Even amid a series of high-profile pricing controversies—and as a few companies made public promises to limit hikes—the pharma industry continued to raise list prices at rates far above general inflation, a new report shows.
Apparently undeterred by political and public scrutiny, branded drug prices increased an average of 12.92% last year, with an industrywide rise of 8.77%—both numbers several times the rate of overall increases in consumer costs.
The figures come courtesy of market researchers at Truveris as part of the company’s National Drug Index. Together with other recent data, Truveris reports that sticker prices have risen an average of 9.98% annually over the last three years.
In a sign that things may be slowing down, however, average first-quarter 2017 hikes were much lower at 2.33%.
While the recent history of price increases points to an unsustainable trend, drug companies and some industry watchers have pointed to recent research showing that net prices—after rebates and discounts—aren't growing nearly as quickly. Still, invoice price growth is important because it directly hits patients in the wallet.
Truveris reports its findings at a tense time for the drug industry as pharma companies continue to defend themselves from allegations of price-gouging. During more than a year of scrutiny, the industry hasn’t been helped by headline-generating controversies from Marathon Pharma, Mylan, Valeant Pharmaceuticals and others.
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Diving into different segments of the pharma business, Truveris reports that branded drug prices grew 12.92% in 2016, while generic drug prices increased by a paltry 0.32%. Overall, the industry’s price growth outpaced general inflation of 2.1%. As Truveris points out, that means drug prices increased 318% above general inflation during 2016.
Last year’s figure follows an industrywide price hike average of 10.43% for 2015, according to Truveris’ report last year. Formed in 2009, the VC-backed company aims to assist clients with managing healthcare costs by bringing transparency to prescription drug systems.
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The figures come on the heels of another deep dive into the industry by QuintilesIMS, which found that branded drug prices grew 9.2% on a list price basis last year, while prices after discounts only grew by 3.5%.
“Actual drug price inflation hurts the patient the most, especially individuals with high deductibles, coinsurance or no insurance at all,” Truveris co-founder and Chief Innovation Officer AJ Loiacono said in a statement accompanying the new report.
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In a defense against all of the scrutiny, several drugmakers have taken a pledge to not increase prices above a certain threshold. Others have released high-level data showing that pharmacy benefit managers are taking a big bite out of retail prices in the form of rebates.
For instance, Eli Lilly reported back in March that after it increased list prices by 14% last year, its rebates grew significantly as it worked to secure payer coverage. So, Lilly only realized a 2.4% increase in prices for the year. The difference is returned to PBM clients and in some contracts, the PBMs themselves.
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J&J said an 8.5% increase in average list prices for 2016 turned into a 3.5% hike in net prices after discounts and rebates. Merck said average discounts have grown to 40.9% in 2016, up from 27.3% in 2010.
Seeking to highlight the issue, industry group PhRMA touted a study back in January showing that rebates and discounts have grown to $106 billion in 2015, up from $67 billion in 2013. In total, branded drugmakers collected 47% of the money spent on prescriptions in 2015, according to the study.
For their part, PBMs argue that their tough negotiations drive overall healthcare savings by forcing better pricing from drugmakers. Then, they returning the savings to insurers based on a level determined in individual contracts.