You’ve seen the stories in the news. Prescription drugs that used to be affordable to the average person are suddenly becoming an ultra-expensive luxury only affordable for the rich. It happened with the anti-parasitic drug Daraprim. Then the much more widely used EpiPen skyrocketed as well. What’s behind this sudden price gouging? And how will it affect retirees and Americans fast approaching retirement?
What’s Behind Prescription Drug Price Gouging?
About a year ago, the infamous pharmaceutical entrepreneur Martin Shkreli bought the rights to Daraprim and raised the price from $13.50 per pill to $750. Over the last few years, the makers of the EpiPen, which many allergy sufferers are forced to buy regularly as a lifesaving precaution, have increased its price tag from $57 to over $600. There are many more examples, not all so headline-grabbing, but the fact remains the prescription drugs people need to live are becoming a luxury they can’t afford.
The average person in the United States pays more than twice as much for prescription drugs than patients in other industrialized nations—$858 annually, or 17% of their overall healthcare expenses. Between 2013 and 2015, those costs went up 20%. Even people whose medications are covered by insurance are still faced with rising copays—or simply finding that their particular level of coverage doesn’t include what they need anymore.
There are several reasons for this, but one of the main ones appears to be new government regulations on drug manufacturers. These companies are allowed market exclusivity on the medications they develop, in order to recoup the money they’ve spent on research and development. This means that many of these drugs are the only ones of their kind allowed on the market. Without competition, pharmaceutical companies essentially have a monopoly. They can set whatever price they want for their medications, and people who want them have to pay it.
Additionally, healthcare providers like Medicare and Medicaid aren’t allowed to negotiate for lower prices. So to keep from losing money, they have to raise their copays. Thus, even with adequate insurance, many people aren’t able to afford the prescription drugs they need.
How This Affects Retirees
Typically, the older you get, the more medications you require to remain in good health. Pills for arthritis, high cholesterol, and more become a necessary part of your daily routine. Interestingly, according to a Reuters analysis, these are exactly the medications that are experiencing significant price hikes.
Add to that the fact that most retirees are on a fixed income. They get a small check from Social Security each month, as well as whatever’s in their IRA or 401(k). Both combined usually equal only a fraction of what that retiree made when they were working. At a time when they need more medications, prices are skyrocketing while their income is slashed.
There are a few ways to offset these costs. Some drugs have cheaper, generic equivalents that work just as well as the name brand. For certain medications, buying in bulk can help lower the price, up to a point. And those with Medicare coverage can apply for a “Part D Supplement Insurance” plan, which covers a portion of their prescription drug expenses. Though of course, with prices rising the way they are, even this may not be enough to help them afford what their doctor prescribes.
Many people and organizations are protesting this prescription drug price gouging. But even if they do make a dent, inflation ensures the cost of medication and other healthcare expenses will likely keep going up in the long run. This is one of many reasons it’s vital that, when you do finally exit the workforce, you have enough saved to cover medications you’ll need for a retirement that may last decades.