Johnson & Johnson's $15B in 2017 discounts lead to negative price change, but are consumers benefiting?

Johnson & Johnson last year saw its average drug prices fall 4.6% as rebates to middlemen continue to grow. But are those drug price cuts making it to consumers? Well, that's another story. 

J&J raised its list prices by an average of 8.1% in 2017 and still came up negative after offering up increased concessions. The top-selling Remicade is one reason for the dip as the company has had to aggressively discount to hold off biosim competition. Still, even excluding the med, the company's price average movement was negative, J&J reported

The drugmaker attributed the price decrease to a "vigorously competitive marketplace" that "drives deep discounts and rebates to payers and providers." 

It was the first time the company reported a decline in average selling prices since at least 2013, the first year for which it has reported aggregate price info. Average price growth after discounts was 4.8% in 2013, 2.5% in 2014, 5.2% in 2015 and 3.5% in 2016. 

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A year ago, J&J disclosed that it offered up $11 billion in rebates and discounts in 2016, meaning that the company had to make another $4 billion worth of concessions last year in negotiations with payers.

J&J isn't alone, of course. Merck & Co. reported in its own recent transparency report that average prices after discounts slipped 1.9% in 2017, the first decrease since 2010. That was despite an average list price increase of 6.6% across its portfolio. For its part, Merck said the decline reflects "specific in-year dynamics, including the impact of loss of patent protection for three major medicines." 

Meanwhile, the company's average discounts have grown to 45.1% in 2017 from 27.3% in 2010, according to the report.

Bernstein analyst Ronny Gal disputed that the J&J numbers highlight a pricing trend. He wrote in an email that it's "more to do with asset mix and the way [J&J] chose to calculate things." 

The company provided more discounts in the year to retain share for Remicade, Concerta, Invokana and Eprex, according to the analyst, while it raised prices "materially where it could, notably with Darzalex and Imbruvica." He pointed out that those two meds have "no (or very limited) commercial rebates." 

"More than a statement on pricing trend, it is a reminder that pharma is by far the most sophisticated player when it comes to presentation of data and managing the public debate on pricing," Gal wrote in an email. 

RELATED: Drug discounting to insurers soars from 28% to 41% in 5 years, with no end in sight: report 

All the numbers add to the story surrounding pharma discounting in recent years as drug pricing has captured attention nationally. In a January report, Wells Fargo analysts found that drug discounting across the industry grew to 41% in 2017, up from 28% back in 2012. The team predicted that the trend will likely continue, even as Congressional midterms approach and drug pricing moves back into the limelight.

But in a battle between payers and pharma over list price hikes and growing rebates, patients are often caught in the middle because the amount they pay is based off a drug's list price. Offering some relief, leading insurer UnitedHealthcare this week said it would pass back manufacturer rebates to more than 7 million members, a move hailed by the drug industry.

RELATED: Bye-bye, solo Express Scripts: What does the Cigna buyout mean for pharma? 

Consistently rising drug prices and associated scrutiny has led to other major industry shakeups in recent months. For one, a group of nonprofit hospitals joined together to announce that they are creating their own generic drug company. More recently, Amazon, JPMorgan and Berkshire Hathaway teamed up for a healthcare partnership to reduce costs. Details about both plans remain unknown.

And on Thursday, insurance giant Cigna scooped up Express Scripts, the last remaining independent large pharmacy benefit manager. With the move and the Aetna/CVS deal, the three leading pharmacy benefit managers will be tied to insurers.

Editor's note: This story was updated with comments from Bernstein analyst Ronny Gal.