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ICYMI: Drug Prices Rose Three Times Faster Than Inflation Over The Past Decade, Despite Discounts

March 04,2020

NOTE: The bipartisan Grassley-Wyden Prescription
Drug Pricing Reduction Act (PDPRA)
would protect taxpayers from being
put on the hook for unlimited Big Pharma price hikes that have no basis in a
functioning free market. Without reforms, big pharmaceutical companies would
continue to receive tens of billions of dollars in taxpayer subsidies and would
have no incentive to keep prices from rising faster than inflation. Currently,
prescription drug manufacturers can charge Medicare more and more every year –
and taxpayers are forced to foot the bill. The PDPRA enacts accountability and
ends corporate welfare without harming medical innovation.

By Ed Silverman

March 3, 2020

Amid
intensifying anger over the rising cost of medicines, a key piece of data has
been missing from the debate — the actual prices after accounting for rebates
and discounts offered by drug makers to payers. Now, a new analysis has come up
with some numbers and the results are illuminating: Over
a recent 11-year period, net prices for hundreds of drugs rose 60%, which was
3.5 times the inflation rate.

Here
are the numbers: From 2007 to 2018, list prices on
602 medicines rose by 159%, or 9% per year. However, after
accounting for rebates and discounts, net prices for the same drugs increased
by 60%, or 4.5% per year. Overall, discounts offset an estimated 62% of list
price increases, although this varied substantially among different types of
drugs.

The
findings are akin to pulling the curtain back on an argument the pharmaceutical
industry has long used to deflect criticism over its pricing. Drug makers
insist that citing any increases in list — or wholesale — prices is incomplete,
if not inaccurate, because these prices do not reflect rebates and discounts
paid to pharmacy benefit managers to win favorable placement on insurance
formularies.

Drilling
down, the analysis found the greatest increases in both list and net prices
were seen in multiple sclerosis treatments, 439% and 157%, respectively. For cholesterol medicines, list prices rose 278% and
net prices jumped 95%. List prices for medicines used to treat rheumatoid arthritis, such as Remicade, rose 166%
and net prices increased by 73%.

Meanwhile,
chemotherapy drugs experienced list prices rising 59%, which were lowest among the
different therapeutic classes, but discounts offset 41% of those increases,
leading to 35% gains in net prices. List prices for diabetes
drugs rose 165%, while net prices
decreased by 1%. As for insulin — a
flashpoint in the debate — list prices jumped 262% and net prices climbed by 51%.

“Insulin
is the poster child for what’s happening in these widening gaps between net and
list prices,” said Hernandez. “In 2014, net prices for insulin began
decreasing, but list prices continued to rise. This shows us there’s been a big
disconnect between list and net prices.”

The
study, by the way, also found that discounts were much larger for Medicaid than
for other payers, which likely reflected regulation, including a mandatory
Medicaid rebate based on price increases over inflation. Specifically,
discounts increased from 40% to 76% in Medicaid and from 23% to 51% for other
payers, notably commercial payers that are able to negotiate prices.



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