What Do the Drug Price Changes Announced in January Tell Us?

The initial findings regarding the changes in prescription drug prices for 2024 have arrived. In this summary, we’ll outline shifts and seek insights from Edmund J Pezalla, MD, founder and CEO, Enlightenment Bioconsult, examine underlying factors.

The Wall Street Journal (WSJ) reported that list prices for some medications rose by about 10% or higher, citing data from 46brooklyn Research.¹ FRMC looked at the data and saw that none of the medications that rose by 10% or more were among the 50 best-selling drugs in 2023. Among the best sellers, the steepest increases were for Xolair (asthma, 8%), Shingrix (shingles, 7.9%), Vyndaqel (heart disease, 7%), and Prolia (osteoporosis, 6.9%). WSJ noted that price hikes like these “are likely to sharpen [federal] scrutiny of the industry.”

There will likely be fewer medications to scrutinize compared to prior years. WSJ reports that the median list price increase among those announced in January was 4.5%.¹ This continues a trend seen since 2019, when no year experienced a median price increase above 5%, according to 46brooklyn’s Brand Drug List Price Change box score.² Conversely, in the 7 years before 2019, median price increases ranged between 7.6% and 9%. A big reason for the relatively modest median price increases this year, according to a separate report from 46brooklyn: There were an unprecedented 24 brand drug price decreases on January 1, 2024.³

Moreover, after applying a weighted average to the price changes (using Medicaid drug utilization trends), 46brooklyn observed a “noteworthy departure from the norm:” The weighted average usually tracks close to the unweighted median. However, in 2024, the weighted average decreased by 1.5%. Brand drug prices that were lowered comprised heavily prescribed medicines such as insulins, asthma/COPD inhalers, and central nervous system drugs, according to 46brooklyn, were the reason for this decrease.

Pricing for the insulins Humilin and Humalog bear this out. After 11 years of annual price increases ranging between 6.2% and 9.9%, in 2024, the price will decrease by 70%, according to the Brand Drug List Price Change box score. The same holds true for the asthma inhaler Advair (41.2% decrease in 2024 after annual increases that ranged between zero and 9%) and the antiepileptic Lamictal (38.2% decrease in 2024 after annual increases that ranged between 3% and 12.5%).²

According to an NPR report, manufacturers seek to avoid penalties triggered by the 2021 American Rescue Plan.⁴ In 2024, it is possible that those penalties – in the form of rebates paid to Medicaid – could exceed the actual net price of the drug (the amount that the manufacturer receives after rebates, discounts, and other reductions).

Dr Pezalla told us multiple forces are at work. “On the one hand, much of the price increases in the past have been matched by increased rebates or contract provisions for increases that protect against increases over inflation. On the other hand, list prices are the prices seen by legislators, policymakers, and the public. Some firms, especially those with high profile drugs, are concerned that they are being targeted for high prices that they do not reap much benefit from.”

According to Adam J. Fein, PhD, net price is a more important barometer of drug price changes than list price. In a post in Drug Channels, he noted that net prices dropped for the sixth consecutive year in 2023, adding that net prices will continue to decline due to the American Rescue Plan provision.⁵

As for highly utilized drugs that experienced higher list price increases in January, payers might not be able to – or want to – respond forcefully, said Dr Pezalla. For Xolair and Prolia, “payers may tolerate the increases, especially if they have price protection clauses to make it easier to switch to biosimilars in the coming years.” Vyndaqel has a near monopoly that will soon vanish, prompting the manufacturer to increase revenue. Shingrix enjoys a monopoly and is fully covered by Medicare Part D and ACA exchange plans. Shingrix also reduces downstream costs.

In Dr Pezalla’s estimation, payers are “holding their own. Revenues for some larger firms have increased, but profit margins are down slightly. However, they aren’t moving backward.” The same can’t be said for hospital systems and other stakeholders. “Compared to the rest of the industry, payers, including insurance companies, are doing well,” Dr Pezalla said.

References

1. Calfas J. Drugmakers raise prices of Ozempic, Mounjaro and Hundreds of Other Drugs. The Wall Street Journal. Published January 18, 2024. Accessed January 26, 2024. https://www.wsj.com/health/pharma/drugmakers-raise-prices-of-ozempic-mounjaro-and-hundreds-of-other-drugs-bdac7051
2. This is the way to analyze brand drug list prices. 46brooklyn. Published January 23, 2024. Accessed January 26, 2024. https://www.46brooklyn.com/branddrug-boxscore
3. Is 2024 the start of a brave new world in drug pricing? 46brooklyn. Published January 12, 2024. Accessed January 26, 2024. https://www.46brooklyn.com/research/2024/1/12/is-2024-the-start-of-a-brave-new-world-in-drug-pricing-acbl
4. Lupkin S. What to know about January’s annual drug price hikes. NPR. Published January 17, 2024. Accessed January 27, 2024. https://www.npr.org/sections/health-shots/2024/01/17/1225083485/what-to-know-about-januarys-annual-drug-price-hikes
5. Fein AJ. Tales of the unsurprised: U.S. brand-name drug prices fell for an unprecedented sixth consecutive year (and will fall further in 2024). Drug Channels. Published January 3, 2024. Accessed January 27, 2024. https://www.drugchannels.net/2024/01/tales-of-unsurprised-us-brand-name-drug.html