Prescription Drugs - Term Paper Example

What is fueling the rise in prescription drugs costs? A number of factors are accounted for the rise in prescription drugs costs, such as: 1. Rise in demand: Much of the increase in prescription drugs costs is attributed to the rising demand, consumption and utilization of prescription drugs. Ageing population, rise of lifestyle and chronic diseases such as diabetes, hypertension and depression and specialty diseases such as Alzheimer’s etc. have led to high consumption of prescription drugs in U.S. Hence, leading to higher government spending on medical drugs. 2. Increase in drug development costs: The average costs to develop a new drug therapy increased by more than 60% from 2000 to 2005 hence leading to higher prescription drug prices for innovative medicines (PhRMA, 2011). 3. Direct to Consumer Marketing and Advertising particularly for higher priced drugs by pharmaceutical companies has also driven the demand, sales and overall spending levels. 4. Price Inflation: Retail prescription drugs prices have increased around 3.

6% annually during 2000 and 2009, higher than the avg. inflation rate of 2.5% (Kaiser Foundation, 2010). It is estimated that prescription drug spending growth would undergo a slower pace until 2017 when high utilization would accelerate the demand for prescription drugs (Keehan, et al., 2008). The incessant rise in demand due to ageing population and rise of innovative medicines will resume to upsurge the prescription drug expenditures for current and future years. Drug development costs for innovative drugs will continue to rise, however, due to a number of patent expiries and higher penetration of generics medicines will balance the overall increase in such costs.

The prices of mature drugs would fall in the future due to generic entries and price reviews by federal and state governments whereas prices of new innovative medicines