Drug Prices Rose Three Times Faster Than Inflation in the Last Decade

In the first analysis of its kind of prescription drug pricing in the United States, researchers found that the net cost of drugs – the price consumers paid, minus manufacturer discounts – grew three times faster than inflation over a decade.

Researchers at the Center for Pharmaceutical Policy and Prescribing at the University of Pittsburgh’s Health Policy Institute examined revenue and usage data for 602 brand-name drugs to measure price increases between 2007 and 2018.

They found that inflation-adjusted list prices for drugs increased by 159% in that period, according to the study published in The Journal of the American Medical Association.

Net prices – which account for manufacturer discounts such as rebates, coupon cards and discounts for low-income people – increased by 60%, or 3.5 times the rate of general inflation, the study found.

Study lead author Inmaculada Hernandez said in a statement the findings are the first to report trends in net drug costs for all brand-name drugs in the U.S.

“Previously, we were limited to studying list prices, which do not account for manufacturer discounts. List prices are very important, but they are not the full story,” said Hernandez, who teaches pharmacy at the University of Pittsburgh. “This is the first time we’ve been able to account for discounts and report trends in net prices for most brand name drugs in the U.S.”

In the statement, Hernandez acknowledged fees paid to her personally by drug giant Pfizer for services unrelated to the study.

The study’s senior author Walid Gellad said in the statement that although net prices began leveling off in 2015, that doesn’t automatically translate to lower costs for consumers.

“Net prices are not necessarily what patients pay,” said Gellad, who directs the Center for Pharmaceutical Policy and Prescribing. “A lot of the discount is not going to the patient.”

Researchers added that prices don’t go down because the majority of discounts come in the form of rebates funneled directly to public and private insurers.

The copays paid by consumers aren’t affected by those rebates since they’re based on list prices, not the net price of a drug, the study said.

Large gaps exist between list and net price increases in between insulin or TNF inhibitors, the study said, adding that for cancer drugs, list and net prices increased at the same rate. Net prices doubled over the decade for multiple sclerosis treatments.

The study also found that discounts are much larger for Medicaid – which offers a mandatory rebate based on price increases over inflation – than for other payers, which typically negotiate discounts for consumers.

Researchers did not immediately respond to requests for comment on the studies.

Gellad said the issue of drug price increases has garnered attention from elected officials, including the Senate Finance Committee which is considering a bill that would add price inflation-based rebates to Medicare.

“We’re seeing a lot of discussion that net prices have stabilized over the last few years, and that does appear to be the case,” said Gellad, who also is a physician and researcher with the VA Pittsburgh Healthcare System. “But the stabilization of net price comes on top of large increases over the last decade, many times faster than inflation, for products that have not changed over this time period. In addition, this net price is an average, with substantial variability across payers and drugs.”