The number of list price increases of prescription drugs is expected to rise in 2021, reversing a trend of the past five years.
A study from 46brooklyn Research, an organization tracking drug prices, found the number of list price increases of brand-name drugs in 2021 has already exceeded the number in 2020, and it is likely to exceed 2018 and 2019.
Through July 2021, list price increases are already at 1,156. In 2020, there were 1,064.
List prices are often cited to show drug prices are out of control. For example, a study in the Journal of the American Medical Association used list prices to show that the 49 most popular drugs rose an average of 76% from 2012-2017.
Aduhelm, the Alzheimer’s drug recently approved by the Food and Drug Administration, has created controversy over its list price of $ 56,000 per year.
If list prices go up in 2021, it would reverse a trend that began in 2016. In 2015, there were 2,261 list price increases among brand-name drugs. That dropped to 1,849 in 2016 and continued to fall each year through 2020.
The average price increase among brand-name drugs declined from 14.4% in 2012 to 5.4% in 2020. So far, in 2021, the average price has increased 5.3%.
Because drugmakers’ processes to set their list prices are a mystery, Antonio Ciaccia, the CEO of 46brooklyn, can only speculate as to why list prices were going down before 2021.
“I think the increased scrutiny on price increases, I believe, has had a chilling effect on the degree and the number of those increases over time,” Ciaccia said. “I think drugmakers are very aware of … the scrutiny that has been placed on them.”
He also speculated why 2021 might reverse the recent trend.
“List prices may be going up because the pandemic caused sharp drops in overall medication usage, or because drugmakers want to fund more research and development or make more profit,” he said.
Ciaccia also suggested it might have something to do with the actual price insurers pay for drugs, which is seldom the list price.
List prices for drugs are much like sticker prices on cars. Insurers employ companies known as pharmacy benefit managers to negotiate with drugmakers. Pharmacy benefit managers extract rebates and discounts from drugmakers to include their drugs on insurers’ formularies.
The actual price insurers pay for the drugs is often referred to as the “net price.”
“In general, government payers, insurance companies, and pharmacy benefit managers are commanding the highest amount of rebates and concessions than ever before — to the point that drugmaker discount growth is actually outpacing drugmaker list price growth,” Ciaccia said. “This puts more pressure on drugmakers to raise prices to keep up with increasing rebate shakedowns.”
In 2019, drugmakers gave $ 175 billion in rebates and other reductions, according to the Drug Channels Institute. The IQVIA Institute for Human Data Science found drug spending increased only 0.8% in 2020 based on net prices.
“While list prices might increase, net prices are going down over time,” Ciaccia said. “That shows just how stupid this system is. That while drugmakers are taking in less net money, they are raising their prices along the way … I don’t say that to defend drugmakers, but to say that as consumers, we deserve more information about … the drug supply chain.”