Prescription Drug Pricing, Advertising and Marketing - Research Paper Example

? Running head: Healthcare Issues Prescription Drug Pricing Insert Insert Insert 30 May The gradualand sometimes steep increases in the price of prescription medicine affect many sectors of the health care industry with public programs, private health insurers, and patients affected drastically. These costs are increasingly becoming necessary to governments and the health care sector as essential drugs are becoming out of reach to sections of the society especially the elderly. Emerging reports have indicated that many of Americans have inherent challenges in paying for the prescription medicines affecting their quality of life and health outcomes. The high costs impose significant economic hardships to low income families, the elderly who depend on fixed incomes and persons who do not enjoy insurance coverage for prescription drugs. High Prescription drug prices have many disadvantages in the long run that affect public health statuses. High prices make prescription drugs counterfeiting alluring; exposing patients to cheap, low quality and ineffective drugs with unmitigated health hazards. They can also lead to development of antimicrobial resistance to most drugs due to uncompleted drug regimens, stretching, and splitting of doses and these may lead to devastating consequences in the society and public health industry. High costs also affect accessibility of treatment and good outcomes in developing nations where most people survive on less than a dollar per day. Prescription drugs constitute the largest expenditure in health care spending and this trend is likely to continue. It is evident that, without effective management and regulation, prescription drug pricing will spill out of control disadvantaging the millions of patients requiring them daily. Introduction The invention and development of new pharmaceutical drugs, that are more effective and specialized, has changed the health care industry over time with many health conditions successfully managed and treated. Prescription drugs may reduce the need for hospitalization and surgery, which may otherwise be too expensive and out of reach to most people especially the elderly (Zhang & Soumerai, 2007). Prescription drug use has steadily increased over time as most people want better health outcomes. The increased demand and use of prescription drugs bought in the United States rose 39% from 1999 to 2009 with a population growth of only 9% (Kimbuende, Ranji & Salganicoff, 2012). Also, annual price increment averaged 3.6% with newer and more expensive drugs demanded and used over older cheaper drugs (Agency for Healthcare Research and Quality, 2007). Higher prescription drug prices have a significant impact on government-funded programs such as Medicare and Medicaid in the United States. This has seen some sections in the society being increasingly forced by circumstances to fund their own medication. Economic hardships may force patients to cut back on required doses to reduce medical costs, which only aggravate the problem. These price increments may be attributed to: Patent Laws To successfully introduce a new drug in the market, research and development costs are usually enormous, and pharmaceutical companies strive at maximizing profits to recoup their expenditures during development. Many new drugs fail clinical tests increasing costing pressure to these companies (DiMasi, 1995). Patent laws give the company’s exclusive rights to sell their new prescription drugs for up to 20 years, and hence prices remain high for this period. Patent protection eliminates competition making drugs expensive and out of reach to most people. Prescription Drug Pricing For maximum profits, pharmaceutical companies use differential pricing resulting in significantly higher prices for some people. Different market sections have varying bargaining power, which these companies use to their advantage. They differentiate their prices among chain and independent pharmacies, hospitals, health plans and managed care facilities. Pharmaceutical companies sell their drugs very cheaply to institutions that have the ability to exclude them from sections of the market. This makes retail pharmacists lack any bargaining power hence buying the drugs at higher prices. High value buyers are offered numerous discounts packages and incentives, which allow them to buy the drugs at significantly lower prices than other retailers. This skews the price in favour of the high value buyers over retail pharmacies. High value buyers utilize formularies making particular drugs in these programs to be used more frequently. Many large pharmacies offer discounts and rebates to third -party buyers to gain access to their large memberships who enjoy lower prices. The uninsured consumers do not enjoy any reduction in prices as they do not have any bargaining power. They pay higher prices than people pay in private and government funded health plans. Pharmaceutical price differentiation is unethical because, in most instances, manufacturers will charge the uninsured and the elderly higher prices to compensate for discounts and rebates offered to high value buyers. They make unusually high profit margins from prescription drug sales probably due to anticompetitive pricing with its negative effects spiraling to competitors and consumers. Cost shifting is unethical and should be strictly monitored to ensure equality in access and cost of drugs. Ethical and appropriate pricing strategies can reduce the high profits garnered by these companies with added benefits of competitive selling going to all patients. Advertising and Marketing Pharmaceuticals are spending billions of dollars in advertisements and marketing of new prescriptions drugs, which influence physicians and consumers demand and prescribing patterns (Rosenthal, et al 2003). Health drugs marketing and the advertisement was regulated by the US food and drug administration, but with the creation of health maintenance organizations and other managed care organizations, that control cost through the use of formularies, the FDA allowed the pharmaceutical companies to advertise directly to patients. Advertised drugs tend to be new and more expensive, as the huge amounts of money spent on advertisement, and marketing are passed on to the consumers. It affects the prescription patterns with doctors and patients influenced heavily by the adverts leading to patients spending more. Some of these drugs may be less effective than other alternate cheaper medicines with similar benefits. These advertisements are unethical and mostly unregulated, and they may publish false clinical trial outcomes in medical journals. Off Label Use Pharmaceutical companies hike the prices of their drugs when these drugs find other additional purposes in medical treatment. This is purely for profit purposes, denying millions of people access to life saving drugs. These prices are unethical as they harm the patient due to inaccessibility yet their prices does not relate to their production and distribution costs. Health Insurance Companies Health insurance companies may influence the prices patients pay for their medication. Large pharmacies with high turnover rates can be able to negotiate better terms with corresponding benefits passed to patients, but smaller independent pharmacies lack bargaining power and, thus, charge exorbitantly. These costs are forked by the uninsured and the elderly who cannot afford health insurance coverage making them forego medication in some instances. Insurance coverage has many draw backs for low income individuals with great difference in the type of prescription drugs available and the amount an individual is to contribute. In some instances, cost sharing leads to higher payment for expensive drugs that adversely affects low income earners who are even unable to pay for minimum co payments (Kaiser Family Foundation and Health Research and Educational Trust, 2009). Prescription drug prices have considerable importance for all stakeholders in the world bearing in mind that without them people die leading to human capital loss, which has serious implications for economic growth. These problems are heightened in developing countries where majority of patient drugs are paid out of pocket with their national governments spending considerably less on health. Developing nation’s patients pay higher prices than developed nations. This is because they must buy the life saving drugs, as most of their population is afflicted with life threatening conditions. The rationale pharmaceutical company’s use in determining prices for life saving drugs in these regions is wanting and unethical. It is imperative for the global community to provide accessible drugs for all human kind lest we lose much more in human capital. Higher prescription drug prices increases the likelihood of counterfeit drug trade and illegal prescription drug trafficking, which can have heavy consequences including death for patients. Counterfeit drugs may have no active ingredients and may cause more damage to patients who unknowingly use them. They can maim or kill unsuspecting patients if they contain harmful ingredients. Higher prices for prescription drugs lead to poor community, national and international public health as improper drug use from skipped doses, low dosages and incomplete dosages lead to the development of antimicrobial resistance important in malaria and tuberculosis. High prescription prices can lead to increased poverty levels in most low income countries, which increase the populations risk to major diseases, counterfeit drugs, and ultimately extremely poor health outcomes. These countries should use generic drugs, which are much cheaper and easily available. Conclusion Existing price differences across the insured and insured, outpatient and admitted patients, developing and developed countries need to be eliminated to ensure acceptable public health status in the world. The United States patients pay some of the highest prices for drugs and their government needs to develop laws and regulations to ensure affordable and accessible prescription drugs for all persons. The elderly and people with chronic illnesses should be given discounts across all pharmaceutical retailers to enable them follow correct treatment programs with better health outcomes. More research and policy making is required on prescription drug patents to enable all stakeholders benefit from innovations made. Federal governments should explore ways of working with pharmaceutical companies on research and development of prescription drugs with an aim of availing cheaper branded drugs for their citizens. Importation laws should be amended to allow competition, which would bring down the price of prescription drugs. All governments should regulate the amount and nature of prescription drug advertisements. This is because it can negatively influence physicians and patients leading to expensive and infective treatment over cheap and effective treatment. Strict regulation should ensure that only irrefutable clinically proven drugs are used in the society. Governments should use all resources possible to stamp out counterfeiting of prescription drugs. There is an urgent need for research and policy making on the role of insurance and health care plans on the increasing prescription drug prices. With commitment and legislation of appropriate health policies, it is possible for a world with adequate access to prescription drugs. Philanthropists need to establish open source foundations for research and development of cheap drugs for all. This can significantly reduce the need for more expensive drug treatments as the rate of antimicrobial resistance to existing drugs would drastically reduce. High drug prices seriously disadvantage low income earners and the elderly. All people should benefit equally from health insurance coverage irrespective of their financial status. We should envision a world with equal and accessible health care products for all people irrespective of age, creed, income, and colour. References Agency for Healthcare Research and Quality, (2010). Prescription Medicines-Mean and Median Expenses per Person with Expense and Distribution of Expenses by Source of Payment: United States, 2007. Medical Expenditure Panel Survey Component Data. Generated interactively. DiMasi, J.A. (1995). Success Rates for New Drugs Entering Clinical Testing in the United States, Clinical Pharmacology and Therapeutics, Jul 1995, vol. 58, no. 1, p. 1-14 Kaiser Family Foundation and Health Research and Educational Trust (2009). Employer Health Benefits Annual Survey, 2009. Retrieved from http://ehbs.kff.org/ Kimbuende, E., Ranji, U., & Salganicoff, A. (2012). Prescription Drug Costs. Retrieved from http://www.kaiseredu.org/Issue-Modules/Prescription-Drug-Costs/Background-Brief.aspx Rosenthal, et al. (2003). Demand Effects of Recent Changes in Prescription Drug Promotion. Retrieved from. http://www.kff.org/rxdrugs/upload/demand-effects-of-recent-changes-in-prescription-drug-promotion-report.pdf Zhang, Y., & Soumerai, S. B. (2007). Do Newer Prescription Drugs Pay For Themselves? A Reassessment of the Evidence. Health Affairs 26(3):880-886. Read More