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Fact Checked

How Are Prescription Drug Prices Set?

How Are Prescription Drug Prices Set? Ever wonder how prescription drug prices are set? If so, you are not alone.

The Process Is Complicated, And Involves Many Companies

Essentially, everyone is trying to figure out what people are going to be willing to pay for the drug. Drug companies usually talk to insurance companies, and examine what insurance companies are paying for other similar drugs. They also consult doctors to understand how willing they would be to use the drug versus alternatives that already exist in the marketplace. Realistically, there is no exact formula to determine a price.

The insurance companies aren’t interested in the total cost of the treatment. Instead, they are more interested in the monthly payment – known as per member, per month. For an insurance company, the longer a treatment takes, the better. This is not always good for patients.

Premium Drugs Drive A Premium Rate

If a premier drug comes along that is more effective than the principle drug, it is reasonable to assume that, at the very least, a 10 percent to 15 percent price premium will be charged. Naturally, this does not always pass the public relations test, but it does drive competition in the market.

Research And Development

There is often discussion surrounding the impact that research and development has on drug costs, typically when a pharmaceutical company is trying to justify the cost of a drug. However, cost of development is typically considered when a company is first deciding whether to develop a drug. Once they determine the cost necessary to cover expenses, the pharmaceutical companies will study what the drug would ultimately need to cost in order to cover those expenses, and whether charging that amount is viable. Ultimately, the research and development aspect is determined at the beginning of the process.

Prescription Drugs Don’t Have To Cost A Fortune

With the USA Rx Discount Pharmacy Card, you can keep your health and your budget in balance. As pharmacy costs can constantly change, you can rest assured knowing you can afford your prescription.

Published March 28th, 2017 by USA Rx
Fact Checked by Chris Riley

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