Why U.S. Drug Costs Are Out of Control

In his New York Times article “New Dosages of Old Drugs are used to Raise Their Prices,”

Barry Meier addresses the controversial trend in the drug industry in which newly manufactured dosages of common drugs are being introduced into the marketplace to circumvent cost controls.

The ulterior motive?

Egregious markups, whose resulting profits end up in the hands of manufacturers, middlemen, and the doctors who dispense them, despite the fact that there is no proof that the new dosages provide a greater health benefit. Consumers and business owners are affected by this practice as rising drug costs raise premiums for individual health insurance, group medical insurance, and workers compensation coverage.

While huge markups in the pharmaceutical industry are not uncommon, there is mounting concern among regulators over two issues; the extreme measures taken by drug companies to gain profits, and the exponential growth of doctors dispensing these new drugs for the profit.

• For example, the muscle relaxant, cyclobenzaprine, was traditionally prescribed in five to 10-milligram pill form. But the newly manufactured dosage of 7.5 milligrams is selling at $3.45 per pill; a markup of at least five times the 5 milligram dose.

• New versions of the painkillers hydrocodone and tramadol have also emerged, carrying equally high increases in the selling price per pill. Studies in California found a dramatic increase in prescriptions for the newly manufactured dosages of cyclobenzaprine from 2012 to 2013, when doctors began dispensing the drugs. In contrast, doctors who gave prescriptions to patients that were filled at pharmacies prescribed traditional doses at much lower costs per pill.

• Doctor dispensing has increased as they seek new revenue streams, but despite attempts at restricting the practice, little headway has been made. Doctors claim their patients benefit, since it is both timesaving and convenient for patients to obtain medications at the doctor’s office.

• Several states, including Florida, Indiana, and Pennsylvania, passed rules that benchmark a medication’s “average wholesale price” and tolerate a small markup over that benchmark. Other states allow a doctor to charge a prescribing fee while prohibiting any markup. However, the new dosages are skewing the averages and undermining the formula’s original intent.

• Compounding medications are another issue. Medications are being manufactured in non-standard forms and strengths even though they are not shown to work any better than standard dosages.

• The unnecessary new dosages and hidden markups put a burden on those trying to drive down costs, and they increase workers compensation costs since doctors who treat injured workers make up the majority of those dispensing the new drug forms.

Another emerging issue is that of wasted medication. Researchers at the Center for Health Policy and Outcomes at Memorial Sloan Kettering Cancer Center recently published a study showing a disturbing trend; billions of dollars’ worth of drugs are thrown away every year due to vial size packaging.

That study found that up to 37% of the top 20 cancer drugs end up in the trash because a single patient does not use the full amount of medication typically included in a vial.  While insurance companies pay for this waste, the consumer is the ultimate loser as the cost is passed on in the form of higher drug costs.