Physicians are the gatekeepers to prescription drugs. Nowadays only a doctor can authorize prescriptions, but it was not always that way. The following is from the Federal Regulation of Medication Dispensing:
The Food, Drug, and Cosmetic Act (FDCA) of 1906 was the first federal law to establish the FDA as the main regulatory body for all medications in the United States. This role became more complex with the Durham-Humphrey Amendment of 1951 and the Food and Drug Administration Modernization Act of 1997 (FDAMA).
These acts defined the two classes of federally regulated medications: OTC and prescription medications.
The law that doctors must authorize prescription drugs only dates to 1951. Prior to the Durham-Humphrey Amendment, most drugs did not legally require a prescription. Of course, there were still drugstores prior to the Durham-Humphrey Amendment. Drugmakers sold their products to drugstores the same way that auto parts manufacturers sell their products to stores specializing in auto parts.
Despite the inflated cost of drugs, medications are the best deal in our overpriced, dysfunctional heath care system. Prescription drugs account for about 10% of health care expenditures, while physician care is about 20% and hospital care nearly one-third. OTC drugs are the only real bargain in health care.
Around 85% of adults had a physician visit last year. About two-thirds of physician visits result in a prescription (range 55% to 75%). Indeed, the purpose of most visits is probably to access medications available only by prescription. Some firms are using the Internet to get around that barrier. The other day I saw an advertisement on YouTube for a telemedicine firm that openly advertised access to prescription drugs without having to see a doctor. You merely fill out a form, a physician reviews and then authorizes your prescription. The drug arrives in the mail days later.
The Durham-Humphrey Amendment had the perverse effect of codifying a system that inhibits access to medications. It also substantially boosts the price consumers pay for drugs. In 1998 insurer Wellpoint petitioned the U.S. Food and Drug Administration (FDA) to switch the (then) prescription drug Claritin to OTC. At the time prescription Claritin cost about $85 a month (~ $1,000 a year). Claritin alone was costing WellPoint $40 million a year. The FDA claimed the federal agency lacked the authority to force drugmaker Schering-Plough to sell Claritin directly to consumers. Rather, Schering-Plough would have to petition the FDA and jump though regulatory hoops proving it was safe enough for consumers to self-medicate. Schering-Plough did not petition the FDA to allow OTC Claritin until 2003. By 2004 generic OTC Claritin (loratadine) was $9 for 100 tablets at Costco. Today it’s about the same price for 365 tablets on Amazon.
More than 700 OTC products were once available only by prescription. Within a couple of years after a brand name product loses patent protection and becomes available over the counter, the price falls up to 97%. However, the politics of OTC are not what you would expect. Because insurers are not required to cover OTC medications, many public health advocates foolishly oppose OTC switching believing it will cost consumers. This was an argument against switching OTC Claritin and heartburn drug Prilosec and later the oral contraceptive Opill.
Drugmakers prefer to sell their drugs by prescription only because consumers are not price sensitive when health insurers are paying the tab. Health plans are required under Obamacare to provide drug benefits, and 88% of drugs are paid for by third party payers. If the FDA allowed more drugs to be sold directly to patients, prices would fall precipitously. In that regard, the FDA functions as a mechanism to keep the price of drugs high by insulating drugmakers from price competition.
The FDA should not function as a profit protection agency for drugmakers. The agency should have a division whose job it is to actively seek out prescription candidates deemed safe enough to switch to OTC. FDA officials could review and set ground rules. A patent holder could still refuse to sell to anyone other than a pharmacy and even sign agreements with pharmacies to not allow customers to buy without a doctor’s prescription. However, the odds are that market forces would result in more price competition for drugs legal to sell OTC. Furthermore, once a patented drug goes generic, numerous competitors spring up to sell the drug cheaper. Another option to boost access to drugs is a third class of drugs called behind the counter drugs. These are drugs that consumers can buy after a short consultation with a pharmacist.