Prescription drug costs are the number-one reason behind rising health care costs. They affect your employer, your health plan — and you.

New medicines, new price tags

More than ever before, health care in America has enhanced our every day lives and improved our life expectancies. We’re living longer. We’re living better — thanks to new technologies and medicines.

The pharmaceutical industry has produced a stream of new drugs in recent years to treat cancers, heart disease, high blood pressure, arthritis, depression, ulcers, osteoporosis, Alzheimer’s disease and the AIDS virus. But these new drugs come with a new price tag, often many times as much as older drugs. In fact, studies have shown that in recent years retail prescription spending has soared nearly 20% annually.

Behind the story

Ever wonder why prescription drug costs are increasing? Here are a few facts to consider:

• Increased usage — In recent years, prescription drug usage has increased. In fact, in 2001 Americans had 3.1 billion prescriptions filled, or more than 10 prescriptions for every man, woman and child.
• Greater patent protection — During the last two decades, drug companies gained greater patent protection on brand-name drugs allowing them to sell their patented drugs exclusively over a longer period of time, often at increasingly higher prices.
• Direct-to-consumer advertising — Consumer advertising promoting specific drugs has had a major impact on consumer demand. According to the National Institute for Health Care Management, direct-to-consumer advertising rose 35% between 1999 and 2000. By raising public awareness, the drug companies have driven consumer requests for specific drugs even though consumers often don’t fully understand the consequences: higher premiums and out-of-pocket costs.

How costs affect you

With increased usage and direct-to-consumer advertising, the prescription drug market has grown enormously. Unfortunately, with increased demands come increased costs — especially when it comes to brand name drugs, the most expensive drug type. The more you use costly brand-name prescription drugs, the more costs rise — which means you and your employer ultimately pay more in the form of higher premiums, coinsurance and copays. That’s why choosing generic prescription drugs whenever possible can save you money.