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Why Out-of-Pocket Prescription Drug Prices are Expensive in the United States


WhyOut-of-Pocket Prescription Drug Prices are Expensive in the UnitedStates


Table of Contents

Abstract 3

Why Out-of-Pocket Prescription Drug Prices Are Expensive in the United States 4

Out of pocket expenditures 5

Insurances 5

Political Influences 6

The U.S. Government Monopoly 6

The Delay of the FDA to Approve Generic Products in the U.S 7

How the Prescription Drugs Get Regulated 7

The Management of the Cost of Pharmaceuticals 8

Comparative Clinical and Profitable Assessment 8

Insurance of the Citizens 9

The Out of Pocket Expenditure for People with Chronic Illness 9

The Noncompliance of Prescribed Medication 11

The Resources Available for Patients Unable to Afford Medications 11

Patient Assist Programs (PAP) 11

Medicare-Approved Discount Cards 12

Conclusion 12

Recommendation 13

Enabling the Patients Take Advantage of Allowances 13

The Federal Governments Should Offer Tax Credit to the Low-Income Citizens 13

The Promotion of Credit Markets Regarding Prescription Drugs 14


Someresearchers connected the escalating expenditures of the prescriptiondrugs to the growing share of the out-of-pocket (OOP) drugs, whichare majorly highly-priced lifesaving medications. The elderly personswith at least three chronic illnesses had an expenditure of $6,800those with one chronic condition spent $4,600, while the individualswith no such illness spent $4,000. Furthermore, the result showedthat more than 23% of adults with chronic diseases had OOP expenseson insurance premium and health care above 5% income of the familyfor two years. Moreover, the OOP share regarding the expenses indrugs are relative approximately 15% expensive in comparison withhospital services, and the main reasons include copays, coinsurancesas well as deductibles. The research paper, therefore, scrutinizesthe reasons why prescription drugs are highly priced in the State,straining the income of most patients as opposed to other developednations.

WhyOut-of-Pocket Prescription Drug Prices Are Expensive in the UnitedStates

Prescriptivedrugs form the central facet of a health system that is vital in themedical department for treatment specialization in primary cares indifferent parts of the world, including the United States. A surveyconducted in the United States revealed that in ten dollarsexpenditure, at least one of it was attached to spending onprescription drugs previous researchers also showed thatprescription drugs catered for about 4.7% and 5.6% U.S. investment in1980 and 1990 respectively (Schoenetal.,2010). In other words, the prescribed drugs in the United States almostbecame twice the spending on the healthcare of the U.S. in a span ofless than a decade, making the gap of expenditure per individual tobe the highest among different nations. Precisely, the comparisonrevealed that the United States registered a total of $790 per headcompared with $599 evident in Canada, $292 in the New Zealand amongothers due to safety, access, and challenges of the cost (Spurlingetal.,2010).

Furthermore,the most current pricing and the fundamental drivers of drug cost inthe U.S. depicted the realities of the trends attached to thespending of medications as a controversial topic that requiredthorough scrutiny. Some researchers connected the escalatingexpenditures of the prescription drugs to the growing share of theout-of-pocket drugs which are majorly highly priced lifesavingmedications. The next explanation that some scholars suggest is thestructure of the insurance of prescribed medicines in the U.S., whichis in the form of costing from various insurance companies, thegovernment, as well as the OPP. The research paper, therefore,scrutinizes the reasons why prescribed drugs are highly priced in theState, straining the income of most patients as opposed to otherdeveloped nations. Precisely, the paper aims at discussing the wayprescriptive drug pricings are related, and how the out-of-pocketexpenditure is given to the persons with chronic illnesses, theprescribed medication noncompliance, as well as the resources inplace for a person unable to cater for drugs.

Outof pocket expenditures

Thehealth care sector in the U.S. is confronted by the ever rising costsof out of pocket prescription drugs. Consequently, the country hasbeen recording high expenditures compared to other nations of theworld regarding prescriptive medicines. The reasons for high cost ofout of pocket prescription in the United States are attributed to thefollowing factors:


Inthe United States, the insurance coverage for the pharmaceuticals andother pharmacy services are relatively costly as compared todifferent avenues of expenditure, and that makes the prescribed drugsalso to be highly priced. Moreover, the OOP share regarding theexpenses in drugs are approximately 15% expensive in comparison withhospital services, and the main reasons include copays, coinsurances,as well as deductibles. The other cause of the increase of prices ofthe prescription drugs due to insurance is that many of the OOP drugspoint to a chronic illness, which demands for the intake of medicinefor an extended period of time, making even few purchases exorbitantwhen likened with OOP costs after doctor visitation(Schoenetal.,2010).

TheUnited States patients who stay in the hospitals for weeks as aresult of an intensive coronary artery surgery usually pay part withmillions of dollars, while the cost of the OOP amount to fewthousands of dollars. However, the specialty drugs copays anddeductibles are very high in the United States, even though somehospital-based and lifesaving services sell similar drugs at arelatively subsidized price. In 2014, it notable that the patients inthe United States registered as high as $45 billion U.S. dollars onthe OOP prescription drugs in comparison with $54 billion of thecases of the physician services and lastly, approximately $31 billionon the services of the surveyed hospitals (Gadkari&amp McHorney, 2012).Moreover, most patients in the States need to register in plans thatrequire high deductibles with a specified employer, or under thedirectives of Affordable Care Act-ACA exchanges, forcing them to meetsuch escalated prices before getting insurance. Besides, the outcomesof ACA exchanges revealed that a significant number of plans getclosed formalities where some insurers are unable to pay for drugswithout clear covers (Maxwell,2011).


Mostpolicies and policy impacts on the prescription medicines in theUnited States ignore the relevance of values as a vital question whendetermining the costs and expenditure of patients on OOP drugs. Inother words, some pharmaceuticals and healthcare-related regulationsare not favorable for markets to cope with new information, whilealso not taking into account the great risks that majority of drugmanufacturers undergo. Furthermore, the theory of economicshypothesizes that the way consumers get price control benefitsdetermines the way they can moderate, short run, as well asovershadow the innovations that assist in regulating the cost ofmedical products, for example, the OOP drugs (Morgan&amp Kennedy, 2010).

TheU.S. Government Monopoly

Thefederal government of the United States has highly regulated theimport of generic medicines in the country, which could be sold at alower price thus causing high price of the out of prescription drugs.Studies on pharmaceuticals revealed that the amount of a given drugcould reduce to 55% people from the original price if there are twogenerics in the market, while the addition of three more relatedtypes of drugs leads to a price decline of approximately 33% (Schoenetal.,2010).

TheDelay of the FDA to Approve Generic Products in the U.S

Thereis a backlog of as high as five years in the U.S. denying the genericmanufacturers a chance to supply varieties of prescription drugs tothe citizens and hospitals. Such case discourages the generic drugsmanufacturing from undertaking their businesses in the nation thusenabling few industries in the states to practice monopoly and hikeout of pocket prescription drugs beyond the affordability of mostpatients with chronic illness (Schoenetal.,2010).

Howthe Prescription Drugs Get Regulated

TheUnited States has numerous methods of regulating the prescriptiondrugs to patients, and such policies have influenced the increasingcost of the essential products leading to numerous cases ofnon-adherence. However, the research paper will mainly dwell on theaspects of affordability and accessibility while discussing theregulatory approaches on the prescriptions drugs especially the OOPexpenditure in the U.S. (Spurlingetal.,2010).

TheManagement of the Cost of Pharmaceuticals

Thegovernment of the United States has processes that determine theinsurance coverage of specified medicines and the criteria of costsharing with the aim of regulating the prescription drugs inaccessibility in the U.S. market. Furthermore, various stakeholdersincluding the pharmaceutical manufacturing companies, hospitals andthe government of the States control the drugs by developing pricingpolicies as well as engaging in negotiations that standardize thepricing of prescription drugs (Schoenetal.,2010).

ComparativeClinical and Profitable Assessment

TheU.S. also uses negative formulary which asserts that all medicinescan attract public subsidy unless they are branded as non-profitable.That helps in -depth assessment of which prescription drug isnecessary for a government subsidy at a particular period to enhanceregulatory processes (Morgan&amp Kennedy, 2010).

Insuranceof the Citizens

Thehealthcare departments in the U.S. utilize the insurance strategiesto regulate the prices of prescription drugs making non-insuredpersons pay high prices while giving levies to low-income individualsthat have exceeded a 5% threshold of the total family earnings ondrug purchase (Maxwell,2011).

TheOut of Pocket Expenditure for People with Chronic Illness

TheUnited States registered the high rate of skipped prescription onchronic diseases, but they still reported the highest Out-of-pocketexpense of $1,000 in 2013 with approximately 13.2% of the populationrevealing such high costs. The main group that experiences thehighest OOP expenditure in the United States is the elderly withchronic illnesses as indicated by the study conducted between 2001and 2005 $4,800 expense on insurance premiums and services concerningthe healthcare (Spurlingetal.,2010). The elderly persons with at least three chronic illnesses had anexpenditure of $6,800 those with one chronic condition were $4,600while the individuals with no such illness spent $4,000. Furthermore,the result showed that more than 23% of adults with chronic diseaseshad OOP expenses on insurance premium and health care above 5% incomeof the family for two years. Worse still, approximately 8% of theindividuals spent more than 10% of the total revenue for a two years’period while 3% of the entire population had an expenditure of 20% ofthe earning for the similar length of the time (Gadkari&amp McHorney, 2012).

Furthermore,the youths with cerebrovascular illnesses and diabetes also had ahigh financial strain where 56% of those suffering from braindysfunction and 46% of those diagnosed with diabetes parting withmore than 5% of their earnings on OOP within a period o9f two years.Regarding the low-income citizens with chronic illnesses in the U.S.,67% of the populace used 10% of their two years’ income onpurchasing prescription drugs which were more than five timescompared to a person with high income. Moreover, 13% of suchindividuals in the low-income had as high as 20% of their totalexpenditure for two years going to the purchase of the drugs (Gadkari&amp McHorney, 2012).

TheNoncompliance of Prescribed Medication

Inthe United States, the approximated prescription of medicationswritten on a yearly basis amount over 3.8 billion but 50% of them iseither incorrect or not followed at all. A survey of one thousandpatients proved at a total of 75% did not take their medication asprescribed the doctor while in a study investigating a total of75,000 patients that got insured on a commercial basis 30% of theentire population did not receive new chronic condition prescriptions(Spurlingetal.,2010).Furthermore, poor compliance results into 33% to 69% adverse effectsrelated to drug misuse that require hospital admission in the UnitedStates (Gadkari&amp McHorney, 2012).

Fig.Prescription drugs concern issues (Spurlingetal.,2010).

TheResources Available for Patients Unable to Afford MedicationsPatientAssist Programs (PAP)

Itis a social support in the United States which different companiesutilize to avail prescriptions drugs to persons that are unable topay for their medications. The manufacturers use such methods to givethe drugs at a low price or free of charge while claiming that it istheir social obligation to treat patients irrespective of theirfinancial status while those act in the manner as a marketing tool(Spurlingetal.,2010).

Partnershipfor Prescription Assistance

Theplatform offers both social and financial resources for low-incomepersons who cannot afford medication through the provision of freedrugs or making the accessible to the individuals at a subsidizedprice (Maxwell,2011).

Medicare-ApprovedDiscount Cards

TheU.S. has cards that people of low income utilize to access more thanseventy programs that offer subsidized or free medication after whilethey are only needed to pay $30 monthly contribution (Maxwell,2011).


Theprescription drugs in the United States almost became twice thespending on the healthcare of the U.S in a span of less than a decademaking the gap of expenditure of the United States per individual tobe the highest among seven different nations. The main group thatexperiences the highest OOP expenditure in the United States is theelderly with chronic illnesses as indicated by the study conductedbetween 2001 and 2005 $4,800 expense on insurance premiums andservices concerning the healthcare. Furthermore, the youths withcerebrovascular illnesses and diabetes also had a high financialstrain where 56% of those suffering from brain dysfunction and 46% ofthose diagnosed with diabetes parting with more than 5% of theirearnings on OOP within a period o9f two years.

RecommendationEnablingthe Patients Take Advantage of Allowances

Thegovernment should formulate policies that encourage the potential ofthe patients to benefit from rebates, for example, there exist manydynamics in the supply chain of prescription drugs, and that wouldcall for patients cost sharing which are majorly based on PBMsdiscounts. Pharmaceutical companies will offer a specified amount ofdiscount in the line of particular prescriptions inscribed on theirproducts in exchange for the preferred features on the PBMsformulary. A vivid example is the case of Harvoni in regards to thetreatments of hepatitis C that got released by Gilead Scienceportrayed the list of a twelve weeks’ therapy course to beapproximate $94,500. However, the reports showed that PBMs providedabout 50% discount but the only problems are that patients in theUnited States required paying coinsurance which focuses on theholistic retail prices as opposed to the cut costs. The U.S.department of human and health services should, therefore, help inreduction of prescription drugs premiums by considering thecoinsurance of the drugs to be based on net rebate price as opposedto the retail costs.

TheFederal Governments Should Offer Tax Credit to the Low-IncomeCitizens

Itis important for the U.S. government to provide tax credits topersons whose expenditure on the prescription drugs are higher than aspecified threshold, for instance, subsidizing individuals that spendmore than $1500 annually on OOP drugs. Another approach that thegovernment could utilize is the allocation of the tax creditconcerning spending burden, for instance, subsidizing individualswhose income stains on drugs is more than 5% threshold. Precisely,the approach can get implemented by levying insurance cover ofpatients that have spent an extensive amount of money exceeding aspecified threshold.

ThePromotion of Credit Markets Regarding Prescription Drugs

Thefinancial innovations that encourage drug markets are vital ensuringthat most people get a lot of prescription drugs thus benefit fromthe discounts without necessarily pay the whole amount of theproducts. Hospitals can spread out the prices of OOP to encouragemore customers to get their drugs at a lower price since they willnot need to buy the drugs for an extended period reducing thecoinsurance cost. Another example is that robotic tools which arenecessary for undertaking prostrate surgery have a useful lifespan ofseven years therefore, the customers can spread out their paymentsfor such a period. Some researchers connected the escalatingexpenditures of the prescription drugs to the growing share of theout-of-pocket drugs which are majorly highly priced lifesavingmedications.


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Maxwell,J. C. (2011). The prescription drug epidemic in the United States: aperfect storm.&nbspDrugand alcohol review,&nbsp30(3),264-270.

Morgan,S., &amp Kennedy, J. (2010). Prescription drug accessibility andaffordability in the United States and abroad.&nbspIssueBrief (Commonwealth Fund),&nbsp89,1-12.

Schoen,C., Osborn, R., Squires, D., Doty, M. M., Pierson, R., &ampApplebaum, S. (2010). How health insurance design affects access tocare and costs, by income, in eleven countries.&nbspHealthaffairs,&nbsp29(12),2323-2334.

Spurling,G. K., Mansfield, P. R., Montgomery, B. D., Lexchin, J., Doust, J.,Othman, N., &amp Vitry, A. I. (2010). Information frompharmaceutical companies and the quality, quantity, and cost ofphysicians` prescribing: a systematic review.&nbspPLoSMed,&nbsp7(10),e1000352.