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Please, Let’s Stop Talking About the Cost of Healthcare in Terms of Percentages

April 4, 2018
Posted by: Posted by: Gerald “Pharmacist Jerry” Finken, RPh, MS

%Rx ≠ $Rx

Prescription drugs prices continue to go up every year. Is it the disaster they say it is? Perhaps not. Why?

CNN recently published an article about soaring drug prices and used only percentages to prove its point that there is a real problem when it comes to the cost of prescription drugs today.  The problem with using percentages is that they are numbers without units and can be misleading.  For instance, if we Google the average cost of Nitrostat, we find that it is estimated to be $38 for 25 tablets. For ease of calculation, let’s round up to $40 for the same.  If Nitrostat was $8 in 2013 and now costs $40 in 2018, the price would have increased by 400% as stated in the article, but in actual dollars the increase would be $32.  A $32 increase over five years for a drug may not get our attention, but a 400% increase certainly raises eyebrows.  It’s a different way of looking at things that, in my opinion, is causing false alarm.

Additionally, over the last five years, we also know that “listed” drug prices are not necessarily the “real” price of the actual drug, but actually the prices “charged” for the drug. Calculations, like those of CNN, are based on the “charged” prices, which include “middleman” costs, rebates, negotiated prices, etc.  What we really need to know about drug prices, in order to form an educated opinion about whether the costs are reasonable or not, is the actual “net cost” charged by the drug companies – which unfortunately is not information available to the public.  In order to avoid possible hysteria though, for sure, we should disregard articles where only percentages are used, as the perspective is askew.

Let’s analyze for a moment the comment in the CNN article by Sen. Claire McCaskill, D-Missouri, comparing the increase in drug prices to that of cars:  “Can you imagine if you went to an auto dealership and last year’s exact model was being sold at a 20 percent mark-up, and then you went back the next year and it had happened again? That’s exactly what’s happening in the prescription drug industry, where the cost of identical drugs skyrockets year after year.”

If Nitrostat goes up 20% next year it will go from $40 to $48, an $8 increase.  At the same time, if we want to buy a car for $30,000 this year, we will be paying $36,000 next year or an increase of $6000.  I think we would all agree that this 20% comparison is not quite the same thing.  A better comparison would be the price of gas for the car.  If this year we spend $3.00 per gallon, then next year we would be spending $3.60 per gallon or $0.60 per gallon more or $12.00 more per average fill-up.  The difference between the cost of medication versus the cost of gas is an ethical one.

We should also remember that medication costs actually reduce overall healthcare costs when patients are compliant and adherent.  This brings me to another important point. Let’s consider what would happen if the patient just stopped taking Nitrostat—based upon the 400% ($32.00) increase calculation.  Next, let’s look at the average cost of treating a heart attack:  approximately $40,000 for the first 90 days.  If the cost of healthcare is increasing at a modest and understated two percent/year then in five years the cost would be approximately $44,000 and the government, or the patient, would be paying $4,000 more to treat their condition.  I believe paying an additional 400% increase over the next five years ($160.00) for Nitrostat, a preventative treatment, to be far better than paying the understated 2% ($4,000) for treatment after a heart attack.  I think every heart attack patient would agree as well.

Look, no one likes price increases, but we also need to put things in perspective. In addition, we should redirect our attention to the real issue—the financial consequences of NOT paying the price for prescription drugs. I’m 100% sure (pun intended), we can all agree that preventative care is WAY less expensive than reactive care and ultimately the preferable choice and expense— even increases of 400%.  What do you think?

Pharmacist Jerry

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