Drug Spending Higher Americans, especially older Americans, are spending much more on prescription drugs. It's not clear whether higher spending on drugs saves money elsewhere in the healthcare system, such as on costly surgeries or hospital stays. But drug spending may cause a net economic gain, as well as improving the health of those who take them. But there are important questions.
Most drug companies make most of their money from a few blockbuster drugs.
Even if a cheaper, effective drug exists, a drug company might try to convince doctors to use the more expensive treatment. There is sometimes little competition, with the top brands charging basically the same amount and making billions. Generic companies come in and sell the drugs at much cheaper rates. But pharmaceutical companies say they need to make huge profits on their drugs in order to pay for high research costs. If they can't charge an arm and a leg, they say, fewer life-saving drugs will be developed.