As the drug-pricing debate intensified over the last 8 months, we've heard a common refrain from pharma: List prices are misleading. Real prices are lower, sometimes much lower, because of discounts and rebates.
Those rebates are proprietary information, drugmakers say. Sometimes analysts calculate approximate discounts--such as in hepatitis C, after AbbVie ($ABBV) entered the market and competitive negotiations with payers sunk Gilead Sciences' ($GILD) per-script revenue. Those discounts were estimated at up to 40%.
Thing is, those money-off deals depend on the individual drug--and as some Washington Post coverage shows, they aren't necessarily making up for list-price hikes.
After tracking the list price on Novartis' ($NVS) blockbuster leukemia drug Gleevec, the newspaper extended the analysis to Gleevec rebates, with the help of SSR Research. The research firm also totted up discounts on several other Novartis drugs for comparison's sake.
You'll find a helpful chart here. But suffice it to say, Gleevec's discounts started out at less than 10% in 2006 and, with little variation off that initial figure, actually started to decline in 2014. By the end of last year, Gleevec was discounted in the low-single-digit range, on average, SSR estimates. Meanwhile, list prices on the drug increased by 15% annually, on average, the firm says, so the rebates weren't offsetting price increases.
That Novartis would cut rebates in recent quarters is a common strategy--Gleevec lost market exclusivity in February, and India's Sun Pharmaceutical has launched a knockoff version under a phased-in marketing deal with the Swiss drugmaker. Pharma companies commonly raise prices as drugs near the end of their market monopolies, often to push patients over to their newer treatments.
In Gleevec's case, that would be Tasigna. And Novartis has sweetened the deal for switching with rising rebates and discounts that, by year's end, averaged around 60%.
That's a logical strategy for a Big Pharma company dealing with loss of protection on a blockbuster drug. It isn't much of a logical defense against price-hike criticism.
Meanwhile, SSR figures that companywide, Novartis rebates and discounts run about the same, on average, as those across the industry, as Tasigna hefty discounts, for instance, offset Gleevec's much smaller ones.
And industrywide, those discounts have increased from around 20% to about 30% since 2006, SSR estimates.
Those figures shed some light on pharma's list price versus real price defense. But as statistics have shown as politicians and the media have delved into drug pricing, many drugs have steadily increased in price over the same timeframe. And Novartis' specific figures show that drugmakers can offer small discounts on drugs with steady, accumulating price increases--like Gleevec. There's no reason to believe that Novartis is alone in that.
Last week, we at FiercePharma suggested that drugmakers back up their rebate-and-discount defense with actual numbers on specific drugs. Are price increases really eaten up by bigger rebates? Only specific numbers will tell, and until those specifics are made public, the industry's explanations don't cut it.
- read the Washington Post story (sub. req.)