March 9, 2020

Rx drug prices spiked 60% over a decade—even after discounts and rebates

Daily Briefing

    The net prices of hundreds of prescription drugs increased by 60% from 2007 to 2018, according to a study published Tuesday in JAMA that's one of the first to account for discounts and rebates provided by drugmakers.

    Slide deck: How can health system leaders help to manage rising drug costs?

    Study details

    For the study, researchers examined trends in prescription drug list prices, net prices, and discounts from 2007 to 2018. They reviewed pricing data from investment firm SSR Health on 602 brand-name prescription drugs that were available before January 2007 and had U.S. sales figures reported by publicly traded companies. The researchers estimated the drugs' net prices—which account for all manufacturer concessions including rebates, coupon cards, and other discounts—using company-reported sales for each of the drugs and the number of units sold in the United States.

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    Inmaculada Hernandez, an assistant professor at the University of Pittsburgh's School of Pharmacy and a co-author of the study, said, "This is the first time we've been able to account for discounts and report trends in net prices for most brand name drugs in the United States. Previously, we were limited to studying list prices, which do not account for manufacturer discounts. List prices are very important, but they are not the full story."

    The researchers did not examine out-of-pocket costs paid for the drugs.

    Findings

    The researchers found that the list prices, which do not include discounts and rebates from drugmakers, of the 602 drugs increased by an average of 159% from 2007 to 2018—or about 9% annually. After the researchers accounted for manufacturer discounts and rebates, they found that the drugs' net prices increased by an average of 60%, or about 4.5% annually, though they noted that net prices stabilized between 2015 and 2018. Net prices overall increased at a rate 3.5 times faster than inflation, STAT+'s "Pharmalot" reports.

    According to the researchers, list and net prices varied significantly across drug classes. For example, they found that list and net prices increased by averages of 439% and 157%, respectively, for multiple sclerosis treatments, representing the highest average price increases among all of the drugs they reviewed. In comparison, the list and net prices of lipid-lowering agents increased by averages of 278% and 95%, respectively, while the list and net prices of insulins increased by averages of 262% and 51%, respectively.

    The increases in list and net prices coincided with a rise in drugmaker discounts, the researchers found. According to the researchers, manufacturer discounts for drugs covered by Medicaid increased from an average of 40% in 2007 to an average of 76% in 2018, and from an average of 23% in 2007 to an average of 51% in 2018 for other payers. Overall, the researchers found that the increases in discounts offset list price increases by an average of 62%.

    Discussion

    According to Axios' "Vitals," drugmakers often claim that public outrage over increasing list prices for prescription drugs is unwarranted because those prices do not represent the discounted prices that insurers actually pay for the medications. However, the study's findings show that those net prices also are increasing.

    Walid Gellad, an associate professor of medicine who heads the Center for Pharmaceutical Policy and Prescribing at the University of Pittsburgh, said, "We're seeing a lot of discussion that net prices have stabilized over the last few years, and that does appear to be the case. But the stabilization of net prices comes on top of large increases over the last decade, many times faster than inflation, for products that have not changed over this time period."

    According to HealthDay, net prices typically don't reflect the amount patients pay for drugs because coinsurance and copayment requirements typically are based on a drug's list price. "Pharmalot" reports that, because the researchers didn't look at patients' out-of-pocket costs, the study offers "no information on the extent to which consumers experienced rising costs in line with the increases in net pricing."

    Further, a spokesperson from Pharmaceutical Research and Manufacturers of America (PhRMA), a trade group for the prescription drug industry, said, "[B]y focusing on a limited set of brand medicines, the study fails to account for the built-in cost containment that characterizes the prescription medicine life cycle. Medicine prices typically fall up to 90% following the introduction of a generic, providing a cost containment mechanism that does not exist in any other part of the U.S. health care system." The spokesperson added, "Thanks to robust competition, price growth has been nearly flat for brand medicines over the past five years, and experts estimate it will grow below inflation through 2023."

    Still, the spokesperson said PhRMA "agree[s] that the status quo isn't working for patients." For example, the spokesperson said patients "often pay based on list prices at the pharmacy counter even though competition in the market allows payers to extract large rebates and discounts." The spokesperson said the group "support[s] policies to reform the supply chain so patients benefit from the rebates and discounts at the pharmacy counter" (Silverman, "Pharmalot," STAT+, 3/3 [subscription required]; McKiski, HealthDay/U.S. News & World Report, 3/3; Owens, "Vitals," Axios, 3/4; Hernandez et al., JAMA, 3/3).

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