the ACA — 2018 Biennial {{!}} Commonwealth Fund|website=www.commonwealthfund.org|year=2019|doi=10.26099/penv-q932|access-date=2019-10-23|last1=Collins|first1=Sara R.|last2=Bhupal|first2=Herman K.|last3=Doty|first3=Michelle M.}}</ref>

There can be significant variation of prices for drugs in different pharmacies, even within a single geographical area.<ref name="Consumer Reports January 2016">{{cite web|author1=Consumer Reports|title=Save Money on Meds: 6 Tips for Finding the Best Prescription Drug Prices|url=http://www.consumerreports.org/drugs/6-tips-for-finding-the-best-prescription-drug-prices/|website=Consumer Reports|access-date=8 March 2017|date=5 January 2016}}</ref> Because of this, some people check prices at multiple pharmacies to seek lower prices.<ref name="Consumer Reports January 2016"/> Online pharmacies can offer low prices but many consumers using online services have experienced Internet fraud and other problems,<ref>{{cite web|author1=Consumer Reports|title=Is it OK to buy medicine online? - Consumer Reports|url=http://www.consumerreports.org/cro/news/2015/08/is-it-ok-to-buy-medicine-online/index.htm|website=Consumer Reports|access-date=8 March 2017|date=30 August 2015}}</ref> such as long shipping times from overseas and a higher insecurity regarding [[Quality control|quality]], genuineness and safety of the ordered products.

Some consumers lower costs by asking their doctor for generic drugs when available.<ref>{{cite web|author1=Consumer Reports|title=Generic Drugs: The Same Medicine for Less Money|url=http://consumerhealthchoices.org/wp-content/uploads/2012/01/GenericDrugs-FINAL.pdf|website=Consumer Reports|access-date=8 March 2017|date=January 2012}}</ref> Because pharmaceutical companies often set prices by pills rather than by dose, consumers can sometimes buy double-dose pills, [[Medicine:Pill splitting|split the pills]] themselves with their doctor's permission, and save money in the process.<ref>{{cite web|author1=Consumer Reports|title=When It's Safe to Split Pills|url=http://www.consumerreports.org/drugs/is-it-safe-to-split-pills-in-half/|website=Consumer Reports|access-date=8 March 2017|date=30 December 2015}}</ref>

=== Not purchasing the medications / inaccessibility ===
In countries without universal healthcare, there can be unaffordable [[Finance:Out-of-pocket expense|out-of-pocket]] costs for needed medications. Approximately 25% of Americans find it difficult to afford prescription drugs.<ref name="10.1038/s41408-020-0338-x"/> In the case of expensive anti-obesity medications it has been noted that many people "who could most benefit from weight loss may be unable to afford such expensive drugs".<ref name="nyt-04-28">{{cite news |last1=Kolata |first1=Gina |title=Patients Taking Experimental Obesity Drug Lost More Than 50 Pounds, Maker Claims |url=https://www.nytimes.com/2022/04/28/health/obesity-drug-eli-lilly-tirzepatide-wegovy.html |access-date=13 May 2022 |work=The New York Times |date=28 April 2022}}</ref> This may be of higher concern for conditions that are more risky or detrimental to health and/or which, unlike obesity, don't have additional treatment options that are both widely known and effective – like further improvements in diet and physical activity in the case of obesity. A study found that among U.S. Medicare beneficiaries without subsidies, 30% of [[Medicine:Medical prescription|prescription]]s written for anticancer drugs, 22% for hepatitis C, and more than 50% for disease-modifying therapies for either immune system disorders or hypercholesterolemia were not filled by patients.<ref>{{cite journal |last1=Dusetzina |first1=Stacie B. |last2=Huskamp |first2=Haiden A. |last3=Rothman |first3=Russell L. |last4=Pinheiro |first4=Laura C. |last5=Roberts |first5=Andrew W. |last6=Shah |first6=Nilay D. |last7=Walunas |first7=Theresa L. |last8=Wood |first8=William A. |last9=Zuckerman |first9=Autumn D. |last10=Zullig |first10=Leah L. |last11=Keating |first11=Nancy L. |title=Many Medicare Beneficiaries Do Not Fill High-Price Specialty Drug Prescriptions |journal=Health Affairs |date=1 April 2022 |volume=41 |issue=4 |pages=487–496 |doi=10.1377/hlthaff.2021.01742 |pmid=35377748 |s2cid=247953729 |issn=0278-2715}}</ref>

The right to science and culture is one of the rights in the [[Philosophy:Universal Declaration of Human Rights|Universal Declaration of Human Rights]] according to which "Everyone has the right freely to participate in the cultural life of the community, to enjoy the arts and to share in scientific advancement and its benefits."<ref>{{cite web |title=Universal Declaration of Human Rights {{!}} United Nations |url=https://www.un.org/en/about-us/universal-declaration-of-human-rights |publisher=United Nations |access-date=5 June 2022 |language=en}}</ref>

=== Effects on healthcare systems ===
While some have concluded that "[[Medicine:Drug development|drug development]] is likely to remain an expensive and resource-intensive process",<ref>{{cite news |title=The price of health: the cost of developing new medicines |url=https://www.theguardian.com/healthcare-network/2016/mar/30/new-drugs-development-costs-pharma |access-date=5 June 2022 |work=The Guardian |date=30 March 2016 |language=en}}</ref> a study found that wide range of medicines in the [[Medicine:WHO Model List of Essential Medicines|WHO Model List of Essential Medicines]] can be profitably manufactured at very low cost by [[Medicine:Pharmaceutical industry|pharmaceutical industries]] and that "Most EML medicines are sold in the UK and South Africa at prices significantly higher than those estimated from [[Finance:Production (economics)|production]] costs".<ref>{{cite journal |last1=Hill |first1=Andrew M. |last2=Barber |first2=Melissa J. |last3=Gotham |first3=Dzintars |title=Estimated costs of production and potential prices for the WHO Essential Medicines List |journal=BMJ Global Health |date=1 January 2018 |volume=3 |issue=1 |pages=e000571 |doi=10.1136/bmjgh-2017-000571 |pmid=29564159 |pmc=5859811 |s2cid=4007393 |language=en |issn=2059-7908}}</ref>

Global spending on prescription drugs in 2020 may have been ~$1.3 trillion and "The high cost of prescription drugs threatens healthcare budgets, and limits funding available for other areas in which public investment is needed".<ref name="10.1038/s41408-020-0338-x">{{cite journal |last1=Vincent Rajkumar |first1=S. |title=The high cost of prescription drugs: causes and solutions |journal=Blood Cancer Journal |date=June 2020 |volume=10 |issue=6 |pages=71, s41408–020–0338-x |doi=10.1038/s41408-020-0338-x|pmid=32576816 |pmc=7311400 }}</ref>

==By region==
===United States===
Prescription drug prices in the United States have been among the highest in the world. The high cost of prescription drugs became a major topic of discussion in the new millennium, leading up to the U.S. health care reform debate of 2009, and received renewed attention in 2015. High prices have been attributed to monopolies given to manufacturers by the government and a lack of ability for organizations to negotiate prices.<ref>{{cite journal | vauthors = Kesselheim AS, Avorn J, Sarpatwari A | title = The High Cost of Prescription Drugs in the United States: Origins and Prospects for Reform | journal = JAMA | volume = 316 | issue = 8 | pages = 858–71 | date = 23 August 2016 | pmid = 27552619 | doi = 10.1001/jama.2016.11237 }}</ref>

Individuals are able to enroll in health insurance plans, which often include prescription medication coverage. However, insurance companies decide which drugs they will cover by creating a [[Medicine:Formulary (pharmacy)|formulary]]. If a medication is not on this list, the insurance company may require people to pay more money out-of-pocket compared to other medications that are on the formulary. There are also often tiers within this approved drug list, as the insurance company may be willing to cover a portion of one drug but prefer and completely cover a cheaper alternative.<ref>{{Cite web|url=https://www.coveredca.com/individuals-and-families/getting-covered/prescription-drugs/|title=Prescription Drugs {{!}} Covered California™|website=www.coveredca.com|access-date=2019-10-23}}</ref>

[[Medicine:Medicare Part D|Medicare Part D]] is a branch of Medicare that helps to cover costs of prescription medications for patients aged 65 and up. From 2010 to 2018, the Part D plan "nearly quadrupled" its spending on the catastrophic coverage phase.<ref>{{Cite journal|last1=Dusetzina|first1=Stacie B.|last2=Keating|first2=Nancy L.|last3=Huskamp|first3=Haiden A.|date=2019-10-10|title=Proposals to Redesign Medicare Part D — Easing the Burden of Rising Drug Prices|journal=New England Journal of Medicine|language=en|volume=381|issue=15|pages=1401–1404|doi=10.1056/NEJMp1908688|pmid=31483987|s2cid=201837322 |issn=0028-4793}}</ref> This increase in spending is attributed to the rising pricing of prescription medications.

===United Kingdom===
It varies by region in the {{wipe|United Kingdom}}. In Wales, Scotland and Northern Ireland prescription costs have been completely abolished, however in England the current prescription cost for adults as of 1 April 2021 is £9.35 per item dispensed.<ref>{{Cite web|url=https://www.nhs.uk/common-health-questions/nhs-services-and-treatments/how-much-nhs-prescription-charge/|title = NHS prescription charges|date = 9 November 2020}}</ref> There are subsidised costs for those claiming Universal Credit.

===Developing world===
In developing countries medications make up between 25 and 70% of health care costs.<ref name=WHO2008Price/> Many medications are beyond the reach of the majority of the population.<ref>Angela Saini [https://www.newscientist.com/channel/health/mg19325972.800-making-poor-nations-pay-for-drugs.html Making poor nations pay for drugs], New Scientist, 31 March 2007</ref> There have been attempts both by international agreements and by pharmaceutical companies to provide drugs at low cost, either supplied by manufacturers who own the drugs,<ref>[https://www.newscientist.com/channel/health/dn14141-gsk-tops-new-ethical-ranking-for-investors.html GSK tops new ethical ranking for investors – health – 16 June 2008]. New Scientist. Retrieved on 23 April 2011.</ref> or manufactured locally as [[Social:Generic drug|generic versions of drugs]] which are elsewhere protected by [[Social:Patent|patent]].<ref>[https://www.newscientist.com/article/dn870-drugs-bust.html Drugs bust – 13 June 2001]. New Scientist. Retrieved on 23 April 2011.</ref> Countries without manufacturing capability may import such generics.

The legal framework regarding generic versions of patented drugs is formalised in the Doha Declaration on Trade-Related Aspects of Intellectual Property Rights and later agreements.{{citation needed|date=March 2017}}

== See also ==
* {{section link|Criticism of patents|Proposed alternatives to the patent system}}
* Cost of drug development
* [[Social:Generic drug|Generic drug]]
* [[Medicine:Health policy|Health policy]]
* [[Philosophy:Inverse benefit law|Inverse benefit law]]
* [[Chemistry:Pyrimethamine#Availability and price|Pyrimethamine pricing history]]
* [[Medicine:Prescription drug|Prescription drug]]
* [[Organization:Unitaid|Unitaid]]
* Examples of drug controversies:
** {{section link|Sofosbuvir|Economics}}
** {{section link|Daclatasvir|Economics}}
** {{section link|Epinephrine autoinjector|Price}}
** {{section link|Insulin (medication)|Economics: United States}}

== References ==
{{Reflist}}

==Further information==
{{Refbegin}}
* {{cite journal | vauthors = Alexander GC, Casalino LP, Meltzer DO | title = Physician strategies to reduce patients' out-of-pocket prescription costs | journal = Archives of Internal Medicine | volume = 165 | issue = 6 | pages = 633–6 | date = March 2005 | pmid = 15795338 | doi = 10.1001/archinte.165.6.633 | doi-access = free }}
* {{cite journal | vauthors = Alexander GC, Tseng CW | title = Six strategies to identify and assist patients burdened by out-of-pocket prescription costs | journal = Cleveland Clinic Journal of Medicine | volume = 71 | issue = 5 | pages = 433–7 | date = May 2004 | pmid = 15195778 | doi = 10.3949/ccjm.71.5.433 | s2cid = 21846191 }}
* {{cite journal | vauthors = Alexander GC, Casalino LP, Tseng CW, McFadden D, Meltzer DO | title = Barriers to patient-physician communication about out-of-pocket costs | journal = Journal of General Internal Medicine | volume = 19 | issue = 8 | pages = 856–60 | date = August 2004 | pmid = 15242471 | pmc = 1492500 | doi = 10.1111/j.1525-1497.2004.30249.x }}
* {{cite journal | vauthors = Pham HH, Alexander GC, O'Malley AS | title = Physician consideration of patients' out-of-pocket costs in making common clinical decisions | journal = Archives of Internal Medicine | volume = 167 | issue = 7 | pages = 663–8 | date = April 2007 | pmid = 17420424 | doi = 10.1001/archinte.167.7.663 | doi-access = free }}
* {{cite journal | vauthors = Rabbani A, Alexander GC | title = Out-of-pocket and total costs of fixed-dose combination antihypertensives and their components | journal = American Journal of Hypertension | volume = 21 | issue = 5 | pages = 509–13 | date = May 2008 | pmid = 18437141 | doi = 10.1038/ajh.2008.31 | doi-access = free }}
{{Refend}}

==External links==
*[http://www.haiweb.org/MedPriceDatabase/ Database of International Medication Prices]
*[http://mshpriceguide.org/en/home/ International Medical Products Price Guide]
*[http://www.haiweb.org/medicineprices/international-medicine-prices-sources.php Multi-country price sources]


{{DEFAULTSORT:Prescription Costs}}
[[Category:Pharmacy]]

{{Sourceattribution|Medication costs}}