Tori Marsh, MPH, is on the Research team at GoodRx and is the resident expert on drug pricing and savings.
Key takeaways:
- Since 2014, drug prices have increased by 33%, outpacing price increases for any other medical commodity or service.
- Inpatient and outpatient hospital services have also seen substantial price increases since 2014.
- Nonprescription drugs are the only medical service or commodity to see a decrease in price.
Prices for prescription medications are surging faster than prices for any other medical service or good, according to new research from GoodRx. And on top of that, all medical services combined have increased by about 17% since 2014. This research comes as the COVID-19 pandemic continues to sweep the nation, exposing the many flaws of our healthcare system.
The GoodRx Research Team compared data from The Bureau of Labor Statistics’ Consumer Price Index to the GoodRx Drug List Price Index, and while prices for most medical goods and services are rising, prescription drugs have seen the largest increase. Since 2014, prescription drug prices have increased by 33%. During the same period, other medical services, like inpatient hospital services, nursing home care, and dental services have increased by 30%, 23%, and 19%, respectively.
Data from the Consumer Price Index (CPI) measures the change over time in prices for goods and services that people purchase, while the GoodRx List Price Index measures drug list price changes. Both datasets track daily price changes. But the drug list price index data is based off of official list prices set by manufacturers, and the CPI data comes from surveys of consumers and establishments.
So how do prescription drugs compare to healthcare prices from the BLS?
The many prices of prescription drugs
The Bureau of Labor Statistics has its own measure of prescription drug prices. And while its index also reveals rising prices for drug costs, the trend isn’t as steep as the GoodRx List Price Index.
Since 2014, the Bureau of Labor Statistics shows that prescription drugs have increased by 20%, while drug prices on the GoodRx List Price Index have increased by 33%.
Why the difference? The two indexes are looking at different measures of drug prices. The GoodRx prescription drug index tracks drug list prices, which are the official prices set by drug manufacturers. In comparison, the BLS prescription drug price index reflects a mix of cash prices (the price a consumer pays without insurance or a discount) and insurance prices.
Patients typically pay the cash or insurance price at the pharmacy, and not the list price of a drug. However, the list price is the official price set by a drug manufacturer, and can have lasting effects on the price of a drug and healthcare overall. In essence, higher list prices lead to higher out-of-pocket costs for patients.
Even though the indexes measure different prescription prices, one thing is clear — patients are paying more for their medications no matter how you look at it.
What do prices for prescription drugs, inpatient hospital services, and outpatient hospital services have in common?
Since 2014, prices for inpatient and outpatient care have increased by 30% and 26%, respectively.
Like prescription drugs, prices for inpatient and outpatient hospital services are wildly opaque. Patients at both the pharmacy counter and in the hospital rarely know the cost of their medication or procedure until after the fact. Plus, one in five patients are hit with surprise medical bills after an elective surgery. These out-of-network surprise bills happen even to those with insurance, and reports have shown patients seeing bills upwards of hundreds of thousands of dollars.
Also just like prescription drugs, opaque hospital pricing has long outraged patients, and has spurred initiatives from the Trump administration to improve transparency. Certain price transparency acts have driven some hospitals to post the list price for each service. But patients are still finding it difficult to understand the full price of a procedure, and hospital groups across the nation are contesting these policies.
Still, it’s no surprise that these three medical services are rising more than others. A lack of transparency often leads to rising prices and stifles competition in the market, which is essential to driving costs down.
The cost of living longer
With a price running upwards of $100,000 a year, the cost of nursing home care has increased by 23% since 2014, rising just above average hourly earnings. Like many services in this analysis, nursing home care is already expensive, and only continues to rise in price.
Who is affected most by these rising prices? Those without insurance, and those who require long-term care. What’s more, a large chunk of the U.S. population will be exposed to these rising prices. In fact, a recent analysis noted that three-quarters of Americans above the age of 65 will need nursing home care at some point.
Some medical goods and services are trending below wages
While some services are seeing out-of-control price increases, dental services, physicians’ services, eye care, medical equipment, and nonprescription drugs are rising at a rate that is slower than average hourly earnings.
Since 2014, the price of dental services has increased by 19%, hitting a sector of healthcare that is notoriously unaffordable. In fact, cost is the largest reason that Americans skip the dentist, with 59% of Americans noting that they have forgone an appointment because of the price.
Physicians’ services include any service that is performed and billed by a private practice MD, and can include home visits or visits in an office or hospital. Since 2014, these services have increased in price by 10%.
Nonprescription drugs, also referred to as over-the-counter (OTC) medications, are the only medical service that has seen a drop in price since 2014. But they have only dropped by a little more than 2%. Much of this is likely due to competition and transparency in the market. Multiple versions of OTC medications on the market coupled with the ability for patients to price compare in the drug aisle have likely led to a small decline in prices.
Summing it all up
Prescription drug prices have risen faster than healthcare costs since 2014, and previous research from GoodRx shows that drug prices have also risen faster than any other commodity or service over the same time period.
So what does this tell us? Prices for prescription drugs are out of control. And Americans are feeling it. One-third of Americans say they have skipped filling a prescription one or more times because of the cost, and 1 in 10 adults have reported rationing their medications because of cost. Skipping and rationing medications, referred to as non-adherence, can lead to an unhealthy population, higher visits to the emergency room, lower productivity, and higher death rates — all things that can strain the health system and economy.
With prices for prescription drugs and healthcare overall rising, patients need to be educated consumers now more than ever. This means shopping around for prescription drugs, talking to doctors about cost, and fully understanding health insurance.
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