THE COST OF PRESCRIPTION DRUGS
September 8, 2005
The prescription drug system in the United States is unnecessarily burdensome and hurts the poorest, according to Reason magazine's Kerry Howley. In theory, prescription drugs are supposed to protect patients against harmful drugs. But, the paper notes that many extremely safe drugs still require a prescription. For example, statins are a remarkably safe drug, but nonetheless require a prescription.
The reason that so many drugs require a prescription is because pharmaceutical companies can make more money from prescription drugs than over the counter drugs. This is because customers do not pay the full price for prescription drugs, but insurance companies do. Consequently, customers over-consume, pharmaceutical companies charge high rates, while insurance companies pay the bill.
This is extremely hard on people without insurance. Obtaining a prescription drug is very expensive:
- The uninsured must take a day off of work to see a doctor and obtain the prescription.
- Then they must pay the full retail price for drugs, while neither the insured (they pay through insurance) nor insurance companies (they get bulk discount rates) do.
- As a consequence, many poor people avoid getting the medicine they need.
Howley argues that limiting prescription status would be extremely beneficial to Americans. She notes that:
- When Claritin went over the counter in 2002, the price for a year's supply plummeted from $1,066 to $365.
- A 1997 study by Kline & Company, a market research firm, found that American consumers saved almost $13 billion a year by using over-the-counter medicines switched from prescription-only status.
- In a 1983 study, MIT economist Peter Temin found that doctor visits for the common cold fell by 110,000 a year between 1976 and 1989 as the FDA switched cold medicines to over-the-counter status.
Source: Kerry Howley, "Locking Up Life-Saving Drugs," Reason Magazine, Reason, August/September 2005.
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