As I stood at the pharmacy counter of a major chain pharmacy waiting for my wife’s prescription refills, I started thinking about the legal drug sales in the United States. My wife has more medical problems then Carter had Little Liver Pills. Some of my readers may be old enough to remember those pills, but most of you will not be. If it weren’t for some good Rx insurance her meds would cost me well over $1000 every month. Why do prescription medications cost so much? At first glance, it appears that the major drug companies are as bad as those dealing in illegal drugs are. Nevertheless, that was before I spent several hours online researching the subject. Here’s what I discovered.
Drugs are big business in the United States with the sales of legal drugs competing strongly with illegal drugs. In 2008, according to the Generic Pharmaceutical Associations Industry Report, the sales of all brand name pharmaceutical drugs amounted to $228.5 billion. The report goes on to say that 69 percent of all prescriptions written are for generic drugs but all the generic drugs prescribed only accounts for 16 percent of that $228.5 billion sales figure. At first glance, it appears that these companies are reaping a hefty profit, but when we look closer, we see that they have some hefty expenses as well.
Every year the major drug producer invests an average of $73.9 billion in administrative costs and marketing costs. Their marketing involves radio, television, magazine, and newspaper advertising to make the public more aware of their various prescription drugs and their value but it involves all the samples and other materials provided to physicians and medical centers. Every year these same drug manufacturers invest an average of $28.8 in R&D (Research and Development). Considering that it takes an average of 10 to 15 years to get a new drug ready for the market, each new drug cost an average of $288 to $432 billion. These companies spend an annual average of $102.7 billion on administrative costs, marketing costs, and R&D costs, which is 44.9 percent of their gross profits. Now we are looking at a net profit of $125.8 billion. Suddenly what drug companies charge for their prescription drugs don’t seem so outrageous any longer.
According to a report prepared by the Kaiser Family Foundation there were 12.6 prescriptions written per capita in the United States in 2007, up from 8.6 prescription per capita just ten years earlier. Still, few Americans without medical and Rx insurance could afford the costs of those medications. My wife is one of the fortunate one because our copays amount to less than $5 even for a drug that would cost $400 or more without insurance but not all insurance coverage is as good. Most aren’t as good because most have a donut hole and when you fall into that hole you can end up having to pay the full amount for your prescription until you’ve spent the amount necessary to get you out of the donut hole and that can amount to several thousand dollars depending on what meds you are on. Everyone should have equal access to medical care and that includes the medication prescribed for him or her. I’m a true blue American but in this particular case socialized medicine may be the only answer to the medical care crisis that’s upon us.
