March 3, 2022

Wild & Whacky: The price of medicine.

Two recent studies show wild price increases and whacky variability. 

A couple of recent studies are highlighting what anyone who has had to buy prescription drugs already knows. Prices are not only wild, they’re downright whacky. 

On the wild side.

A study conducted by ValuePenguin last year looked at data from the Centers for Medicare and Medicaid Services (CMS) to see the trajectory of medical spending since 1970. Here are the key findings about the cost of prescription drugs: 

  • Spending increased from $6 billion to $370 billion in 2019
  • Out-of-pocket costs increased by 1,093%
  • Cost to private health insurance rose by 32,820%
  • Retail prices rose by 6,633%

One stat line says it all. Prescription drug costs are projected to increase to $560 billion–a 10,087% increase since 1970 and a 299% increase since 2021. 

See the study here

On the whacky side.

A more recent study by ValuePenguin analyzed data from the Kaiser Family Foundation and the U.S. Bureau of Economic Analysis to plot the trajectory of prescription drug spending since 2010. 

The headline stat is that pharmaceutical spending increased by 77%, from $322 billion to $570 billion since 2010.

Now for the whacky part. Not all states saw equal increases. 

The states with the largest jumps in spending:

  • 117% Washington D.C.
  • 110% Colorado 
  • 109.5% Texas

These states saw the lowest jump in spending:

  • 43% Minnesota
  • 49% West Virginia
  • 49% North Dakota

But, in spite of the increases, copays decreased from $48 billion to $47 billion. 

Whackier still is that only 5% of prescriptions are being paid for completely out of pocket, yet the state with one of the lowest increases in spending, North Dakota, also has the highest percentage of medications completely paid out of patients’ pockets at 12%. 

And if you think that states known for their high cost of living would also have the highest per-household expenditures, you would be incorrect. 

The three highest per-household costs were:

  1. Delaware–$6,512.55
  2. Kentucky–$6,033.30
  3. Tennessee–$6,006.82 

New York finished 8th with $5,241.68 and California 48th with $3,329.31. 

See the study here.

Why so wild and whacky?

On the demand side of things, authors of the second study point out that each year has seen an increase prescription use, as well as higher prescription strengths and stronger dosages. They also point to population growth. Over the past 10 years the U.S. has grown by more than 22 million people. More people, more meds. 

On the supply side, they say prices are being driven up by higher research and manufacturing costs. 

The second study also notes that the cost of individual prescription drugs can vary from state to state–even from city to city–because of differing legislation and because some but not all states belong to Medicaid purchasing pools, which can lower patients’ costs. 

While these are offered as causes of wild and whacky costs, the bigger picture problem is what many call a broken or fractured healthcare system. 

Cure the cause, say goodbye to the symptoms.

Without a national effort, individual markets will continue responding to supply and demand, resulting in the spending trends highlighted in these studies. 

The public sector has had some success with things like purchasing pools and the Affordable Care Act, yet prices continue to climb unevenly, depending on location.

The private sector–companies like GoodRx and Mark Cuban Cost Plus– has stepped in on the cash-purchase side to provide some stability and control. 

Much more needs to be done. Gifthealth is proudly committed to joining the effort with the goal of increasing access to more affordable medications for everyone across the country. We are continuously developing new manufacturer partnerships, growing our prescriber relationships and innovating as if our lives depend on it. Because one day, each of us will depend on medications for our health and wellbeing.

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