Causes of Drug Price Increase in The US
The drug industry has complained that the program has not only led to price increase but also promoted cost shifting and reduction in medical discoveries, and private sector research. However, from the literary context, the 340B drug-pricing program is smaller than the rest of drug market share and therefore, the drug industry’s obligation to offer discounted prices under the program would essentially affect their pricing techniques (Conti and Bach 19). The primary aim of this study is to determine the plausibility of the mentioned claim about the 340B drug-pricing program. Moreover, the paper would analyze the potential economic (financial) consequences of the 340B program on the drug industry while focusing on the pharmaceutical sector. Background Information The Health Resources and Services Administration (HRSA) administers the 340B drug pricing program which essentially needs the drug manufacturing companies to sell the outpatient drugs to the covered health care organizations at a reduced cost (Fong 34).
How does the monetary size of the 340B program relate to the pharmaceutical industry expenditure in other sectors? US Expenditure on Drugs The first step, which is essentially needed to facilitate the achievement of the objectives of the study, is to understand the US expenditure on the drugs. This section of the paper would provide the data of drug expenditure in America and literature review on the factors influencing the drug expenditure over time. The researcher involved the relevant stakeholders such as wholesalers, pharmacies, health planners and the pharmacy managers to collect the data. Following the long chain of distributing drugs, discounts are given at all stages of distribution (Kantarjian and Chapman 403). For this study, the author used the estimated values from the retail and non-retail drug expenditure obtained from the Department of Health and Human Services Office of the Assistant Secretary for Planning and Evaluation (ASPE).
Several publications have discussed the factors, which influence the increase in the drug price. According to ASPE, the estimated costs of the drugs have increased significantly between 2011 and 2014, with the drug prices rising higher than the dose prescribed to the patients. The increase in drug price, which is approximately 15 percent during the period, is a result of the approximated 7 percent inflation rise between 2010 and 2014. Moreover, ASPE elaborates that apart from inflation, other factors such as population growth and increase in prescription per person contribute to the rise in drug price in the entire drug industry (Conti and Bach 24). On the other hand, OACT suggests that the increase in the cost of drugs is contributed by factors such as increased expenditure on new medicines, the growth of price for brand-name drugs, increased spending on generics and fewer spending on the blockbuster drugs going off the patient.
Therefore, though we expect many industries to manufacture the generic drugs, just about two or three companies make such drugs currently. Ideally, the drug manufacturers have also proved that the price increase on drugs is essentially needed to cater for the cost of research and development. According to Reinhardt, most of the manufacturers spend a lot of their income on drug marketing and the administration expenses leaving the little amount of money to run the research and development programs. Moreover, the amount of money generated by the drug manufacturers through the sales of drugs at a higher price than the other countries in the world is higher than the amount spent on research and development (Warren and Shankar 91). Therefore, the increase in the prices of drugs is because of the cost of drug development but not due to research and development.
In case the manufacturers increase the price of the brand-name drugs faster than the inflation rate, the rebate percentage also increases thus discouraging the manufacturers from increasing the drug prices. Moreover, the drug manufacturers are entitled to sell the brand-name drugs to the Medicaid at a fair cost. Therefore, they are obliged to provide larger rebates in case the fare price is less than the AMP subtracts the URA (Kantarjian and Chapman 403). Furthermore, the researcher has included the Prime Vendor Program (PVP), which allows the legible entities to pay the drug manufacturers less than the 340B ceiling prices at a particular time. According to HRSA, the $12 billion expenditure in 2015 accounted for a small fraction of the $457 billion. However, the Office of the Inspector General (OIG) states that some of the manufacturers charge drug prices more than the stipulated 23.
1 percent for brand-name drugs (Conti and Bach 46). Thus, most of the companies neglect the terms of the 340B drug-pricing program. Therefore, many discounts result from the avoidable actions of the manufacturers. The Table 2 below illustrates the breakdown of the 340B discounts in 2015 based on the inflationary penalties and fair price requirements. 2011 2012 2013 2014 2015 Actual expenditure on 340b drugs (%) 6. 0 Gross spending on 340b medications ($) 9. 1 Total discount for 340b medicines ($) 3. 1 Baseline discounts for 34ob drugs ($) 2. 2 Gross expenditure on specialty drugs (retail and no-retail) ($) 82. 9 Patient cost sharing assistance 6. 1 Statutory rebates and fees for brand-name drugs 340b drug discounts 6. 6 Baseline 340b discount 4. 5 Inflationary penalty Add-on and fare price requirement 1. 1 Other Statutory rebates, discounts, and fees 35. Thus, the drug manufactures charge higher amount on the upper income-earning families.
Such fees are sometimes imposed on the low-income earning citizens. Therefore, the government interferences are the causes of overcharging the drugs in the health sectors. Conclusion From the research, the author made the following conclusions: 1. The 340B discount represents about 1 percent of the net US drug expenditure 2. The government should introduce new techniques for generating income. It should abolish the tactics of increasing the taxes on drugs and withdrawing the subsidies on the medical care 3. The government should also enact policies, which protect the low-income earners from price discriminations. The American citizens should practice hygiene and body exercise to reduce the rate of emergence of many infections. Works Cited Conti, Rena M. Xu, and Yamini Kalidindi. "Impact of the 340B Drug Pricing Program on Cancer Care Site and Spending in Medicare.
From $10 to earn access
Only on Studyloop