- A new report from a trade association representing pharmacy benefit managers (PBMs) aims to poke holes in an industry argument that rising drug prices can be attributed, in part, to increases in the amount of rebates and discounts given by drugmakers to payers for product coverage.
- The study, commissioned by the Pharmaceutical Care Management Association (PCMA), found no evidence of correlation between drug rebate levels and increasing prescription drug costs among the top 200 brands by 2016 sales.
- As pricing has remained in headlines across the U.S., payers and the pharma industry have turned against each other in an effort to shift blame and attention. Influential trade lobby PhRMA, for example, rolled out an ad campaign in April accusing payers of failing to pass along savings they receive from rebates and discounts.
At a high level, the trend in prescription drug prices looks clear: steady list price growth plus higher spending on specialty drugs and pricier biologics. But an opaque system, coupled with a complex distribution model, complicates efforts to discern cause and effect, or the underlying drivers of drug costs.
Attacked for double-digit annual list price increases, some drugmakers have made an effort to rein in more egregious price hikes while arguing that list prices don't capture the true cost to patients.
List prices, or wholesale acquisition costs, are commonly disclosed. But drugmakers frequently give payers rebates or discounts to secure coverage for their drugs — and it's those net prices that are rarely made public.
PhRMA has made a concerted effort to link those rebates and discounts to the higher out-of-pocket costs felt by consumers as well as the overall trends in prescription drug spending. In addition to a high-profile ad campaign dubbed "Share the Savings," the trade group has commissioned several reports showing the effect of rebates and discounts on both patient spending and drugmaker bottom lines.
PCMA's report, however, adds new evidence pushing back on that line of thought. According to the study, drugmakers raised list prices even in therapeutic classes where rebates are typically low. In multiple sclerosis, for instance, the estimated average list price rose 125% between 2011 and 2016. Net prices increased even more, by 156%, during the same time period — indicating the list price growth was not fueled by a large uptick in rebate level.
Yet the report clashes with evidence presented elsewhere, although that may reflect limitations in the study's data set. (The report doesn't include intravenously administered drugs, for example, due to differences in reimbursement and discounting.)
Data from QuintilesIMS, for instance, shows a large gap between invoice price growth and net price growth among so-called "protected brands," or patent protected drugs on the market for at least two years. In 2016, invoice prices rose by 9.2%, while net prices increased by only 3.5% — a smaller difference than in the previous two years but still much larger than in 2011 and 2012.
All told, rebates, discounts and other price concessions offset brand price growth by 62% in 2016, according to QuintilesIMS.
Only a few drugmakers have published data on the difference between list prices and net prices for U.S. products. But data released by Merck, Eli Lilly and Johnson & Johnson's Janssen unit shows a similar gap between the two. Lilly reported its total average discount to list prices across its U.S. product portfolio reached 50% in 2016, markedly higher than in 2012. Merck and J&J disclosed average discount rates of 40.9% and 35.2%, respectively.
So far, not many others have followed the lead of those three drugmakers, making it hard to paint a picture of the entire industry in the U.S. While pharma will continue to argue rebates are driving up costs, a lack of transparency could prove more damaging to an already battered public image.