Most of us Americans have first-hand experience with the broken state of the U.S. prescription drugs market. In March, our son said his ADHD medication wasn’t working anymore. We set up an appointment with his pediatrician–which is when the Kafka-esque insurance wrangling began.
The doctor prescribed a medication listed on our insurer’s published formulary (the list of prescription drugs, whether brand name or generic, covered by its policies). The insurer denied the prescription, then denied the prior authorization our pediatrician submitted. Then we learned the published formulary was incorrect.
We got a copy of the correct formulary and tried again. We had to call around to find a pharmacy that had the new drug in the generic form (since the name brand isn’t covered), only to have the prescription denied again.
Rx Frustration Redux
The insurer told our doctor that a prior authorization was required, even though this medication is on the preferred formulary, so the pediatrician dutifully submitted that paperwork. Several days later, this prior authorization was also denied. The pediatrician’s nurse practitioner called the insurer, “threw a bit of a fit,” and got the insurance company to follow its own rules.
I picked up the medicine that same day. But despite the drug being listed in the formulary as costing $21 with insurance, I was charged $215–because our son has not yet met his $3,300 annual deductible.
The cherry on top of this sundae of frustration is that the new medication doesn’t seem to be working as hoped–so we’re going to have to go through all this again with another drug.
I know our situation is far from unique. But how did we get here? Why do insurance companies have so much power over our prescription drug choices and costs? And considering Trump’s May 12th executive order to lower prescription drugs costs, is it possible that there may be some relief on the horizon?
Here’s what contributes to the dystopia that is American prescription drug prices, and what we can expect from the current administration’s plans to improve the situation.
Why do prescription drugs cost us so dang much?
The press conference where Trump announced the executive order to lower prescription drug costs was plagued by his usual word salad–with a side of weird fat-shaming. But the verbal weaver-in-chief did at least make one valid point: Americans pay a lot more for the same drugs compared to citizens of other countries.
There are a number of potential reasons for this cost disparity, none of which are within an individual consumer’s control:
Research and development
Pharmaceutical companies like to point to the high cost of research and development as the main driving force behind the high cost of prescription drugs in America. And to be fair to Eli Lilly et al (which is not a phrase that I often type), the pharmaceutical industry spent $83 billion on R&D in 2019 alone, which is more than ten times the amount spent per year in the 1980s, adjusted for inflation.
But even with that staggering cost of R&D, that’s not the reason Americans are rationing their life saving medicine. The Journal of the American Medical Association found in 2022 that there is no connection between the amount of money a drug company spends on developing a medication and the price of that medication.
Profit motives
Though the top executives will deny this until they’re blue in the face, it’s hard to ignore the fact that pharmaceutical companies make billions of dollars per year–and can even measure their profits in hundreds of dollars per second.
Drug companies can set their own prices for medically necessary drugs, and they are abetted by an opaque, inconsistent, and bureaucratic employer-sponsored insurance system. This allows big pharma to (allegedly) determine drug prices based on profit motive rather than health outcomes.
Direct-to-consumer advertising
In 1997, the FDA relaxed the rules for pharmaceutical broadcast advertising, making it possible to advertise prescription medications directly to consumers on TV and radio. Drug companies embraced the opportunity wholeheartedly, spending about $1.3 billion on direct-to-consumer (DTC) ads in 1997, and that number soared to $8.1 billion in 2022. Pharmaceutical companies claim that DTC advertising helps inform consumers about health conditions and medical treatments.
I’m old enough to remember when direct-to-consumer prescription drug commercials first appeared. The ads seemed dubious to teenage me, since every commercial spot convinced me I needed Claritin, despite having no seasonal allergies. Many consumer advocates and medical professionals worry that consumers are similarly influenced to request unnecessary medication, which increases the cost of care.
Those increased costs appear to be the rationale behind the huge investment pharmaceutical companies put into DTC ads. The industry wouldn’t shell out more than $8 billion per year for the altruistic goal of keeping patients well-informed. It’s a for-profit industry, after all.
Pharmacy benefit managers
Pharmacy benefit manager (PBM) is the health industry role you’ve never heard of that’s behind the rage-inducing price of your blood pressure medicine. The PBM is a third-party contractor that negotiates drug prices between the pharmaceutical company, the insurer, and the pharmacy.
It’s the PBM that created the formulary we consulted while trying to get my son’s prescription (and it was probably the PBM that failed to update the formulary, which added three weeks to our hyperactive goose chase). Additionally, the PBM decides which medications are preferred, which are not covered, and how much patients will pay for them before and after meeting the deductible.
On the other side of the equation, the PBM negotiates discounts or rebates for the insurance companies from the drug manufacturers and determines how much the pharmacies will get paid by the insurers.
Unfortunately, the PBM can keep a portion of the discount or rebate they negotiate, as well as some of the money they receive from the insurer for the pharmacy–and none of their fees or incentives are transparent. These go-betweens are incentivized to increase prices for everyone to line their own pockets and their involvement is not a line item in your drug price.
Insurer cost sharing
Big Pharma doesn’t carry all of the blame for high drug costs. Insurance is also a usual suspect. Many insurance companies have shifted more of their costs onto patients in recent years via higher premiums, copays, and deductibles.
In our case, all three of those insurance costs have gone up in the past few years. Meaning we will be paying over $200 for our son’s monthly medication unless he reaches his $3,300 annual deductible–Ha Shem forbid.
Trump to the rescue…?
Like a broken clock occasionally telling time, our fearful leader has bumbled into identifying a real problem. Americans are spending way too much money on prescription drugs and it’s easy to see that citizens of other countries don’t have this issue.
So what exactly does the May 12th executive order say, and will it bring relief to patients who just want reasonable drug prices?
What’s in the executive order
The specific plan outlined in the so-called “Delivering Most-Favored Nation Prescription Drug Pricing to American Patients” executive order is classic Trump, overpromising a bright and beautiful improvement with an unclear method of execution.
The order directs the Department of Health and Human Services, led by Robert F. Kennedy, Jr., to negotiate with pharmaceutical manufacturers to set lower drug prices by mid-June. If that doesn’t happen, Secretary Bear Carcass will create a new rule tying U.S. drug prices to prices paid by patients in other countries.
And that’s it. That’s all the executive has ordered.
Prices aren’t going down anytime soon
Unfortunately, other than threatening to take the CEOs of Merck, Pfizer, and Johnson & Johnson to RFK Jr’s favorite swimming hole, there’s not much Trump can do to get the pharma companies to agree to lower prices.
As of right now, the administration seems to mainly be asking the drug manufacturers to pretty please lower their prices.
I’m not holding my breath. (Well, except around certain cabinet members.)
Complex, infuriating, and ubiquitous
There’s no bright side to the dystopian reality we’re living in, where a pencil-pusher in another state gets to decide on my kid’s medical care and I’m still coughing up a couple of Benjamins every month for medicine that doesn’t work. And even when our leaders correctly identify this as a problem, they don’t have real solutions, because the issue is so big, entrenched, and difficult to solve.
That doesn’t mean there’s no hope for us little folk. Whether it’s your kid’s nurse practitioner giving your insurance company a piece of her mind, your pharmacist finding you money-saving coupons, your doctor calling colleagues to get you as many samples as possible, or just a fellow patient listening sympathetically, the American healthcare system is still full of compassionate people supporting each other through this crap.
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