Drug prices jump 9.1% in biggest rise of the decade

Drug prices leaped last year by 9.1 percent. That's the biggest increase in at least 10 years, Express Scripts found in its annual drug-trend report. Some common meds got double-digit increases, such as the 13.6 percent increase for Eli Lilly's (NYSE: LLY) antidepressant Cymbalta, or the 12.1 percent rise on Merck's (NYSE: MRK) cholesterol med Zetia. Could it be that drugmakers were preparing for the agreed-upon Medicare and Medicaid rebates in the healthcare reform legislation?

Pharma companies say no. The rebates will hurt; Lilly just yesterday predicted that revenues would drop up to $700 million next year because of them. And Lilly tells the Wall Street Journal that its prices weren't affected by the reform package. New pricing depends on "marketplace conditions and recovery of our R&D costs," a spokesperson tells the Journal. Likewise, Merck blamed its rising prices on R&D investment, among other things. "[P]rice adjustments are independent of healthcare reform," a spokesman tells the paper.

Express Scripts begs to differ. The increases were "exacerbated by the healthcare reform debate," Steve Miller, SVP and CMO at Express Scripts, tells the newspaper. But we might also want to blame other drug-payment "gatekeepers" such as insurers, PBMs, and employers, Credit Suisse analyst Catherine Arnold says. Discounts and rebates offered to those customers can inspire price increases to help offset the costs.

All of these reasons seem to underscore the basic complexity of drug pricing and payments--indeed, the healthcare cost-and-payment world in general. Cut costs here and watch them grow somewhere else. Raise prices on some meds and find discounts eating away at revenues for other drugs. No wonder it took more than 1,000 pages of legislation to change the system.

- read the Wall Street Journal piece