US Pharma Prices Increase by 9.8% in Past Year
Many of the world’s largest pharmaceutical companies have boosted their sales in the first quarter of 2016 by increasing prices on their biggest products, according to a new analysis.
More than two-thirds of the 20 largest pharmaceutical companies, including Pfizer, Biogen, Gilead Sciences, Amgen, and AbbVie, benefited from higher prices for their popular medications, as well as a greater prescription volume in some cases, according to the Wall Street Journal analysis. The analysis was based on data disclosed by drug companies in regulatory filings, which included the impact of net pricing—after all rebates and discounts to insurers and pharmacy-benefit managers are taken into account—on product sales growth or decline.
From May 2015 through May 2016, prices of US-made pharmaceuticals rose 9.8%, the second-highest increase among the 20 largest products and services tracked by the Bureau of Labor Statistics’ Producer Price Index.
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Pharmaceutical companies are somewhat limited in their power to raise drug prices. For example, state Medicaid programs limit drug-price increases to the rate of consumer inflation. Additionally, commercial insurers often collect rebates for drugs in competitive disease areas, such as hepatitis C and diabetes. Although pharmaceutical companies have pointed to such discounts and rebates as evidence of market checks on drug pricing, their financial disclosures reveal that these have not prevented net price increases.
In the first quarter, Pfizer’s price increase and greater prescription volume helped drive the revenue for nine drugs to approximately $2 billion in the US. Biogen Inc reported that sales of its multiple sclerosis pill Tecfidera (dimethyl fumarate) rose 15% to $744.3 million in the first quarter. Gilead Sciences Inc reported price increases for four of their HIV drugs; the total combined sales for these drugs was $2.43 billion.
Geoffrey Porges, a Leerink Partners LLC biotech analyst told the Wall Street Journal, “Companies are very fond of saying, ‘No, no, don’t pay any attention to list price increases.’ The industry sort of hiding behind that is really a diversionary tactic.”
The report also showed that the rising prices and increased use of expensive medicines is driving a surge in US drug spending. Per-capita spending on the Medicare Part D program rose by 11.6% in 2015, and the total benefit spending on the program rose 15.1% to $89.5 billion in 2015. The analysis projected that the per-beneficiary Part D spending will grow by 75% from 2015 to 2025, compared with a 37% rise in hospital spending and 57% increase in doctors’ costs.
Although there have been several federal investigations into drug pricing, Congress has not demonstrated an interest in pursuing the issue. - Julie Gould
