Brand name prescription medications are expensive. That fact shouldn’t be news to anyone. What is new is the rate in which these medications are going up in price. In the last few years the price of nearly every brand name prescription medication, all of which were very expensive to begin with, have skyrocketed at many times the rate of inflation.
In order to quantify exactly how rapid the rate of these medication prices are going up, I compared the average price retail pharmacies in the US paid for 335 brand name listings of more than 100 medications over 3 years. I compared what pharmacies in the US paid (the NADAC price) for these medications on the first week of October 2012 to what they paid for the same medications on the first week of October 2015. This list consisted exclusively of brand name prescription medications for which no generic version was yet available. All of the drugs used were listed on the NADAC price lists for October 4, 2012, October 10, 2013, October 8, 2014 and October 7, 2015 for comparison.
What I found was both shocking and yet not shocking at the same time. Of all the medications on my list, only two of them (Norvir and Podofilox ) went down in price. All other brand name prescription drugs on my list went up a minimum of 9% and an average of just over 56% in price in only 3 years. For comparison, the average rate of inflation during that period of time was only 3.23%. That means that brand name prescription medications have been going up in price at about 16 times the average rate of inflation since October 2012.
Here’s a PDF list of the medications I compared along with their prices to show how much they cost and how much their prices have risen.
I should note that this inflation of prices wasn’t restricted to the medications on that list. My initial study dealt exclusively with medications that had no generic competition. However, to see if a generic equivalent had any effect on the price of a band name medication I compiled a second list of brand name medications that already had inexpensive generic alternatives.
This second list contains 86 listings of 35 different brand name medications, then a second set listing their exact generic equivalents. Again the NADAC prices for these medications was compared on the first week of each October to the price of the same medication listing each subsequent October from 2012-2015.
Surprisingly, the prices of these brand name medications still went up an average of 46% in three years even though the prices of the generic equivalents for these medications dropped an average of 21% over the same time period.
This second part of this study is perhaps more interesting than the first part because it shows that generic competition appears to have very little, if any, effect on the prices of brand name medications. If there were any market forces whatsoever influencing the prices of brand name medications then you would expect these prices to go down once the exact same medication is available in generic form for only a few pennies. This clearly isn’t the case since the exact opposite is happening: brand name medication prices are going up at about the same rate whether or not the medication has any generic competition.
So, why are the prices of these drugs going up as quickly as they are? One reason is that there’s nothing to stop the pharmaceutical companies from raising their prices. A pharmaceutical company has a monopoly on any medication that’s still protected by a patent. Also, here in the US, there are absolutely no laws that protect consumers from price gouging by the pharmaceutical companies.
But even without a patent there appears to be no limit to what the pharmaceutical companies will charge for their products. This shows that the pharmaceutical companies are getting very desperate.
The pharmaceutical companies have produced very few new blockbuster products in the last 15 years. Most of the new medications released since 2000 have been, at best, marginally successful but, more often, complete flops. The patents on most of the popular prescription medications have either run out or are about to run out. This is why revenue for the major pharmaceutical companies has been mostly flat even though the prices of their drugs have gone up by more than 50% in three years. With few new ideas, pharmaceutical companies are faced with a shrinking market share and an increasingly bleak future.
In their desperation they’re raising the price of everything they’ve got left. It’s the only way they can maintain their revenue when they have less to offer each year. So, in reality, these drug prices are just the price we have to pay to keep a failing industry with no new ideas afloat.