Because they CAN. Over forty years ago when prescription drug coverage by insurance companies began, drugs were fairly cheap. There were few chain drug stores and most drug stores were owned by one or two pharmacists. Pharmacies bought drugs directly from the manufactures, not wholesale companies like today. A few years after the prescription drug plans came into existence the drug manufactures came to the realization that what ever they charged for a drug, the insurance companies would pay. The law of pricing what the market would bear was nullified. The people who had prescription drug coverage did not care about the price because the insurance company was paying and all they had to pay was a small copay.

And so socialized medicine began, but it was privatized. At about the same time generic drugs came on the scene. Before generic drugs the name brand drugs would enjoy many years on the market with little competition and good profits. When a company developed a new drug they got a patent for a period of time, but even when the patent ran out they would often make lots of money for many years later. But when generics came along, the high profits would disappear at the end of the patent period. Before generics the name brand companies would structure their pricing to recover their development cost over a period of a few years. Today most name brand companies structure their pricing to recover their cost in the first year.

From a business point of few this is only logical because when the patent runs out so will the sales and ultimately the profits. So now with development cost being fairly high and most drug prices not ruled by free enterprise the name brand drug companies are getting huge prices for new drugs.

There are some changes occurring that are starting to challenge the name brand companies. First with the down turn in the economy and hard economic times many companies are reducing their prescription drug benefits and with high unemployment many families are losing their insurance drug coverage. So the laws of free enterprise are starting to take over the prescription drug pricing. People are refusing to fill prescriptions for drugs that are priced beyond their means.

Also laws have changed on how the name brand drug companies can sell their new drugs. In the past the drug companies sent out teams of well trained drug salespersons. They would give the doctors all kinds of trinkets, toys and paraphernalia with the name of the new drug on it to help keep the name of the drug in front of the doctor. They gave out pens, note pads, and every conceivable advertising item to keep the name of the new drug in the doctors face. This is no longer allowed. It has been suggested that the drug companies were actually behind the new laws on drug advertising because they can now direct these moneys to TV advertising, which has proven to be extremely successful.

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