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Why prescription drug prices are high graphic

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When it comes to the high price of prescription drugs, there’s a lot of blame to go around.

For a single prescription drug, there are often five companies involved, from development all the way to your medicine cabinet. Those include the drugmaker, wholesaler, pharmacy, pharmacy benefit manager, and your insurer. Each company makes a tidy profit along the way. And as prices increase, so do those profits.

On Tuesday, CEOs and executives from seven pharmaceutical companies are testifying at a Senate hearing about the role they play in setting high drug prices that patients increasingly are on the hook for. In the US, Drugmakers ultimately set the list price of their medication, which they can increase at their discretion.

List prices for pharmaceutical have been increasing over the past decade. But many drug companies have said that net prices — which factor in discounts and rebates negotiated by pharmacy benefit managers on behalf of employers and insurers — have increased far less, or even declined.

They say consumers are paying high out-of-pocket costs for their drugs because of policies set by insurers and pharmacy benefit managers, likely a refrain that will come up often in Tuesday’s hearing.

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Here’s an example of how drug prices get set, based on a monthly prescription with a list price of $100 a month for a person with a commercial insurance plan that covers all but a $20 co-pay.

Skye Gould/Business Insider

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