Why Are Some Drug Prices So High?

Have you gone into a pharmacy and asked to buy your prescription medication without insurance? Were you shocked by the high price? You’re not alone. Paying directly for medicine is becoming more commonplace as insurance premiums and deductibles rise to unprecedented levels. There are a lot of factors that go into the price of a medication. This blog will cover new drug pricing, generic drug pricing, and how an insurance company can set high drug prices.

Why are name-brand drug prices high?

When a manufacturer sets the price of their medication, they are trying to recoup the astronomical cost of developing that drug as quickly as possible. The infographic below takes you through the process and cost of bringing a new drug to market.

With their temporary exclusive rights, the manufacturer sets a high price for as many years as possible. They are earning back that 2 to 3 billion dollars spent to get the new drug to market. Only after the drug manufacturer’s patent and exclusivity have expired can generics enter the market through a shortened FDA approval process.

Is there any hope to get a new drug at a low cost? Not likely if you buy directly from a pharmacy. Pharmacies buy and sell products just like every other retail shop. A pharmacy buys their medications from a wholesaler and resells that drug at a higher price to make a profit. For most name-brand drugs, the price from the wholesaler to the pharmacy is already very high. There is not a lot of wiggle room to lower the cost. If you don’t have insurance, you will end up paying as much as a mortgage for some of these name-brand drugs. For these expensive medications, I believe the best way to afford them is to appeal directly to the drug’s manufacturer for their patient assistance programs. Most manufacturers have patient assistance programs that will help you with all or a portion of the name-brand drug cost. We have compiled a list of popular name-brand drugs and their manufacturer’s patient assistance programs to help you in your efforts on our Drug Company Patient Assistance Program page.

Why are generic prices low?

After medications have been in the market for many years, the manufacturer will lose their patent and exclusivity protection. Other drug manufacturers will apply for and be granted generic approval to produce the medication’s generic form through the FDA. Generic medications must have the same strength, dose, route of administration, and active ingredient(s) as the brand. The generic medications also must meet the same quality, strength, and purity standards as brands, so they have the same benefits and effects. These generic manufacturers sell the drugs at a much lower cost because they do not have to earn back billions of dollars on research and development.

Generic drugs are produced by any drug manufacturer that thinks there is a market for them. These new manufacturers increase the drug’s availability and help create competition in the marketplace. Competition means lower cost and more affordable medications.

There are thousands of low-cost generic drugs available for patients to use. However, many big chain pharmacies will only sell a shortlist of around 20 or 30 generics directly to the patient at a low price. Patients who have multiple prescriptions may end up going to 2 or 3 different pharmacies to find each drug’s lowest cost. At Pure Life Pharmacy, we have over 1000 medications for $10 or less all in one spot. We will save you time and money when looking for the lowest cost generics.

Do Insurances Set Pharmacy Prices?

Yes, insurance companies set prices on any medication a pharmacy bills through insurance. The insurance company’s contract forces the pharmacy to sell the medicine at the same price billed. For example, when a pharmacy bills a medication to insurance for $100, they must sell that same medication to the cash pay patient at the same price of $100. If the pharmacy wants to help a cash pay patient with no insurance by selling them that same medication for $10, the pharmacy will violate their insurance contract. This violation puts the pharmacy in jeopardy of losing their contract altogether, which may mean financial ruin. They also may owe the insurance a hefty financial penalty for their violation.

There is a way for a pharmacy to offer low-cost generics without violating their insurance contract. As mentioned previously, some pharmacies will provide a shortlist, usually between 20 and 30 medications, at a reasonable cost directly to the patient. This shortlist is separated from other drugs and never billed to insurance. Pure Life Pharmacy decided to cancel all our insurance contracts to free us from any contractual obligations completely. We have over a 1000 medications listed for less than $10 per month supply.

Insurance will likely set the price for a name-brand drug because they are almost always billed through insurance. However, you should know insurance companies may set the price hundreds of dollars higher than the name-brand medication’s already steep cost. We at Pure Life Pharmacy will sell any name-brand medication with a limited mark up of $6. If our wholesaler price is $100, we will sell it to you for $106.

Final Thoughts

Trying to find affordable medication can be a daunting task. You shouldn’t spend your valuable time doing research, looking for discounts and copay cards only to find that the big chain pharmacy won’t honor the discounted price. You need to work with a pharmacy that understands the drug pricing and how to find the most affordable options for you. Pure Life Pharmacy loves saving you money and will work with you to lower your monthly medication costs.

~Jeffrey
Jeffrey O. Hoover is the Founder and Owner of Pure Life Pharmacy. Learn more about Jeffrey.

Links Referred to in Infographic Image:

1. It takes an average of 12 years for an experimental drug to pass from the laboratory to your medicine cabinet
2. Research and Development of a new drug is estimated to cost $2-3 Billion
3. For every 5,000 drugs that enter the preclinical testing process, only one makes it to market
4. After R&D and FDA trials, the manufacturer applies for and receives FDA patent and exclusivity protection