Drug prices continue to climb, but who's to blame?
- As anger over rising drug prices continues to simmer in legislative chambers across the U.S., major industry trade group PhRMA is continuing its efforts to shift blame onto the payers and middlemen, which it claims fail to fully pass on the discounts given by drugmakers to secure coverage.
- A new report released yesterday by PhRMA found that over 50% of out-of-pocket spending by commercially insured patients is based on the list price of a medicine, rather than the negotiated, lower net price. While many patients pay a fixed co-pay for a prescription, an increasing number are responsible for a higher share of costs due to higher deductibles or cost sharing.
- Unsurprisingly, the Pharmaceutical Care Management Association (PCMA), a national association representing pharmacy benefit managers, fired back in a succinct, bulleted statement that argued PhRMA is playing a shell game to divert attention away from drugmakers raising prices.
Drug prices are rising. But by how much, and who's responsible? Answering those questions has provoked a back-and-forth battle of finger pointing, with the biopharma industry on one side and insurers and payers on the other.
A 2016 report from IMS Health (now QuintilesIMS) found invoice prices for branded drugs — without accounting for rebates or discounts, in other words — rose 12.4% in 2015 after a 14.3% jump in 2014. But that same report also found competition and payer pushback on costs led to more negotiated concessions, leading to a net price increase of only 2.8%.
A more recent analysis by Express Scripts, one of the largest pharmacy benefit managers in the U.S., painted a similar picture, although only for drugs covered by those commercial plans managed by the company.
This continued bifurcation of list prices and net prices has led pharma into the rather odd position of attempting to convince lawmakers and the public to ignore list price increases, which in the industry's view don't reflect the true cost to consumers. Critics, however, argue those higher list prices still affect consumers with higher deductible plans and those on the hook for a higher proportion of costs.
Now, PhRMA is making the case that payers should bear the blame for not sharing savings from rebates and discounts with those consumers responsible for paying more.
The newly released analysis, conducted by a division of QuintilesIMS, shows roughly one in five prescriptions for brand drugs are filled based on the list price, whether through cost-sharing calculated by co-insurance or through in-deductible spending. For specialty medicines, that share rises to just over one-third.
When those costs were tallied up and compared to total out-of-pocket spending (including co-pays), over half (52%) of spending on branded medicines and 90% of spending on specialty medicines comes from prescriptions filled in the deductible or with coinsurance — i.e. based on the list price, rather than the discounted price, of a drug.
Mylan CEO Heather Bresch, who been the target of pointed criticism about the high price of EpiPens, made a similar argument in an interview this week on CNBC, pointing to PBMs and high deductible plans as the problem.
But the "middlemen" aren't having it.
"The report ignores the most obvious and important point: rising out-of-pocket costs are a by-product of rising drug prices and the wave of new high-priced specialty brands coming to market," PCMA said in a statement on the report. "While not all health plans apply manufacturer rebates to reduce cost-sharing on each drug, it's usually because the savings are being used to reduce premiums."
Even as PhRMA ramps up its efforts to improve the pharmaceutical industry's image, there are signs drugmakers are shifting strategies. A number of large pharmas, including Allergan, Novo Nordisk and AbbVie, have pledged to limit annual price increases to single digits, while others such as Merck and Eli Lilly are publishing more data on their pricing strategies.
And just this week, two hotly anticipated drugs from Roche and the team of Sanofi and Regeneron were approved for multiple sclerosis and eczema, respectively. While both will carry high absolute prices, both will be priced lower than some expected and, in the case of Roche's Ocrevus (ocrelizumab), below some currently marketed competitors.
Whether such small steps are enough to blunt criticism remains to be seen, however.