A Wealth of Ideas for a Problem Bankrupting Americans: Strategies for Lowering Drug Costs in the U.S.

“Without the meds, I’d be homeless and mumbling to myself,” says Alan, an articulate, sharply-dressed Ivy League graduate. “With the meds, I make about 200k a year.” Alan is not postulating about the loss of function he’d experience without his medication–he knows because he lived through it several years ago, prior to receiving his prescription. While traveling abroad, Alan suddenly began to suffer severe psychiatric symptoms including delusions and hallucinations. This led to a weeks-long hospital stay during which his
symptoms persisted until, finally, Alan’s doctors found a medication that made them stop: Abilify. Unfortunately, Abilify costs about $1500 per month in the US, and Alan has been forced to sign up for a very costly health plan to obtain coverage for the drug. “It’s more than my mortgage and property taxes combined,” Alan notes. A generic form of Abilify is available, but Alan has been forced to stick with the brand name version after suffering an adverse reaction to the generic.

While Alan is fortunate to be able to afford the medication with income from his business, the high cost is still something that factors into every decision: “The solution I’ve found is simply to charge higher fees and try to raise my income. I’m charging a lot more than I used to charge to provide services. That seems to be working ok for now. But it’s putting the cost burden onto my clients ultimately, and that makes it hard for me to be cost-competitive.” In spite of Alan’s current stability, his unease is palpable at being so dependent on a drug with such an astronomically
high price tag.

Samantha, mom to two school-age boys, is less fortunate. She is unable to afford the $100-$200 per month out-of-pocket cost for the three medications she needs to manage her psychiatric symptoms since losing her job and health insurance earlier this year. “It’s very scary,” Samantha says. “When I got laid off, the number one thing I was worried about was where I would get my medications.” She has started skipping doses and cutting her pills in half in order to make her supply last, putting herself at risk of breakthrough psychiatric symptoms. “I don’t know when I’m going to be able to pay for the medication, so I dosed myself down by splitting my pills, which you’re not supposed to do, but I didn’t have a choice. That’s been constant ever since I’ve been on psychiatric medication, because I’ve never had the financial stability, except for a few brief periods, to afford those medications.”

Though both Alan and Samantha’s difficulties center on their psychiatric medications, the struggle to afford prescriptions is common for Americans with medical conditions of all types: diabetes, cancer, heart disease, obesity, dementia, and innumerable others. 18 million Americans are unable to pay for their prescribed medications at all, according to a nationwide poll released September 2021. Another poll revealed that around three in ten adults chose to skip doses of their medications, or did not fill one of their prescriptions in order to save costs. Some vulnerable groups of Americans are disproportionately affected by these struggles: nearly one in five Americans in households making less than $24,000 per year say they can’t afford their medications. Women were 34% more likely to experience an inability to pay for prescribed medications than men, and individuals dealing with chronic health conditions were 34% more likely to have difficulty paying for medications than those without chronic health conditions, according to a 2019 study. And despite this crisis of drug affordability, drug prices continue to rise: at the start of 2022, the price of hundreds of prescriptions in the US rose by an average of 5%.

Politicians, physicians, and public health policy experts alike are quick to acknowledge the problem. In a December 2021 speech, President Joe Biden declared that medications in the US are “outrageously expensive.” Dr. Sanket Dhruva, a UC San Francisco cardiologist and drug policy researcher, describes a need for innovation and disruption to “address the high [drug] costs ordinary Americans are facing…that are ultimately significantly limiting their ability to live healthily.” Dr. Dhruva cites a number of factors that have led to the current state of drug pricing in the US, including lack of competition for brand-name drugs, lack of negotiating power on the part of the government and public insurance programs, and direct-to-consumer pharmaceutical advertising. When a drug is approved for sale, drugmakers are protected from competition through exclusivity and patents. Dr. Dhruva explains that this means once a brand name drug receives FDA approval and coverage by insurers, it is generally the only drug on the market with that active ingredient for a certain number of years. This is essentially a monopoly, and prices can be set as high as the market will bear.

While the patent process exists around the world, other elements driving up drug prices are unique to the United States. For example, governments in nearly all developed nations negotiate with drugmakers before a drug is made available on their markets, and a government may decline to offer a drug if it is deemed too costly or not significantly better than currently-available treatments. In contrast, the United States offers every FDA-approved drug on its market, regardless of cost or relative effectiveness. This effectively eliminates any negotiating ability on the part of the US government. Additionally, Medicare, a public health plan which provided coverage to 61 million older Americans in 2019, is prohibited by law from negotiating with pharmaceutical companies, similarly setting the stage for manufacturers to be able to name their price for brand name drugs.

The United States is one of just two countries in the world that allow pharmaceutical companies to market their products directly to consumers. This type of marketing increases expenses for drugmakers, since the FDA does not limit the amount spent by pharmaceutical companies on advertising. Drug advertising can also lead patients to ask for costly medicines that may or may not be appropriate for their care. For example, a patient may ask for a new, expensive drug after seeing an ad, when in truth the new therapy may not provide significant improvements over older, cheaper alternatives.

Drug prices in the US were comparable with those of other advanced nations until the mid-1990’s, when American prices broke off and headed skyward, with overall drug spending tripling by 2007 (Health Affairs). The explosion of new therapies coupled with poor price controls created the perfect storm for ballooning pharmaceutical spending. This timeline also correlates with the FDA’s decision in 1997 to relax advertising guidelines, allowing drugmakers to assume control of a significant segment of American advertising space.

While the problem of skyrocketing drug prices is by no means new, some exciting ideas aimed at tackling the issue are emerging this year. The most concrete attempt at disrupting the current situation has been made by billionaire entrepreneur Mark Cuban, who launched the Cost Plus Drug Company in January 2022. The company is a drug manufacturer and online pharmacy, offering its generic drugs direct-to-consumer with just a 15% markup applied to manufacturing cost. An example from the Cost Plus Drugs website is cancer drug Imatinib (generic for Gleevec). A 30 count prescription of 400mg Imatinib sells for $47.10 from Cost Plus, while the retail price for the same quantity is nearly $10,000. Cost Plus Drug Company currently offers just over 100 generic drugs, but hopes to increase that number quickly.

A second promising strategy has been set in motion by President Biden, who has recently created a policy allowing Medicare to negotiate drug prices. Many believe this is a critically important piece of the puzzle in achieving lower drug costs in the US. However, the policy won’t produce any savings to patients until 2025, and even then will be limited to just 10 drugs. While Biden’s proposal does take the unprecedented step of opening the door for Medicare to negotiate with drug companies, it clearly won’t go far enough on its own to alleviate the problem.

Innovative ideas focusing on just one drug, insulin, have emerged in California. Insulin is needed by millions of Americans who have diabetes, but the price of insulin has risen steadily over the last decade. The American Journal of Managed Care cited, for example, that the average cost of Humalog brand insulin was $21 in 1996, and $275 in 2019. This is a 1200 percent increase, when inflation during that same period was just 64 percent. Complications of diabetes—including lack of access to insulin—results in about 8 million hospitalizations each year in the US, and several Americans die each year attempting to ration their insulin. Insulin carries some unique challenges since it is a hormone normally created by the body, making it a “biologic” class of pharmaceutical. This makes manufacturing insulin more complex than other “small molecule” type drugs, which can be produced in the lab more easily. Another driving factor in the increasing cost of insulin is that just three manufacturers (Novo Nordisk, Sanofi, and Eli Lilly) supply 100 percent of the insulin in the United States. This absence of competition has created an environment where these “big three” have been able to continually increase insulin costs for Americans. In 2019, these companies introduced generic versions of their insulin, but the costs of these are still prohibitively high for many with diabetes in the US.

California Governor Gavin Newsom announced in January that he wants California to manufacture its own insulin, and that the state is actively working on a partnership to make it a reality. While Newsom has spoken about lowering drug costs for Californians since his inauguration, the machinations of his insulin manufacturing plan haven’t been made public, leading some to wonder if it will really happen. A Bay Area startup called Open Insulin has taken matters into their own hands by actively working to develop a protocol for making insulin since 2015. They intend to release their production method as an open source protocol, which will truly open the door for new players to break into the insulin market and bring the cost down.

Though it is a daunting problem, the epidemic of exorbitant drug price sis an issue that demands a solution simply due to the magnitude of harm it causes. For some patients it may cause mere anxiety, while for others it may lead to bankruptcy, worsening illness, or even death. And this doesn’t account for the wide impact surrounding the patients themselves. Those close to patients are affected financially and emotionally, but the impact extends much farther, sometimes affecting professional contacts like in Alan’s case. It doesn’t take much imagination to see that high drug prices affect all areas of our society to some degree, from the burden placed on emergency rooms when folks run out of their needed medicines, to the unmet psychiatric needs of the growing homeless population, and countless other downstream consequences. The current high cost of so many medications amounts to a form of discrimination targeting the most vulnerable Americans: those suffering from chronic conditions. It sets them at a great disadvantage as compared to someone of the same gender, race, or socioeconomic status that didn’t have the condition.

To the layperson the situation seems utterly senseless: medicines that may cost pennies to make demand thousands of dollars from patients. And while learning about the history and background of high drug prices may help illuminate the complexity of the issue, it does little to provide hope or suggest a solution. However, there are actions that each of us can take to help move the needle on lowering drug prices. We can make it clear to policymakers and elected officials the current situation is unacceptable. We can support industry disrupters whenever possible, such as Open Insulin and Cost Plus Drug Company. Though the roots of this problem are complex and layered, we must press our leaders to find alternatives that enable those in need of medications to obtain them.