Rising Drug Prices Capture Congress' Attention

As the U.S. works to completely overhaul its healthcare system, lawmakers are looking at the cost of prescription medications for a way to cut back on spending.

DRX, a firm that compares healthcare options, found that between 2007 and 2014 drugs used for a variety of conditions saw price hikes anywhere from 75 percent to 160 percent over the seven year period.

The result has been a rise in healthcare costs for consumers, insurers and the government's Medicaid program.

Generating Revenue

Many big pharmaceutical companies raise drug prices each year simply to draw in more revenue.

When a patent runs out for a particular drug, the company making it is typically forced to cut prices due to rising competition from generic options.

Before the patents expire, companies can raise prices in order generate as much cash as possible before the competition barges in.

Acquisitions

Throughout the industry investors have seen quite a few acquisitions which ended with one company buying the rights to a rival's drugs, and immediately jacking up the prices.

This year in February, Valeant Pharmaceuticals Intl Inc. VRX did this by purchasing two heart drugs and raising their prices by 212 percent and 515 percent within 24 hours.

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Valeant said the prescriptions had been undervalued and presented a great opportunity for the company to generate a bit more cash.

The practice isn't uncommon and drug companies say it is necessary to offset the cost of research and development for other drugs.

Generics Also On The Rise

However, brand name producers aren't the only ones increasing their drug prices, the cost of generic varieties has also been on the rise.

Now, the Department of Health & Human Services is looking into generic price increases in an effort to save the government money and cut down on Medicaid spending.

Some lawmakers have proposed a bill that would require the manufacturers of generic drugs to pay rebates to Medicaid much like brand name companies, but generic drug producers have countered saying that the government's backlog of applications to manufacture generic medications has stifled competition by reducing the number of firms capable of producing each drug.