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Aug, 13 2014

I spent 27 years in the retail industry, so I know all the behind-the-scenes secrets. For instance, I know you’d be shocked at how few purchases actually occur at the ticketed full price. I know you’d also be surprised to see what the models really look like prior to all the post-photography “touch-ups.”

But I digress. While interesting, my retail secrets don’t hold a candle to the healthcare industry! 

I’m sharing 6 pieces of info about prescription drugs I’ve learned since defecting to the healthcare industry! (Prior to defection, the extent of my knowledge on this topic was Mr. Mackey’s comments on Southpark: “Drugs are bad, MKAY?” But, I’m pretty sure he wasn’t talking about prescription drugs.)

1) More people are taking Rx drugs

You probably already knew this since you’re likely one of them. According to the US Center for Disease Control (CDC), about half of all Americans reported taking one or more prescription drugs in the past 30 days during 2007-2010. Later studies by the Mayo Clinic found that nearly 7 in 10 Americans are on at least one prescription drug and more than half of Americans take two drugs. 

2) It’s a growing industry

You probably already knew this, too. The CDC says spending for prescription drugs was $234.1 billion in 2008, which was more than double what was spent in 1999. The trend continues: according to the IMS Institute, that number reached $325.8 billion in 2012. Assuming those numbers are correct, the industry has about tripled since 1999. $325.6 is a big number to comprehend, so let’s break it down: that’s $1459 per person each year or $122 per month. 

3) Drugs are expensive to develop

According to a Forbes article

• The average drug developed by a major pharmaceutical company costs at least $4 billion, and it can be as much as $11 billion.
• A single clinical trial can cost $100 million at the high end, and the combined cost of manufacturing and clinical testing for some drugs has added up to $1 billion.
• Fewer than 1 in 10 medicines that start human clinical trials succeed.

The article goes on to challenge these results. Does it really need to cost that much and is that an acceptable failure rate? I won’t pretend to know the answer, but it seems that most other businesses couldn’t survive with those costs and failure rates. Here’s what I know: I don’t want them to stop creating life-saving/enhancing drugs!

4) Patents make a big difference

When a drug company brings a drug to market, they’re given a certain number of years of exclusivity on their US Patent. In other words, only the company who created the drug can sell it. This is partially to help them re-coup the costs of bringing the drug to market outlined in #3. At the end of the exclusivity, competitor drug companies or the original maker of the drug can launch a generic version at a much lower price. Click here for a list of brand name drugs that will become available as affordable generics this year and next.

5) Speaking of generics

You’ve heard the term, but what does it mean? The US Food & Drug Administration (FDA) defines a generic drug as… 

“...identical - or bioequivalent - to a brand name drug in dosage form, safety, strength, route of administration, quality, performance characteristics and intended use….When a generic drug product is approved, it has met rigorous standards established by the FDA with respect to identity, strength, quality, purity, and potency.” 

While there’s little difference in the formula of the drug, there’s a big difference in price. In 2008, the National Association of Chain Drug Stores study showed that the average cost of a brand-name drug was about 4 times as much as a generic. There are some savings to be had! According to the FDA, nearly 8 in 10 prescriptions filled in the US are for generic drugs and the use of generic drugs is expected to grow as a number of popular drugs come off patent through 2015 (see #4).

6) Less drugs are being covered by insurance

Do you know what a “formulary” is? Basically, it’s a list of drugs your insurance company will cover. Each insurance plan has a different list of covered drugs. Many Americans are learning that their drug has “fallen off the formulary” meaning that the insurance company will no longer pay for their medication. In addition, those costs may not count against your deductible or out-of-pocket maximum, making it 100% your responsibility. This is one way insurance companies can keep their costs down. If they cover fewer drugs, less comes out of their pocket. The bummer is that more comes out of your pocket.

6.5) There are ways you can save

Teaser Alert! Since the average American spends $122 per month on medications and less are being covered by insurance, we’ll explore multiple innovative ways to save on your meds in an upcoming article. 

Now it’s your turn! Did you know about these things? Have you had experience with any of these points? Ask a question or comment below with your thoughts. 


Heidi has a passion for helping busy families control their healthcare dime, time and peace of mind! She writes articles to do just that, while keeping it fun and simple for her readers! She also speaks on healthcare issues and is the owner of

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Tanya Boyd
Tanya Boyd
President of Tanya Boyd & Associates

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