Sunday, November 15, 2009

5 Reasons Why Prescription Drugs Are So Expensive In America

Recently we had the opportunity to speak with a doctor from New York, a nice gentleman who like many Americans was in the Medicare "donut hole".  His local CVS was charging $200 for his medication, and Medicare did not cover his cost, so he decided to go online.

He came across our site and found the drug listed for $60.  His first thought was how is this possible?  It must be an illegitimate generic or there must be some catch.  How could the same drug at CVS for $200 be $60 with free shipping? 

This is probably the most common question we get and so we thought it might be useful to explain the discrepancy in price.

There are 5 reasons why prescription drugs are so expensive:

1.  Regulations - The United States has some of the strictest standards for drugs in the world and this is a good thing considering our health is at stake.  In addition, the America sometimes operates as 51 small countries, all with their own rules and regulations.  Each state has their own special requirements for obtaining prescription licenses.

2.  Limited Competition - Regulations while protecting our health also limit competition because it is extremely difficult to obtain the necessary licenses to sell prescription drugs.  This means very few companies are licensed to sell prescription drugs to consumers compared to the size of the market.

3.  Lack Of Innovation - The healthcare field as a whole is a slow moving industry.  In general, the industry is satisfied with the status quo.  After all, "if it ain't broke, why fix it?"  The system is not broke as long as you are on the right side of the equation.  Unfortunately, for most of us, this is not the case.

4.  Brick And Mortar Pharmacies - The way the majority of us get our drugs is by going down to our local brick-and-mortar pharmacy.  Have you noticed how many pharmacies are concentrated in a small area of a typical suburb in the US?  A quick search near HealthWarehouse in Loveland, OH, brought up more than 10 pharmacies.  Can you imagine how much real estate and personnel costs?  Take a place like San Francisco or New York City and the costs skyrocket further.  Factor these costs into the price of your drugs.

5.  Inefficient Distribution System - A typical drug from its origin at the manufacturer to the destination at the consumer has passed through more than a few hands before it reaches you.  These middle steps also contribute to the cost of prescriptions.

Going back to the price discrepancy for our Doctor friend and the reason why our prices are so much lower than the others is simple:  We are more efficient at getting the drug from the manufacturer or wholesaler to you the consumer because we ship from a single warehouse in Cincinnati, Ohio and sell via the Internet.  When you remove the cost of purchasing expensive real-estate, buildings, and personnel across the United States, the price of medications comes down to levels which are affordable for the average consumer.

At $200 a month, our Doctor's cost would have been $2,400 a year.  At $60 a month, his cost comes down to $720, a savings of $1,680!  While $720 is a lot of money, it pales in comparison to $2,000.  We're fairly certain he'll be happy keeping his money in his own pocket rather than spending it at the pharmacy and that's the way it should be.

1 comment:

Leha Tran said...

It's great that you guy just explain what been on everyone's mind.The cost of Health care has increase tremendously I know with this new waves of reforms their will be outburst from the public.So I guess the wheel of competition is turning..let see the best competitor win.cclarisse