Pharmaceutical Industry Insights

Goals

To obtain insights into the pharmaceutical industry, with a specific focus on whether the cost of drugs and treatments are rising or declining. Also, to understand the reasons behind the rise or decline, as well as the profits being generated by pharmaceutical companies.

Early Findings

  • More expensive drugs are entering the US pharmaceutical market and drug prices have risen. Insurers have also devised a new payment method that requires "patients to pay a larger share of the cost and for insurers to pay less: coinsurance."
  • According to research by Inmaculada Hernandez, an assistant professor at the University of Pittsburgh School of Pharmacy, "between 2008 and 2016, brand-name oral prescription drugs rose 9 percent annually, while injectable drugs increased 15 percent per year."
  • Recently, rather than a flat copay, the cost paid by a consumer for these drugs is "often calculated as a percentage, typically 20 to 30 percent, of the drug’s full price."
  • According to a 2019 Consumer Reports survey, "Thirty percent of Americans who currently take prescription medicine say their out-of-pocket cost for a drug they regularly take has increased in the past year."
  • Of the 30% who have experienced increased costs, 12% mentioned that their drug costs increased by $100 or more.
  • A major contributing factor to this price surge is the fact that there are currently no federal laws or regulations aimed at effectively keeping drug prices in check.
  • In the past, pharmaceutical companies attributed high prices of drugs to innovation. They argued, "that new and improved drugs are naturally more expensive." However, a new study published in the journal Health Affairs presents contradicting data.
  • The study "suggests that, largely, costs have gone up because companies are raising the price of drugs that are already available."

Proposed next steps:

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Our background search reveals that the costs of drugs and medication are on the rise. However, there are varying opinions regarding the reasons behind this price surge. We recommend further research to provide 4-5 reasons behind the rise of drugs and/or treatment costs. Since there are varying viewpoints surrounding this issue, we would provide a balanced mix of opinions: i) from the perspective of pharmaceutical companies, and ii) from industry experts, market research, or surveys.
Also, we recommend further research to provide 3-5 insights into the profits being generated by pharmaceutical companies. These insights may include (but are not limited to) i) typical margins generated on a drug sale (for instance, pharmaceutical drugs have a gross profit margin of X% OR a typical pharmaceutical company makes between $X and $Y on drug sales), ii) amount of revenue generated in the US pharmaceutical industry, iii) most profitable categories/types of drugs. [Note: We would not be triangulating any data provided in these insights; we would focus on providing precompiled data from industry experts and/or market research]