Despite recent developments in the fight to corral high U.S. drug prices, the trend toward consistently rising costs—which has held true for years—is likely to persist for the foreseeable future.
That’s according to TD Cowen’s annual report on the near-term outlook for U.S. drug prices. This year’s report, which incorporates findings from a survey of 27 health maintenance organizations (HMOs), pharmacy benefit managers (PBMs) and hospitals, provides a clear conclusion: The price tags of branded medicines should continue to increase in the coming years thanks to steady influx of new, high-value treatments.
Breaking down the numbers, per-unit costs for branded drugs increased by an average of 7% in 2024, Cowen said in its report, a slight increase from 5% in 2023.
Cancer drugs, cell and gene therapies, diabetes and obesity meds, plus those for rheumatology, dermatology, gastrointestinal conditions and rare diseases were believed to have the largest influence on spending, according to the respondents Cowen polled.
The political makeup of the federal government didn’t appear to correlate strongly with branded drug price trends or expectations, Cowen noted. The purchasers included in the analysts' research were surveyed in 2024’s fourth quarter after the U.S. Presidential election.
As for 2025, Cowen said it expects acquisition costs per branded drug unit to increase by 7%. Besides that projection, the team predicts costs will tick up by about 3% annually over a 3-year term, suggesting a moderating of increases after '25.
Regardless of the magnitude of the price increases, purchasers involved in Cowen’s report were resoundingly confident that costs will gradually go up, with only a single respondent each predicting that prices will either decline or stay flat over the next three years.
Most respondents attributed the expected increases to a mix of newer, higher-value drugs, specifically highlighting the impact of oncology drugs, cell and gene therapies and GLP-1s for diabetes and weight loss.
Beyond the influence of new therapies on drug pricing trends, Cowen’s report also accounted for the effects of legislation such as the Inflation Reduction Act (IRA), plus generic and biosimilar uptake and insurance coverage for the red hot GLP-1 class.
On IRA, which implemented limits on out-of-pocket expenses for patients in 2024 and paves the way for negotiated prices on certain high-spend drugs, a whopping 85% of purchasers queried by Cowen said they expect the legislation will have a “modest” or "moderate" impact on drug prices over the coming three years. Just 15% of respondents said they think IRA will have no impact on the cost of branded medicines, and none said they think the legislation will substantially influence drug pricing trends.
In terms of copycat medicines, generic spending has remained largely flat and looks poised to continue that trend, according to the report. And while biosimilars hold a decent share of the market, their overall penetration versus branded drugs trended down in 2024, Cowen said.
Lastly, obesity treatments like Novo Nordisk’s Wegovy and Eli Lilly’s Zepbound enjoy high demand but reimbursement challenges have made it difficult for these products to grow volume in earnest, Cowen said in the report.
The analyst team described the current coverage environment for obesity GLP-1s as “in flux,” with respondents unable to come to a consensus on the level or quality of coverage that currently constitutes the norm. Overall, the purchasers and payers suggested coverage is “highly restricted,” though likely to improve over the next three years.
Cowen chimed in as well, noting that its discussions with payers around obesity drug coverage since 2022 hint at companies gradually turning “towards more forms of coverage for indefinite duration.”
In sum, while the topic of drug prices is often a “source of anxiety for biopharma investors,” Cowen said it sees no reason to doubt the upward trend in prices “[a]s long as biopharma delivers innovation.”
“We view the biopharma sector as fundamentally solid given strength of pipelines, favorable unit dynamics, and that U.S. drug prices do not appear to be a drag on this outlook, blunting price erosion outside the U.S.,” the analyst team said. “This backdrop allows for greater conviction in product forecasts; these products should drive growth for years to come.”