Just the Facts

Five Facts on Drug Cost and Spending

By Emma Petasis
May 16, 2019 | Blog

The high cost of prescription drugs have become a hot button issue in the 2020 presidential and congressional election. Here are a few facts on the problem.

1. Prescription drug spending is the fastest growing health care cost.

Although prescription drugs account for only 10% of all U.S. health care expenditures, they are still the most visceral example of high health care costs for many Americans, who pay an average of $1,443 each year for these medicines.[1]CNBC reports this is more than people pay in any other developed country.[2]

2. Companies justify their prices as necessary to fund expensive research projects.

Pharmaceutical companies say the high cost of medicine is necessary to fund new research. For example, a 2014 Tufts University study found the average cost to develop a new drug is $2.6 billion.[3]


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3.But companies also spend significant funds on direct consumer marketing.

Nine of 10 large pharma companies spend more on marketing and advertising than they do on research.[4]

4. Drug prices increase each year.

The U.S. Department of Health and Human Services predict that drug prices will rise 6.3% a year in the next decade.[5]And an article by Reuters notes that four of the top 10 prescription drugs have increased in price by more than 100% since 2011.[6]

5. Currently, Medicare cannot negotiate prescription drug prices.

The Department of Veterans Affairs is able to negotiate the price it pays for medicine, but Medicare is not allowed, despite the fact that it pays for $129 billion worth of prescription drugs each year.[7]


[1]https://jamanetwork.com/journals/jama/article-abstract/2674671

[2]https://www.cnbc.com/2019/01/10/why-prescription-drugs-in-the-us-cost-so-much.html

[3]https://www.scientificamerican.com/article/cost-to-develop-new-pharmaceutical-drug-now-exceeds-2-5b/

[4]https://www.washingtonpost.com/news/wonk/wp/2015/02/11/big-pharmaceutical-companies-are-spending-far-more-on-marketing-than-research/?utm_term=.3de1c8fb15b9

[5]https://www.theatlantic.com/health/archive/2019/03/drug-prices-high-cost-research-and-development/585253/

[6]https://www.csrxp.org/wp-content/uploads/2016/04/CSRxP_Facts-of-Rising-Rx-Prices.pdf

[7]https://www.kff.org/infographic/10-essential-facts-about-medicare-and-prescription-drug-spending/

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