The Cost of Health

Its no secret health care costs a lot of money. Anyone who read or listened to any form of news source back in 2009, when the debate over the new healthcare law was being waged, could tell you healthcare costs are going up. When looking at the pharmaceutical and biotechnology industry though one again must pay close attention to the status/type of drug to determine price, generic or brand.

Generic drugs can cost anywhere from 30 to 80 percent less then the branded equivalent. In fact in 2011 it is expected that the average brand name drug will cost three times more than its generic equivalent. For drugs with a large number of generics the average price of the generic falls to 20 percent of the brand name drug through intense price competition. At the same time in the decade leading up to 2011 the cost of prescription medication has increased at a rate of 6.9% a year, two and a half times the inflation rate. in 2012 drugs representing 74 billion dollars in sales will go off patent. Another key role in the pharma industry is the role insurance companies play. Because insurance companies pay the brunt of the cost for most prescription drugs people are willing to get the more expensive drug even if a cheaper one is available since they won’t have to pay the full price. In this way an increase in insurance coverage may decrease the purchase of generics and lead to consumers paying a higher price.

Major steps were taken back in 2006 to reduce the cost of prescription drugs. Wal-Mart started to offer four dollar 30 day generic prescription drugs soon after other large wholesalers followed suit. This combined with the passage of Medicare part D, a program designed to reduce the cost of prescription drugs to consumers, helped to slow the increase in prescription drug costs. Even with these developments it can still often cost easily over a 1,000 dollars in out of pocket costs to someone who has insurance. this further pushes consumers to look for cheaper generic equivalents. Manufacturing companies will also change the price they charge for drugs to help improve their image. An example includes Pfizer giving away for free AIDS medications in South Africa.

Many pharmaceutical companies are planning on increasing their focus on specific specialty pharmaceuticals, drugs that require additional care in handling, storage, and patient administration, which carry a higher price tag. At the extreme end certain end of life cancer treatments can cost over 100,000 dollars in the span of a few months. Also due to direct to consumer advertising by manufacturing companies consumer preferences can be changed to give a higher demand for expensive brand name drugs.

Even with all that being said to boil it down simply the price of pharmaceuticals are already very high and are expected to keep getting higher in the coming years.

Sources Used

http://clients.ibisworld.com/industryus/productsandmarkets.aspx?indid=488

http://clients.ibisworld.com/industryus/productsandmarkets.aspx?indid=487

http://clients.ibisworld.com/industryus/productsandmarkets.aspx?indid=1054