Brand Name or Generic Drug Prices Are Rising

The high cost of new specialty drugs rightly has our attention. But that’s not the only reason why employers are reporting significantly higher increases in the per-employee cost of prescription drugs. A recent article in Bloomberg provides some chilling examples of massive and seemingly unjustifiable price hikes for brand-name drugs. According to BloombergView columnist Megan McArdle, “Drugmakers set prices based on whatever the market will bear, especially since demand for some therapeutic drugs is relatively inelastic — in other words, demand does not change much in response to price changes.” And it’s not just the brand-name drugs we have to worry about. An article published last year in Forbes describes why we’re seeing unsettling increases in generic drug pricing as well; namely, consolidations in the pharma industry and supply shortages. Long story short, this is the year to focus attention on the drug benefit.

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Beth Umland
by Beth Umland

Director of Research, Health, Mercer

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