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Bitter Pill to Swallow: Why is the Cost of Medications in the US so high?

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Healthcare and moneyA recent article from CNN Politics discusses the measures Medicare is taking to reduce the cost of medications that financially burden the agency. The title of the CNN Politics article tells just about all you need to know about the contents. It reads, “Medicare now negotiating price of drug that costs $7,100 in US vs. $900 in Canada.” For many years, we here at IsraelPharm have been highlighting the same fact: that drug prices in the US are much higher than in most of the developed world.  Patents protect newer drugs and the manufacturer can set whatever price the American market can bear. Only when that patent protection runs out (after many years) can cheaper generic versions come onto the shelves.  But there are much tighter price controls in most other countries, like Canada, Israel, the UK, the EU, and Australia, which enjoy a degree of socialized medicine. The difference between the U.S. and those countries’ prices can be as high as 60-70%, and in comparison with Israel, they often top 90%. The following table at the bottom of this article lists some of the most frequently prescribed branded medications. It compares the prices between US retail pharmacies, a popular Canadian online drug vendor, and IsraelPharm. The article from CNN Politics picks out three of the most popular medications that represent a good sample of how much people in the US could save if they could buy them at the same price as people overseas. However, the main thrust of the CNN article is to use these examples to illustrate how much Medicare could save if it could buy the drugs at those prices. After dealing with some of the other points that the article makes in a very abbreviated form, we’ll be able to talk more about how the same strategy of buying overseas could affect your pockets. Pricing on Eliquis Anticoagulants are prescribed for the treatment of a wide range of potentially serious or even fatal conditions, like atrial fibrillation (heart flutter) and thrombosis (clotting), which can be precursors to heart attacks or strokes. Eliquis (generic apixaban) is the most frequently prescribed anticoagulant other than the much older form of blood thinner called warfarin. Unlike warfarin, Eliquis is a member of the newer group of medicines known as direct oral anticoagulants (DOACs). DOACs act as factor Xa inhibitors that decrease clot formation by inhibiting the action of factor Xa, a key blood-clotting protein. These new medications have multiple advantages over the older forms of anticoagulants. They don’t require frequent monitoring, have fewer interactions with other medications, and don’t need special dietary restrictions.  On the other hand, they are much more expensive. For at least the next two years, Eliquis will continue to be protected by patent against any generic form of competition, and the license holders could likely get another extension to their exclusive rights similar to the one granted by courts in 2020. When a doctor prescribes these newer drugs, it would be on the basis that the risks associated with the older forms are too significant or they are not delivering the required benefits. Faced with the potentially severe outcomes of inadequate treatment, most patients cannot avoid paying the higher prices. Pricing on Stelara Stelara is an excellent example of how expensive it can be to use the newest medications developed by hi-tech laboratories to specifically treat a small range of conditions. Many years of research and billions of dollars go into developing these medicines, and the failure rate is very high – about nine out of ten don’t make it onto the market. That means that the very small number that do get FDA approval in the end have to recover not only their own development costs, but also some of the funds that were poured into the other drugs that fell by the wayside. Stelara was developed by Janssen Pharmaceuticals. It is a monoclonal antibody medication that targets a subunit of human interleukin-12 and interleukin-23, naturally occurring proteins that regulate the immune system and immune-antibody-mediated inflammatory disorders. The primary beneficiaries are people suffering from Crohn’s disease, ulcerative colitis, plaque psoriasis and psoriatic arthritis. Before Stelara, there were very few options for treating people with these extremely painful and debilitating conditions, and Selara came as a significant breakthrough. However, the drug is costly – the self-administered bi-monthly subcutaneous injection costs as much as $46,000 for people without insurance, down to $26000 with a health insurance coupon. Happily, you can buy the same medication from us for just $1900, and it will be delivered to your door.

Why are drugs in the U.S. so expensive?

This is the sixty-four dollar question. When comparing medical infrastructures in the U.S. with other Western countries, the main factor is the element of “hands-off” free enterprise that rules in the U.S. compared to some degree of socialized medicine in most other countries. The primary role of the FDA is to ensure the quality and effectiveness of medications used in the U.S., and little consideration is given to consumer cost. In the other countries, there is a balancing act between the two. For example, in Australia, a new drug will not be approved by the Therapeutic Goods Administration (TGA) unless it can demonstrate new features and cost advantages over existing medications. Applying for approval for a new drug that does basically the same job as existing meditations at about the same price will fail. In contrast, the FDA will register drugs that perform the same primary function as an existing approved medication, even if it’s more expensive.

What are the comparative prices of popular brand drugs?

The table below compares the average advertised cost of medications from popular U.S. and Canadian retail outlets with IsraelPharm’s price.  In some cases, the packaging is different (number of tablets or volume of liquid), so we have done some computations to get equivalence by bringing the cost down to a per-unit basis so that the comparison is entirely valid. Pricing table as of February, 2024
Product Main use US Retail price (per tablet) Canada Retail price (per tablet) IsraelPharm (per tablet) You save
Jardiance 10 mg tablets Diabetes $20.53 $4.29 $2.87 86%
Eliquis 2.5 mg tablets Blood thinner $10.57 $2.62 $2.02 81%
Stelara 90mg syringe Treats gastrointestinal diseases like Crohn’s disease and ulcerative colitis, plaque psoriasis and psoriatic arthritis $46900 $6600 $1900 96%
Ozempic 4x1mg injections Diabetes/weight loss $1050.00 N/A $550.00 53%
Vagifem 10mg tablets Estrogen suppository $30.75 $6.17 $2.67 91%
Myrbetriq 50mg tablets Overactive bladder $18.00 $3.80 $2.63 85%
Plaquenil 200mg Rheumatoid arthritis $9.35 $1.18 $0.61 93%
Jakafi 20 mg tablets Treating myelofibrosis $159.10 $118.00 $35.63 78%
Trelegy Ellipta 1 Inhaler  Treating chronic obstructive pulmonary disease (COPD) $853.00 $220.00 $215.00 75%
Xeljanz XR 11 mg tablets Rheumatoid arthritis $198.47 $6648 $15.54 92%


Why hasn’t there been progress in lowering the prices of prescription drugs in the US? 

The federal administration has promised to implement programs and policy changes to make pharmaceutical products more affordable. However, these initiatives have had varying degrees of success in impacting consumers regarding reducing drug prices. It’s mostly been about saving Medicare. One key program being pursued by the administration is allowing Medicare to directly negotiate drug prices with companies for high-cost drugs without generic or biosimilar alternatives. Some people are concerned that this will primarily benefit insurers without guaranteeing consumer cost savings. People have become accustomed to the trend of steady increases in prescription drug prices, but the rate at which they are increasing has become a major point of contention. Although there has been some moderation in price hikes over the past five years, substantial reductions in this rate have been rare. Overall, the prices of prescribed drugs continue to rise.

Why is the cost of medications increasing faster than the rate of inflation? 

This is one of the concerns voiced by both the public and individuals with firsthand experience regarding how high drug prices affect public health overall. An ideal target would be to keep increases in the cost of medications in line with changes in household income. At least then, people wouldn’t be falling further behind each year.  In fact, over the past decade, the rate at which prices for prescribed drugs have increased has consistently exceeded the inflation rate. This indicates that drug prices have been rising faster than wages and household income, making them less and less affordable. In 2020, there was an average price increase of 2.9% for drugs, compared to an inflation rate of 1.3%. In the aftermath of COVID, with the inflation rate standing at three or four times where it was in 2020, there could be a yearly increase of between 10% and 15% to 20% for the rest of this decade. Quite a daunting prospect! Getting cooperation from the drug manufacturers will take a lot of work. They are facing post-COVID problems from disruption in supply chains and labor shortages. On top of that, the same problem of higher inflation will result in increased interest rates on their debts and the need to pay higher interest rates to attract the additional funds they need to build new production facilities. These all indicate that drug manufacturers will face pressures to raise prices substantially over the next two to three years, with little chance of them decreasing. We wrote a few months back about how insurance companies are already starting to cut back on their coverage of some of the more popular and expensive medications. First in the line are the weight-loss drugs like Ozempic/Wegovy (semaglutide) and Mounjaro/Zepbound (tirzepatide).  Additionally, it is crucial to recognize the fact that 30 million Americans do not have health insurance. Even if there were a breakthrough for Medicare in reaching some agreement, the trickle-down effect of lower cost of medications for the average buyer would be slow and small.
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