How New Drugs Are Priced
According to Statista, in 2019, U.S. drug store and pharmacy sales totaled nearly 297 billion dollars. While there has been a big focus on pharmaceutical companies and their sky-high prices in the media, including previously released drugs that were passed on to new owners and led to abruptly increased prices, the majority of a pharmaceutical company’s revenue is derived from a steady increase in prices of drugs that have been available on the market for quite some time.
There are multiple factors that go into pricing those medications, whether it’s Adare Pharmaceuticals or another company.
The Effectiveness of the Drug
When pricing medications, pharmaceutical companies consider whether they have the potential to change current medicine practices used to treat conditions that they target. They must also consider if the drug can prevent surgeries and other procedures or certain medical treatments. Drug companies generally price drugs higher if they can extend or have the potential to save lives. If they can reduce the number of pricey surgeries and doctor visits, they’re usually priced higher due to the savings they provide those who need to take them.
Of course, drug companies primarily price drugs to generate the most revenue possible, which frequently includes facing competition that will help lower the prices before enacting increases over time.