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Why Are Drugs So Expensive? Understanding How Drugs Are Developed

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You’re enjoying your favorite prime-time television program when you see an advertisement for a new drug. A few moments later, you see another ad, this time for another drug that treats the same condition. “It costs a fortune to buy these ads,” you say to your spouse. “Maybe if the drug companies spent less on advertising, it wouldn’t cost so much to pay for prescriptions.” If you’ve had that conversation, or a similar one, you aren’t alone. Many of us wonder why prescription medications are so expensive. Thanks to media reports and opinionated pundits on talk shows, the blame is often placed on drug companies, who they claim are just plain greedy and spending millions of dollars more on marketing than they are on developing new drugs. The fact is, while yes, drug companies need to turn a profit (after all, they need to make money to stay in business, and continue to sell their medications and develop new ones), and marketing is important in a crowded marketplace, there are other reasons prescription drugs often come with high price tags.

Why are Drugs So Expensive?

Research, Development and Testing… When you visit the pharmacy to buy Abilify >or another drug, you may not realize it took years to bring that drug to the marketplace. Developing a new medication begins by determining the compounds effective on a particular condition. As you may imagine, that’s not a simple process. Not only must researchers experiment with different compounds to find the magic combination that has a positive effect on the condition, they must also determine how the compound is absorbed, distributed and discharged from the body. Once it’s determined that something could potentially solve a medical problem, additional testing is necessary to evaluate the efficacy of the treatment and identify any potential harmful effects.  Depending on the laboratory, these tests may take place on cell samples or animals, and if those tests are successful, then testing on human subjects begins. Multiple rounds of testing are required to prove a drug does what it says it will do and doesn’t cause harm before it goes up for approval for sale from the FDA. This is somewhat of an oversimplification of the process, but it should give you an idea of the amount of work that goes in to bringing a new drug to the marketplace. Each step of the process incurs expenses, from the actual physical space and equipment needed by the scientists (and the pay for scientists themselves) to the costs of safety monitoring, clinical trials and governmental fees for approval. In short, drug companies estimate the total cost for bringing a new drug to the public is anywhere from $4 to $12 billion.

The Cost of Failure

drugs2One major factor many of us don’t consider when we think about the cost of bringing new drugs to the marketplace is the high cost of failure. For every drug that makes it to consumers, there are dozens more that never leave the research stage. In fact, for every one drug that succeeds in human clinical trials, nine more fail. It costs just as much to develop failed drugs as successful ones, but failed drugs will never earn those costs back the way successful ones will. As a result, drug companies must recoup some of their costs via the prices of approved drugs. Limits on how long drug companies can hold exclusivity or patents on new drugs also influence the cost. Brand-name drugs are almost always more costly than generic drugs; because drug companies can only have the exclusive rights to a drug for up to 20 years, they often want to earn as much as possible on that drug before a lower-cost generic version becomes available.

Saving Money on Your Prescription Drugs

Understanding why your drugs cost as much as they do doesn’t take away the fact some prescriptions can put a serious dent in your bank account. Even if you have insurance coverage for prescriptions, the co-payments and deductibles easily add up. You don’t have to do without a necessary medication, though. There are ways to get the medications you need without breaking the bank. For example, Canadian pharmacies offer lower prices on many medications. You can buy generic Lipitor, for example, for about 25 percent less in Canada than in the U.S. There are several reasons for this discrepancy, but it boils down to the fact the Canadian government places a cap on drug prices and negotiates lower rates with the pharmaceutical companies to keep costs in check. If your health care provider determines you need a prescription, discuss drug costs with him or her before leaving the office. In many cases, providers are unaware of cost discrepancies between pharmacies for insured versus out-of-pocket customers. Work together to find treatments that are both affordable and effective. There’s no denying that medications can be expensive, but there are valid reasons behind those expenses beyond padding the coffers of drug companies. When you consider the work that goes into the development of new drugs and the positive effects they can have on your life, it may take some of the sting out of paying for your next prescription.

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