Prescription Drug Trends

A gene therapy treatment recently approved by the Food and Drug Administration for use against leukemia is priced at $475,000 for a one-time treatment.1 While it’s exciting that new treatments, including prescription drugs, appear to be getting closer to curing society’s most lethal diseases, many of us wonder how we can afford them. Even when such treatments are covered by insurance, the pool of insured participants pay the cost in terms of higher premiums.

The way drug manufacturers determine pricing has become a controversial topic. In the past, the average cost to bring a new drug to market was reported to be around $2.7 billion. However, a new study on cancer medications has arrived at a much lower number: a median cost of $757 million per drug, with half costing less and half costing more. Drug companies dispute the study, saying the cost doesn’t take into account research and development investments made in drugs that fail.2

Meanwhile, health care costs continue to rise, with the average family health insurance plan rising 3.4 percent in 2016 from 2015, outpacing wage growth.3 Even in retirement, when most people qualify for Medicare benefits, health care expenses can be high. Recent estimates project that a healthy, 65-year-old couple retiring this year will need $275,000 to cover their health care expenses in retirement.4 This sum includes paying for Medicare premiums, cost-sharing provisions and out-of-pocket costs, but when you add in over-the-counter medications, dental services and potential long-term care, that figure could be even higher.5

Do you have a strategy in place to help pay for health care expenses in retirement? If not, give us a call.  Some insurance products such as life insurance and annuities provide various options you may want to consider. We’d be happy to discuss your options based on your unique situation.

As for tackling the issue of high drug prices, states are taking the matter into their own hands. California recently passed legislation mandating transparency related to how the pharmaceutical industry sets drug prices in that state.6 In April, New York passed a law that requires prescription drug companies to undergo a review when prices rise and discounts and rebates aren’t offered back to the state for rising Medicaid drug spending.7 Nevada’s legislation more specifically requires a drug pricing process for diabetes medication. The state of Vermont has had a law on the books since 2016 in which drugmakers must provide justification for pricing hikes or they risk being fined.8

Meanwhile, another way to tackle the high cost of prescription drugs could be to introduce a major volume player into the mix – Amazon reportedly has been considering entering the prescription drug market. The pricing power that Amazon wields was enough to drive down the price of CVS and Walgreens stock by nearly 5 percent when a report predicting a potential Amazon move was first announced.9

Content prepared by Kara Stefan Communications.

1 LizSzabo. USA Today. Aug. 30, 2017. “Revolutionary gene therapy approved for leukemia – at $475,000 price tag.” Accessed Oct. 20, 2017.

2 Gina Kolata. The New York Times. Sept. 11, 2017. “What Does It Cost to Create a Cancer Drug? Less Than You’d Think.” Accessed Oct. 10, 2017.

3 Tami Luhby. CNN Money. Sept. 14, 2016. “Employers push health care costs onto workers.” Accessed Oct. 20, 2017.

4 Kelli B. Grant. CNBC. Aug. 24, 2017. “Expect to spend more on health care in retirement — even if you’re well.” Accessed Oct. 10, 2017.

5 Ibid.

6 Lydia Ramsey. Business Insider. Oct. 9, 2017. “California just passed a new law that tackles the rising cost of prescription drugs.” Accessed Oct. 10, 2017.

Julie Appleby. Kaiser Health News. May 22, 2017. “New York State Wants Its Prescription Drug Money Back – Or Else.” Accessed Oct. 27, 2017.

8 Business Insider. June 4, 2017. “‘More is possible’: A bunch of states are taking on high drug prices, and it could start hitting drugmaker profits.” Accessed Oct. 10, 2017.

9 Paul R. La Monica. CNN. Oct. 9, 2017. “Are prescription drugs the next target for Amazon?” Accessed Oct. 10, 2017.

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The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.



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