Increase in Prescription Drug Cost and Its Economic – part 4
Posted by admin in Business EssaysPharmaceutical industry’s traditional viewpoints
The pharmaceutical industry shows several reasons behind high drug price. One of them is the increase of consumption. For example, Due to an increase in drug prices, over half of the drug expenditure increased in the time between 1987 and 1994. The remaining half was due to increased in drug consumption. But from 1994 to 2000, due to price increasing, less than quarter drug expenditure increased. And over 75 percent coming from increased consumption. Recent data support this point. In 2000, drug costs increased by 14.1 percent and 16.9 percent in 2001. So costs increased in both of these years were stimulated by increased drug consumption. On the other hand rising drug prices caused less than a third of the increase. So these reports show that increase in drug consumption is the primary driver for rising pharmaceutical spending, not the increased price of drugs being consumed.
The pharmaceutical industry represented by PhRMA gives the reason behind high prescription drug price. They say that the drug price is high because the industry needs to spend huge expenses on research and development (R&D) to bring out new, innovative drugs for better health and extended lives. They also say that without paying this high by the consumers, new drugs will not be developed resulting in a devastating impact on health.
Real reasons behind increase in drug price
The argue made by the pharmaceutical industry that because of research and development cost for new and innovative drugs, the price of the prescription drugs are high, is not acceptable. It is totally false targeted to mislead the public from truth. With the help of that book it can be analyzed.
Dr. Marcia Angell, former editor of the New England journal of medicine in her recently published book,”the truth about the drug companies refutes the claim. She states that the research and development costs for new and improved drugs are just a small part of drug company expenditure. She also states that their greatest costs, by far, are for marketing and administration (Brewer, 2007). Of the $200 billion revenues generated by selling drugs in U.S., about $20-24 billion is spent on R&D to develop so-called new drugs (Brewer, 2007).
