Despite furor, branded Rx drug prices up nearly 11% last year

A national debate over drug pricing has exploded in the last two years as U.S. the industry’s pricing practices have been exposed.

In the face of a national backlash on drug prices, a handful of drugmakers have pledged to limit their prices on branded prescription drugs to 10% or less this year. As it turns out, that is roughly how much they increased last year anyway.

Express Scripts, the largest U.S. pharmacy benefits manager (PBM), said today that its calculations show brand-name list price increases in 2016 were nearly 11%. The PBM, which is known for aggressively fighting drugmakers on the prices of some drugs, said it managed to keep the average increases in unit prices to 2.5%. It said that drug spending, increased 3.8%, which included both prices and utilization. 

Of course, the vast majority of prescriptions filled in the U.S. are for generic drugs, and prices for those actually decreased. The cost of the most commonly used generic drugs fell 8.7% last year, Express Scripts said, a fact that was seen in the bottom lines of generic producers and wholesalers alike.

Still, the amount of money that Americans paid for their drugs went up. The PBM said that across all of its plans, the average patient out-of-pocket cost for a 30-day prescription was $11.34 in 2016, about 10 cents per prescription more than the year before.

A national debate over drug pricing has exploded in the last two years as U.S. the industry’s pricing practices have been exposed. The high prices for new specialty drugs like cures for hepatitis C and cancer, as well as constant price increases on older branded drugs and even some generics that have multiple producers, have drawn pushback from PBMs, attacks from politicians and federal investigations. Even President Trump has told drugmakers that he expects them to reduce drug prices going forward. These have put enough pressure on drugmakers that some have felt the need to respond.

Japan’s Takeda last week became the fourth multinational pharma to promise a yearly ceiling on the list prices after Allergan CEO Brent Saunders in September issued the company’s “social contract” with patients and then urged his peers to join him in the pledge. AbbVie and Novo Nordisk have also said they will keep a lid on branded drug price hikes.

AbbVie makes arthritis fighter Humira, the world’s best-selling drug, while Novo works almost exclusively in the realm of diabetes care. According to Express Scripts today, those two areas “remain the costliest therapy classes,” accounting for 20% of the total prescription drug spend in the country. It said spending on diabetes medications increased 19.4% in 2016, driven by a 14.1% increase in unit cost. Total spending on insulin––which it said accounts for 40% of all diabetes spending––increased almost 10% between 2015 and 2016.

That fact last week resulted in the filing of a class-action suit on the behalf of insulin users, who accused the key insulin makers Novo, Eli Lilly and Sanofi essentially of a rebate scheme. The suit accused them of significantly raising list prices while keeping the price they offered PBMs the same, to enlarge the rebates offered to PBMs and so try to win better positions on drug formularies. All of this was to the detriment of patients who saw their own out-of-pocket expenses jump, the lawsuit claims. The drugmakers have denied the allegations.

In all of this, drugmakers have taken a variety of tacks in defending themselves, saying that innovation costs money and also blaming wholesalers for taking bigger cuts and insurers for bumping up copays.

Express Scripts lashed out at drugmakers over that today. “Rebates do not raise drug prices, drug makers do," Dr. Glen Stettin, the PBM’s chief innovation officer, said in as statement. 

While the noise around pricing has drawn the price pledge from some drugmakers, CNBC reporter Meg Tirrell pointed out that the industry made a similar promise nearly 25 years ago when then-President Bill Clinton offered up a plan to revamp how the government paid for drugs. According to a New York Times story at the time, “the drug makers say the President is unfairly singling them out. They assert that his proposals would cripple research budgets, delaying the discovery of cures for scourges like AIDS, cancer and Alzheimer's disease.”

Instead, Express Scripts today said that based on a benchmark set in 2008, while the prices for commonly used consumer household goods have gone up 14%, the cost of commonly used prescription drugs has increased 208%.

Editor's Note: The story was updated to reflect the difference in price increases for drug costs vs. drug spending.