Prescription drug costs are on the march, and out of reach for many Americans

Paying the price for drugs

For Americans, prescription drugs are a mixed bag. To some, they are a necessary evil: Medications that are needed to treat ailments but are also expensive and sometimes come with side effects.

The good news? A record fifty new drugs were approved by the U.S. Food and Drug Administration (FDA) in 2015, which increases supply and may put eventual downward pressure on prices.

The bad news, however, is cost relief appears further away than ever, with brand-name medications prices soaring by 16 percent in 2015. Between 2008 and 2015, the prices for these medications rose a whopping 164 percent, according to Express Scripts, a company which provides prescription benefits.

One reason for the increase is that the price for specialty drugs, those used to treat complex and costly conditions, such as cancer, Hepatitis C and multiple sclerosis, is prohibitively high.

New treatments for Hepatitis C, a liver infection which can cause long-term health problems and even death, have 90 percent cure rates. Unfortunately, it also comes with a huge price tag: 12 weeks of treatment in the U.S. with Sovaldi is $80,000 and with Harvoni is $94,5000. Both drugs are manufactured by Gilead.

"We have these drugs that can wipeout this horrible disease and wipeout an epidemic but the cost is so prohibitive. So we'll never stop the epidemic this way if we can't afford the drugs," Dr. Ken Davis, President and CEO of Mt Sinai Medical, told CNBC's "On the Money" in a recent interview.

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Drug manufacturers defend high prices, citing the years of exhaustive research and development involved in creating them. Many pharmaceuticals have generic versions—which according to FDA data can be as much as 85 percent cheaper, saving tens of billions a month.

However, patents on key blockbuster drugs can be a barrier to developing the generic market.

"The Gilead people will tell you they price this drug as they did because it saves so much money downstream," Davis told CNBC, and there's some truth to that. "It saves the health care industry so much money, but that's a new conceptualization of how to price drugs."

According to Davis, America used to make the cost for life saving medicines, such as the Polio vaccine, inexpensive to save lives.

"How have the values of some of the companies changed so drastically from, 'We're going to do good and do well at the same time,' to 'We're going to do good and we're going to charge whatever we can charge because that's what the market will bear,'" he asked.

Ultimately, it means Americans are bearing a higher cost for prescription drugs than many other countries. For example, the price for cancer drug Gleevec is $989 in New Zealand, compared to $6,214 in the U.S., according to the International Federation of Health Plans.

One key reason drug prices are higher in America than other countries is that the government does not negotiate directly with drug companies. Other nations, such as Norway, have their state-run health system set prices with manufacturers.

Since the state is often the only large prescription drug buyers in their country, they have negotiating power.

"The problem is we haven't considered it as a trade issue," Davis said. "We haven't recognized that people in the U.S. market shouldn't pay the whole price for research and development because the rest of the world is regulated."

On the Money airs on CNBC Saturdays at 5:30 am ET, or check listings for air times in local markets.