In 2009, Steven Rosenberg, a practicing dermatologist from West Palm Beach, Florida joined forces with his daughter, currently a medical student at the University of Pennsylvania, to survey the cost of popular prescription skin-care medicines. They wanted to educate local dermatologists about the prices of drugs they were prescribing to patients on a daily basis.
Six years later, their study has revealed uncharacteristically large price increases in prominent dermatologic drugs, a trend the researchers say could have significant implications in the healthcare marketplace.
The Rosenbergs analyzed surveys of four national chain pharmacies from 2009 to 2015, eventually honing in on 19 prescription drugs and several generic options. The mean prices of these drugs, which range from typical acne medications to cancer treatments, increased by 401 percent, with the biggest chunk of price increases occurring after 2011 according to the study.
Take Tazorac, a low-risk cream that helps children 12 and over control acne. The drug cost less than $300 in 2009 only to rocket up past $700 by 2015. Of the 19 drugs reviewed, seven more than quadrupled in price over the six year period.
Much like how auto-dealers almost always undercut a car’s “sticker price” to sweeten a deal, most patients do not pay for drugs at retail price. But major pharmacies, like auto-dealers, ultimately choose a sale price in response to the retail price. So while the retail prices surveyed by the study do not necessarily represent the end cost of a drug to most consumers, the researchers say, the increase in prices will almost certainly affect monthly insurance premiums, typically seen as the gold standard for evaluating the true cost of healthcare.
The price increases would be a minor problem if patients had consistent protection from retail prices, but the safety net has shown signs of weakness on multiple fronts. Baby boomers, who continue to surpass previous generations in life-expectancy and therefore place an ever-greater strain on the Medicare system, face some of the biggest challenges.
One important implication of Medicare enrollment is the automatic exclusion from pharmaceutical coupon savings, reserved for customers without access to government assistance. With little evidence to suggest that Medicare can sustain coverage of expensive drugs on its own, the price changes only increase the likelihood that patients insured by the government get locked out of certain drugs altogether. Many elderly Americans face and will continue to face the seemingly absurd but increasingly familiar scenario of paying expensive retail prices for drugs while enrolled in a health insurance plan.
As the formulas used to calculate insurance become increasingly narrow in their coverage of more expensive drugs, many with private insurance face the same problem. More expensive drugs fall outside of coverage areas or trigger high deductibles, a one-time fee attached to drug purchases.
As one might suspect, less-expensive generic drugs provide some relief. But there may not be sufficient market incentives to keep those prices down, either. Some of the generic drugs surveyed by the Rosenbergs remained stable in price through 2015, but the overall mean price increased by 279 percent after 2011.
Many are quick to draw connections between fluctuations in healthcare and the implementation of the Affordable Care Act, but those connections are not yet clear. The tightening of private health care formulations could have a multitude of causes, and Medicare was already on the decline.
Nevertheless, the ACA’s distinctive approach to healthcare could have implications for consumers if prices continue to rise. For while the ACA has proven itself capable of expanding healthcare coverage, the quality of that coverage remains a key variable.
If the narrowing coverage options of Medicare and private insurance are any indication, government subsidies may fall prey to the same rising costs. Expanded coverage will do little good if it leaves essential drugs beyond the reach of those it purports to assist.
Lastly, rising prices will inevitably raise the specter of potential price caps on U.S. pharmaceutical companies, a route other countries have already pursued. Many are uneasy with the idea that cold, mechanical market forces dictate the fate of potentially lifesaving drugs, but while slowing down markets with regulation may make healthcare more affordable, it may not necessarily make it better.
For now, expect researchers to map out the costs of other kinds of drugs with increased thoroughness. The day will come when we can no longer kick the Medicare can down the road, and rising prices may bring that day sooner than Washington would like.