Politicians and headlines regularly describe U.S. drug prices as “skyrocketing." But new data from analysts at SSR Health show prices haven't been growing as fast as they were—and the amount payers actually shell out is falling.
In the second quarter, list prices in the U.S. grew 3.1%, compared with a 4.6% increase during the same period last year. After rebates, prices fell 5.8% during the second quarter, compared with a 6.1% drop after rebates during last year’s second quarter.
The net pricing changes typically reflect a mix of increases and decreases across the industry—among various products, companies and market segments—but this time around, “literally no products, companies, or market segments" displayed big net price increases, the analysts wrote. All “of the significant contributions to net price trend were negative."
Celgene, Biogen, Novartis, Allergan and Bausch Health added most to net prices, while lower net prices at Gilead Sciences, Johnson & Johnson, Novo Nordisk, GlaxoSmithKline and Sanofi dragged down the overall total.
Product-wise, Sanofi and Regeneron's Dupixent, Pfizer and Astellas’ Xtandi and Celgene’s Otezla—which recently sold to Amgen for $13 billion-plus—posted the highest net price increases from last year’s second quarter.
On the other end of the spectrum, GSK’s respiratory drug Breo Ellipta, Sanofi’s basal insulin Lantus and J&J's anticoagulant Xarelto experienced the biggest net price declines.
Importantly, the numbers don't include price hikes in July, a month when drugmakers often push through their second price increases of the year. This July, for instance, Roche, Merck & Co. and Novartis were among companies that raised prices on dozens of drugs. Novartis implemented six price hikes of 9.9%, according to a note from Wells Fargo analyst David Maris, who cited MediSpan PriceRx data.
Price hikes slow way, way down
For years, drugmakers have routinely raised prices to the point where pharmaceutical costs are among the biggest issues in Washington, but under the harsh spotlight, drugmakers have been more hesitant—and conservative—about price hikes.
As of the end of the second quarter, and as 2020 presidential campaigns get into gear, an “unprecedented” number of drugs—47% of them—haven’t seen list price increases at all this year, the analysts wrote.
As for double-digit hikes? SSR found a “nearly complete absence” of them.
There's a reason double-digit price hikes may be rare these days. As pricing scrutiny mounted back in 2016, Allergan CEO Brent Saunders pledged to limit price hikes to once per year at single digits, a stance many of his peers later adopted. Since that pledge, 9.9% price hikes have become somewhat commonplace through the industry.
Looking ahead, the SSR analysts believe drugmakers will continue to price cautiously through the 2020 elections and “perhaps beyond if drug pricing remains a political priority.”
For prices after discounts and rebates, the analysts believe formulary exclusions “are likely to be applied more broadly” and that co-pay accumulators will keep gaining steam, further driving net prices down. Average list-to-net price discounts grew to 45%, according to the report, up from 43% during last year’s second quarter.
The data add to the ongoing drug pricing conversation as Congress and others weigh ideas to fight high U.S. drug prices. The Trump administration has worked to implement proposals of its own but has encountered setbacks on those efforts. Meanwhile, the industry has sought to police itself through limits to its own pricing.