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Why Drugs Cost So Much

Don’t think for a moment that the high cost of prescription medication matters less because most of the cost is paid for by insurance companies or the government.  These costs are passed along to the consumer in the form of high premiums and taxes.

So one way or another, you’re paying for it.

The average American pays $1,200 a year for medication, the highest of any country.  In Germany that cost is around $800, and in France and Spain less than $700.

Here, individual drugs just cost more.

European countries’ national health plans negotiate prices directly with the drug companies. Medicare, which accounts for 30% of all healthcare expenditures in the US, does not.  People pay what the market will bear.

But a lot of people can’t pay it.  One in five Americans have not taken medication as directed because of cost. In Germany, Canada and Australia, one in ten haven’t.  But since we’re only paying a part of the cost, 14% on average, we have no idea what the total cost is.

This week, the attorney general’s rule to require drug companies to state the cost of each drug in all advertising was overturned by a federal court.  The price of pills remains a mystery.

Unique in the United States are pharmacy benefit managers, and these companies take a big chunk of the profits in pharmaceuticals.  They are middle-men between the drug companies and distributors and the public, and are often owned by insurance companies.  They take rebates from manufacturers and do not pass along the savings to the government in Medicare claims or to the insured patient in private claims.

The generic market also has seen price increases, and state attorneys general have begun to launch investigations into collusion and price-fixing among generic manufacturers.

Pharmaceutical companies often justify the high price of their medicine by pointing to enormous expenditures on research and development.  These costs are enormous, but financial analyses of these companies reveal that the budgets for marketing and promoting medicines are even larger than R&D budgets.

In the not too distant past drug companies were forbidden by law from advertising directly to the public. Now people march into their doctors asking for the latest drug they saw advertised for their condition on TV or in a magazine.

Usually, doctors write the prescription, which makes one wonder who is directing care and managing cost: physicians or drug company marketers?

The rising cost of promotional efforts for drugs and the extremely high cost of new individualized medications fuels the increase in total healthcare costs.  These increases, borne by everyone who pays health insurance premiums or payroll taxes, whether they take medication or not, make healthcare unaffordable for many.

High cost of medicine makes noncompliance with treatment more common.  When noncompliant, people get sicker and less able to work or afford insurance.  And noncompliance can actually make the cost of care increase for all involved.

The downward spiral traps many without care.

Some argue that drug prices must be regulated to bring costs down.  Others advocate for a freer market and more information in the hands of the consumer.  If Medicare negotiated drug prices with manufacturers, prices would surely come down, but not all drugs would be included or made available to covered individuals.

As it stands, drugs cost a lot.  Obscene amounts in many cases.  Yet we need them to manage mental illness and must continue to pay.

And pay, and pay, and pay.

Why Drugs Cost So Much

George Hofmann

After much of a life spent in and out of hospitals, jobs, and relationships, George has spent the last dozen years living successfully with bipolar disorder 1. He teaches meditation as an adjunct therapy for mental illness, and writes and speaks about the therapies of meditation, movement, and meaningful work. Visit George at or join the Facebook group Practicing Mental Illness

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APA Reference
Hofmann, G. (2019). Why Drugs Cost So Much. Psych Central. Retrieved on December 13, 2019, from


Last updated: 16 Jul 2019
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