Prescription Drugs 101: Understanding the price you pay at the pharmacy

Written by Derek Monson

August 21, 2020

A new study recently credited the prescription drug industry with playing a major part in the U.S. having the fourth best healthcare system in the world. Meanwhile, the Trump administration is pushing pause on an executive order intended to reduce prescription drug prices. And here in Utah, lawmakers enacted ongoing tweaks to a new law requiring greater price transparency among various prescription drug market players.

What do these global, national and local developments tell us?

That the prescription drug market is more vital than ever.

And despite significant public concern about prescriptions – whether it be their cost or the development of new treatments or vaccines or their regulations – the prescription drug market remains largely misunderstood. This market is a complex web of interconnected organizational players – drug manufacturers, distributors, insurers, pharmacy benefit managers, pharmacies, and governments at the federal and state levels. Too often, its complexity obscures answers to basic and important questions that significantly impact families and businesses every day:

  • How does the market determine what a patient pays for a drug out-of-pocket?
  • Who influences those prices, and what role do they play?
  • What can be done to make prescription drugs more affordable for patients, while continuing to encourage the development of new drug treatments?

To address these questions, Sutherland Institute is launching “Prescription Drugs 101.” This series will describe and decode each component of the prescription drug market for policymakers and interested members of the public through sound research and analysis, written to be understood by a general audience.

The first installment in this series will offer a general overview of how the prescription drug market works. We will briefly describe the various economic actors in the market and how their interactions determine the price you pay at the pharmacy window. We will then turn to interviews with experts and industry leaders in various sectors of the prescription drug market to deepen readers’ understanding of how out-of-pocket prescription drug prices are determined – and what can be done to maintain the strength of prescription drug innovation while making prescriptions more affordable.

Our goal is not only to increase your understanding of the cost of prescription drugs, but to help you know what you can do about it. We hope that you’ll join us on this journey. Have a question you’d like answered? Want to leave a comment? Email si@sifreedom.org.

Prescription Drugs 101: The players

Prescription Drugs 101: Follow the money

Prescription Drugs 101: The 6 things that determine the price we pay

Prescription Drugs 101: One visual to rule them all

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