I have done some analysis on pharmacy costs for clients recently. During that time, I noticed an increase in the cost per prescription for some drugs. Our pharmacy partners have shown the same trend in their data. This upsurge made no sense to me.

Many drugs are coming off of patent, meaning generics of those drugs can now be manufactured. Historically, this has always driven down costs and “generics” was synonymous with “cheaper.”

A Wall Street Journal article may give us a clue as to why this is happening.  It turns out the pharmaceutical companies are buying smaller companies or their rivals, and jacking up their prices. Since 2008, branded drug prices have increased 127%, versus an 11% increase in the Consumer Price Index (CPI).

This is very similar to what is occurring in the hospital world. Hospitals are buying competing hospitals, medical groups and ambulatory surgery centers, and once they have established a virtual regional monopoly, they raise all the prices.

If you can’t beat them, buy them.