breaking news

I-75 South closed in Tipp City for crash involving semi, 2 cars

A video guide: How do prescription drug prices get set?


Editor’s note: In order to give our readers the best information from which to make health care decisions, the Dayton Daily News is digging into what drives prescription drug prices with a multi-part series. The full investigation will run in Sunday and Monday’s papers and look for more from this investigation online this week.

IN-DEPTH REPORT 

Read the and watch the full investigation into prescription drug prices

One of the most aggravating aspects of the prescription system for consumers is the mystery of why some drugs cost so much.

For every generic drug that costs next to nothing, there’s a Yervoy. The treatment for skin cancer costs more than $92,000 per user annually, or more than $250 a day.

The world of drug pricing is shrouded in layers of complexity that often confound the principles of basic economics. For example, despite increased competition for the most common drugs on the market , prescription drug prices continue to rise faster than all other types of health care services, according to the Centers for Medicare and Medicaid Services.

The American public spent $324 billion on prescription drugs in 2015, a 168 percent increase since 2000. While insurance masks some of these increases, the cost to the consumer comes in a variety of ways, from higher insurance premiums, higher deductibles and more cost-sharing.

READ MORE:3 reasons prescription drugs cost so much

Critics say drug makers are taking advantage of the public’s ignorance about pricing.

“The American people should not be forced to choose between filling a prescription or making their monthly mortgage payment,” Sen. John McCain said in a statement last year announcing the bipartisan FAIR Drug Pricing Act, which would require drug makers to publicly disclose information on planned price increases.

 

“Transparency leads to accountability, and it is past time that mantra applied to the skyrocketing cost of prescription medication.”

RELATED:Pill bags let users dispose of prescription drugs safely

Here are the basics of the drug supply chain and how prices get set. The video above gives a more detailed look at who makes money in this supply chain:

1. The pharmaceutical company sets the list price for the drug, based on how much it needs to recoup for research and development — it costs an average of $2.6 billion to develop a new drug and get it through the FDA approval process — plus the production cost and whatever profit is built into the pricing structure.

2. Manufacturers sell drugs to wholesalers at a negotiated discount.

3. The wholesaler distributes the drug to pharmacies and hospitals at a slightly smaller discount and keeps the difference as profit.

4. At the pharmacy counter, how much you and your health plan sponsor pay is dependent on your plan. In most cases, consumers pay a set co-pay amount and the pharmacy bills the health plan through a pharmacy benefit manager for the rest, plus a small fee for profit.

5. Pharmacy benefit managers are companies that run prescription benefits for health plans. They use the millions of patients they represent as leverage, offering preferred coverage status to a drug in exchange for bigger rebates from the manufacturer.

6. The rebate the pharmacy benefit manager has negotiated with the manufacturer gets paid to them after the main drug transaction. The pharmacy benefit manager then passes all, some or none of that rebate amount along to the health plan sponsor depending on their contract.

Critics argue that the rebates don’t actually lower drug prices because manufacturers build the cost into their pricing structure.



Reader Comments ...


Next Up in Local

Placenta previa diagnosis can create anxiety in expectant moms

Women diagnosed with placenta previa early in their pregnancy should be careful that the discovery doesn’t steal the joy they have for the upcoming birth of their child. Placenta previa is a condition where the placenta implants low in a woman’s uterus very close to or even on top of the opening of her cervix. The condition is often asymptomatic...
NEW DETAILS: Police used GPS data to find Dayton man’s body in creek
NEW DETAILS: Police used GPS data to find Dayton man’s body in creek

GPS data was received during the 911 call Charles Romine made Sept. 18 when he was confused about where he was, but dispatchers “are trained that the primary source of location information comes from the caller,” according to a statement sent out Friday afternoon by Dayton police. Romine, 71, was found dead two days later — Sept....
I-75 N back open near Botkins in Shelby County
I-75 N back open near Botkins in Shelby County

The northbound lanes of Interstate 75 are back open at Ohio 274 near Botkins in Shelby County. The vehicle in the crash is off the side of the highway, but traffic remains backed up. A medical helicopter took one person to an area hospital. The northbound lanes of Interstate 75 are shut down this evening near Botkins in Shelby County. The highway is...
Dayton man killed by Moraine police had life surrounded by violence
Dayton man killed by Moraine police had life surrounded by violence

Two Moraine police officers shot and killed a Dayton man whose life and family have been surrounded by violence. Jamarco D. McShann, 23, was killed Friday when Moraine police said he pointed a handgun toward them during an early morning suspicious vehicle call. The Montgomery County Coroner’s Office pronounced him dead at the scene of the shooting...
Centerville Key Club decorates pumpkins for Children’s patients
Centerville Key Club decorates pumpkins for Children’s patients

Approximately 70 child-sized pumpkins were delivered to Dayton Children’s Hospital on Oct. 19, courtesy of the Centerville High School Key Club. ››RELATED: Local JROTC team recognized at Statehouse They were decorated with brightly colored polka-dots, stripes and other designs. Some were painted to resemble emojis or...
More Stories