Drug manufacturers have to switch from price hikes to some alternative ways of increasing profits

What do you think about drug prices in the USA? Do you consider them to be reasonable? Most Americans are likely to answer “no” to this question. In fact, 73% of US citizens think that the government should take more steps to regulate the prices of prescription medicines. Sure, those on premium insurance plans do not face any problems with paying for their medicines, but there are millions of US citizens who use high-deductible insurance plans or have no insurance at all, and, when they get seriously ill, they have to spend a large portion of their income on medications. More to the point, they sometimes have to choose between buying drugs or food, and in such cases the choice is clear enough.

drug manufacturers

One more argument one should mention: drug prices in the USA are the highest in the world. And the difference is dramatic. Canadians ― our close neighbors ― pay up to 87% less, and, as for other countries, the pricing difference reaches up to 97%. That seems irrational, doesn’t it?

How are drug prices formed in the USA?

The characteristic feature of the American pharmaceutical industry is the lack of regulation. In the USA, manufacturers may set any prices they consider to be acceptable. If patients keep on buying some product, its price is supposed to be adequate. But, in fact, in many cases consumers have no choice, if they do not buy medicines, they may face serious health problems or even die. So, they agree to pay any price a manufacturer sets. As a result, pharmaceutical companies may raise their prices as high as they want to or as patients can afford.

At the same time, in many countries, governments get much more involved with the affairs of drug manufacturers. For example, if a pharmaceutical company wants to introduce some product to Canadians, it has to turn to a special board for the latter one to approve the price of the drug. The members of the board compare the price proposed with prices in the countries with a similar level of economic development. In case the price offered is higher, it is not approved. And, as you can see, such an approving scheme allows Canadians to save much money.

However, one should also mention that the manufacturers’ greed for money is not the only factor that makes prices increase. There are two more players that also have major roles. They are insurers and pharmacy benefit managers that act as intermediaries. In fact, produces do not always get list prices for their products. In most cases they work in alliance with insurance companies, since most Americans use the services of such companies. But manufacturers do not work with insurers directly, they entrust negotiations to pharmacy benefit managers. As a rule, insurers want to get a significant discount, and producers have to meet their demands, since otherwise their products will not be included to formularies and, consequently, will not gain popularity among consumers.

As for managers mentioned above, they are supposed to focus on the needs of consumers in the first place. But in most cases the main reason why they fight for large discounts for insurers is the fact that their income depends on the size of that discount.

So, manufacturers tend to offer bigger discounts in order to please such intermediaries and to raise list prices in order to compensate losses. As a result, pharmacy benefit managers make good money and insurers (as well as the majority of their customers) do not feel the difference in prices. Sure, patients on high-deductible plans and uninsured consumers have to overpay.

In addition, as you have probably noticed, drug prices are regularly increased, which significantly contributes to the growth of the revenue of medicine producers. In the recent years the income of pharmaceutical companies rose by 5 % every year on average due to rises in price.

Still, one should acknowledge that today manufacturers tend to avoid price hikes because of the political pressure. Trump’s administration makes every effort to solve the problem of high drug prices. So, in 2018 the number of price enhancements was reduced by 31%.

The analyst Geoffrey Porges has analyzed data on 17 large companies and has found out that without price increases their sales growth might have diminished by 6%. Many experts claim that drug manufacturers rely too heavily on price hikes. According to the results of the research, conducted by Porges, the list of companies that are too dependent on price hikes (as of 2018) includes Amgen, AstraZeneca, GlaxoSmithKline and Pfizer.

And, taking into account the current policy of the government, they need to work out some other schemes for increasing their profits, otherwise they are likely to experience all sorts of financial problems, including difficulties with finding investors.

There are 3 options to choose from:

  • to introduce a new product or an updated version of an old one;
  • to negotiate with doctors so that they prescribe their medicines to a bigger number of patients;
  • to encourage consumers to take their medications on a regular basis.
  • Let us discuss them in detail.

Speaking about inventing new medicines, one should first of all take into account that such projects cost about $2,5 billion as of today, so there is a very limited number of manufacturers that can afford that. Besides, nowadays scientists are focused on working out treatments for complicated diseases, such as cancer or Alzheimer’s, and there is a huge risk to suffer a defeat.

As for increasing the amount of prescriptions, there are frequently restrictions on the number of pharmaceutical agents that can visit a particular doctor. And, if to take into account the fact that most new medicines are aimed at treating rare diseases, it seems to be evident that there are not many opportunities to get more prescriptions.

So, it turns out that the most advantageous variant is to work with patients so that they get the exhaustive information on their diseases and realize that taking prescribed medicines according to the plan is a must. It is also worth to note that, in the USA, drug producers lose about $250 billion every year due to the fact that consumers do not take their medicines as recommended.

Are there any ways to reduce drug expenses today?

 As it has been mentioned above, medicines cost much less in other countries, so the obvious solution is to buy them abroad, for example, in Canada. It is a well-developed country with the proper drug legislation and control, so it is safe enough. Besides, it is one of our closest neighbors. You have probably heard about people making trips to Canada to purchase medications at lower prices, haven’t you? Sure, today, in the epoch of the Internet, you can order medicines from Canada online. No doubt, when it comes to buying drugs, it is crucial to choose a trustworthy pharmacy, since there are hundreds of companies distributing counterfeit products or just cheating customers out of their money.

So, here are the characteristic features of a proper online drugstore:

  • it is not newly organized;
  • it doesn’t offer the prices that are too low (they should not differ dramatically from those at other websites);
  • you have the opportunity to contact it;
  • it guarantees 100% privacy;
  • it provides its customers with free consultations with professional doctors.

Is it safe to switch to generics?

While surfing discount platforms, you are likely to notice that most of them offer generics as an alternative to original products that are more expensive. And in most cases the difference in prices is so big that it seems too suspicious to customers. So, let us have a close look at generic medicines for you to have the opportunity to make an informed choice.

The main difference between generics and brand products is origin. Generic drugs can be manufactured by any company in any corner of the world. As a rule, they come from countries with a low level of salaries. Manufacturers start producing generics after patents on original products expire. They do not have to spend money on researching, testing or advertising, and that also contributes to the reduction in prices.

Generics contain the same active ingredients, but doses may differ. Consequently, they may turn out to be even more effective than original medicines. One should also note that generic medications are obligatory tested for safeness. So, if you want to pare down your drug expenses to the minimum, that’s a suitable solution.

Is it allowed to buy medications from abroad?

It is widely known that importing medicines to the USA is illegal. However, as of now, the FDA is focused on those who import drugs for reselling, and, in case you order them from Canada or another country for personal use only, you will not be prosecuted. So, you may safely place an order right now.

It is also worth saying that the US government is currently considering the legalization of the importation of medications from Canada. Still, such changes are not likely to be introduced in the near future.

The problem is that such a step may result in shortages. The Canadian market is significantly smaller than the American one, and it cannot provide medicines to both countries. Sure, if the demand exceeds the supply, manufacturers will increase prices. As you can see, the risks are too serious.

In any case, such intentions of the government are a good sign. They prove that buying drugs from Canada is safe enough. In conclusion, we want to highlight that, taking into account the fact that in the USA most drug manufacturers keep on selling their products at unreasonably high prices so far, ordering drugs from Canadian online pharmacies seems to be the easiest way out.