My experience of average Rx prices back in the late 1960s and early 1970s makes me question this AI’s stated average Rx price in 1970. Back in the summer of 1967, I was working as a pharmacy student for a small local/regional chain pharmacy. I got assigned the task of calculating the average Rx cost/retail of 1000 new Rxs. The pharmacy stored Rxs on. I tried to find a graphic, but none were found, there were 1000 paper Rxs on each “wire storage unit” Being the pharmacy student, I was given the task of calculating the retail & cost of 1000 new Rxs. So I started with the most recent “full” storage unit.  I had to go thru each Rx in the file, pull the Rx bottle from the shelf, and calculate the medication cost for the particular Rx. No electronic calculators in 1967, but there were slide rules. I had been using a slide rule since I was in High School. The final results were in the $4-$5 range – I don’t remember the exact number. I do remember when I opened my independent pharmacy in 1976, I did all projected gross revenue and gross profit was calculated on an average of $5/Rx.  The chat states that in 1970 the average Rx price was $2.12, which seems to be out of sync with what I saw back then. I have often stated that today the average Rx was approaching $60/Rx. But the chat is quoting an average price from Medicare Part D data, which probably produces a higher average price because Medicare Part D Rxs is dealing with Rxs for the disabled and/or Seniors. Using a “back of napkin calculation”… $5/Rx in 1970 and 54 yrs later, an average CPI of 3% would suggest that Rxs today would be in the $40/Rx range, but that doesn’t take into consideration, that total Rx market has flipped from 90% brand name in 1970 to 85% generic in 2024. All things being equal, with the exception that the PBM industry is now in charge of determining the price of 80%-90% of all Rxs, maybe the average Rx price would be in the $30s today. So, one must ask, why are our Rxs at least $30 higher than would otherwise be expected? Could it be padding the bottom line of the PBM industry’s net profits?

What was the average prescription price in 1970 as compared to the average prescription price today and the percentage of generics of all Rxs for both time frames

To compare the average prescription price and the percentage of generics of all prescriptions between 1970 and today, we need to look at historical data and current statistics. Here is a detailed comparison:

1. High Launch Prices

Pharmaceutical companies set high initial prices for new drugs, which often increase over time. This is particularly evident in branded drugs, where launch prices have been rising significantly year over year.

2. Lack of Competition

The U.S. patent system grants manufacturers monopolistic control over the market for brand-name drugs, limiting competition and allowing prices to remain high. Even when patents expire, inadequate competition among generics can keep prices elevated.

3. Market Exclusivity and Patent Protection

Drug companies use patent protections and exclusivity programs to maintain high prices. These protections prevent generic competition, which would typically drive prices down. The practice of “evergreening,” where companies make slight modifications to extend patent life, exacerbates this issue.

4. Research and Development Costs

The high costs associated with research, development, and regulatory approval of new drugs are often cited as justifications for high prices. Pharmaceutical companies need to recoup these substantial investments, which contributes to the high cost of medications.

5. Lack of Price Transparency

The opaque nature of drug pricing, involving confidential negotiations and rebates among manufacturers, insurers, and pharmacy benefit managers, makes it difficult for consumers to understand and compare prices. This lack of transparency can lead to higher prices and less informed decision-making.

6. Limited Bargaining Power

Unlike many other countries, the U.S. does not have a central negotiating body to leverage lower prices from pharmaceutical companies. Instead, negotiations are fragmented across numerous health plans, resulting in weaker bargaining power and higher prices.

7. Mergers and Acquisitions

Consolidation within the pharmaceutical industry through mergers and acquisitions reduces competition. This consolidation can lead to monopolistic practices and higher drug prices.

8. Insurance Benefit Designs

Insurance plans with significant patient cost-sharing provisions can increase out-of-pocket costs for patients, making medications less affordable. Additionally, the design of these benefits often lacks incentives to control drug prices effectively.

9. Regulatory Delays

Delays in the approval process for generic drugs by the FDA can also contribute to higher prices, as fewer generics are available to compete with brand-name drugs.

10. Lobbying and Political Influence

The pharmaceutical industry spends billions on lobbying efforts to influence drug pricing policies. This lobbying power can hinder regulatory and legislative reforms aimed at reducing drug prices.

Conclusion

The rising cost of prescription drugs in the United States is driven by a combination of high launch prices, lack of competition, market exclusivity, high R&D costs, lack of price transparency, limited bargaining power, industry consolidation, insurance benefit designs, regulatory delays, and significant lobbying efforts. Addressing these issues requires comprehensive policy reforms and increased transparency to ensure medications are affordable and accessible to all.

Filed under: General Problems