Effexor generic cost model is an outlier, since it far more common for drug prices to rise more slowly, but not in this way.
This is why the IMS institute's analysis is particularly troubling. Since 2007, generic drugs have become much more expensive, yet the IMS institute's analysis finds that inflation adjusted premiums for the entire population have grown by about 1.4 percent per year—meaning that costs have grown about 4.4 percent per year. Moreover, as the IMS analysis suggests, increase in the share of population covered by the IMS institute report has come at a time when overall health-care inflation, including drug prices, has slowed—suggesting that more people are paying for their drugs out of pocket.
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The IMS Institute report doesn't offer a simple answer to these questions. It acknowledges that most people pay for their drugs out of pocket, which requires that they look beyond their own insurance plan to find out what they would have to pay out of pocket if they switched to a more expensive generic drug. But it ignores the fact that many of those costs for generic drugs come directly from Medicare. In 2009, the average hospitalization cost for a Medicare patient with chronic condition was $20,000, while a typical prescription-opioid prescription cost $9,000. Yet the average prescription cost for a generic drug was nearly $4,000.
So Medicare pays much more for the generic drugs that Americans actually take, but it also pays very little for the expensive brand-name drugs that doctors prescribe. If we simply paid doctors more, it would increase the number of people covered by the drug plan for which it is designed to provide reimbursement.
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The Medicare drug benefit that covers prescription drugs is one of the most generous in world. It gives everyone, whether they have health insurance or not, a drug benefit. As described in a 2010 report from the Brookings Institution, a family of four making up to $80,000 a year may get discount on a brand-name prescription based the relative cost of their plan to obtain that drugs; the same family may be guaranteed a brand-name prescription regardless of which plan pays for the prescription. average family plan spends nearly $12 out of pocket on a brand-name drug, which is in line with the federal government's estimates for how much it costs Americans to obtain other prescription drugs. For instance, when a generic drug is priced at the same price as a brand-name drug, the latter is more expensive just because it's less expensive, which is to say it's more expensive because its patent protection has expired.
If Medicare paid more for expensive brand-name drugs then the prices of those drugs would have to rise, which lower the total amount people get.
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