The base price of the most commonly used brand-name drugs rose on average by nearly 11 percent in 2016, providing added grist to the debate over the need for government intervention to slow the rate of growth of pharmaceutical prices and eliminate blatant price gouging.
A new study released on Monday by Express Scripts, a major pharmacy benefit management services based in St. Louis, found that the average price of brand name drugs has steadily risen by more than 200 percent since 2008, far outpacing the 11 percent overall cost-of-living increase during the same period.
From a base price of $100 set in January 2008, the price of the most commonly used brand medications increased to $307.86 last year (in 2008 dollars), the study found. Prescription drugs for the treatment of diabetes and inflammatory conditions like rheumatoid arthritis ranked as the costliest therapy class. Indeed, one out of every five dollars spent on pharmaceuticals was for those medicines, according to the report, followed closely by spending on medications for the treatment of cancer.
The drug industry has argued for years that the high costs of developing and testing the new class of drugs called biologics, which targets the disease by targeting the gene that causes the problem, are a big part of the problem. Abbvie’s (ABBV) Humira is a perfect example. A report in Forbes shows that even if it cost what the industry claims is $2.5 billion to develop a biologic drug, Humira earned it back and then some long ago. The drug generated $14 billion in sales in 2015 alone. Forbes says a biologic can cost $50,000 or more a year per patient, which is a killer for consumers, insurers and taxpayers.
Soaring drug prices surfaced as a major issue during last year’s presidential and congressional campaigns and is already getting attention from the new administration and Congress. Last week, President Donald Trump summoned the heads of many top drug manufacturers to the White House in a first step towards fulfilling his campaign pledge to crack down on soaring drug prices that have dramatically driven up the costs of Medicare, Medicaid, and employee health programs.
Trump also pledged to speed up Food and Drug Administration approval of generic drugs to boost competition with more expensive brand names as part of an effort to reduce what he termed “astronomical” drug prices. He also favors accelerated FDA approval of cutting-edge drugs for treating cancer and other life-threatening diseases. “We have to do better at accelerating cures,” he declared.
Prescription drug prices have risen at a double-digit rate in recent years and are projected to continue to rise at that pace this year. Over the past two years, the country has been buffeted by high-profile cases of price gouging by drug companies by as much as 1,000 percent to 5,000 percent for some life-saving drugs that have been on the market for years.
However, the Express Scripts findings on rising brand drug prices tells only part of the story. That’s because the drug industry offers substantial rebates and discounts to preferred buyers and consumers that often substantially reduce the base price, according to industry experts. For instance, Express Scripts, one of the three largest pharmacy benefit managers in the country, is responsible for negotiating rebates based on the list prices of prescription drugs.
The company boasted today that spending on prescription drugs by its clients was up by just 3.8 percent in 2016, far below the nearly 11 percent national average. Moreover, prices for the most commonly used generic medications declined by 8.7 percent in 2016, according to the Express Scripts analysis.
Trump and some of his Republican allies on Capitol Hill believe that steps to encourage and speed up the development of generic drugs may be the key to revving up competition – and bringing down prices. The House Energy and Commerce Committee is scheduled to begin consideration this week of a bill that would require the FDA to review applications for generic versions of drugs for which there is little if any competition within 180 days, according to Modern Healthcare.
The measure, sponsored by Chairman Greg Walden (R-OR), would also offer pharmaceutical companies that submit such applications a voucher that promises a quicker review of another generic product. “We all remember recent situations where bad actors jacked up the price of older, off-patent drugs because there was no competition,” Walden said in a statement. “We want to make sure that doesn't happen again.”
But the bill's proposed six-month review period is only slightly shorter than the eight-month review and action target established by FDA officials last year, according to Modern Healthcare. And it is longer than the four-month goal proposed for certain priority drug applications.
While the bill is in line with some of Trump’s stated aspirations for reining in drug costs, it is on the face of it a relatively weak start to addressing a massive problem that is costing consumers and government agencies billions of dollars annually. There will likely be efforts to beef up the legislation with other tougher provisions. Sen. Bernie Sanders (I-VT) and Rep. Elijah E. Cummings of Maryland, the ranking Democrat on the House Oversight and Government Reform Committee, are pressing for much tougher measures.
“We have to get the prices way down,” Trump told the CEOs of Merck, Amgen, Eli Lilly, Novartis and Johnson & Johnson, as well as the head of the trade organization PhRMA, last Tuesday. "We have to get prices down for a lot of reasons. We have no choice, for Medicare and Medicaid, we have to get prices way down.”
At the top of his meeting with pharmaceutical company CEOs, Trump outlined a number of steps for preventing future surges in drug prices, although he didn’t mention two of the more controversial ideas that he and Democratic presidential nominee Hillary Clinton advanced during the campaign: One would allow the importation of cheaper drugs from Canada to enhance competition. And the other would permit Medicare officials to negotiate down prices with major drug companies by eliminating a non-negotiation ban contained in the 2003 Medicare Part D drug legislation.
The drug companies have strongly lobbied against both of those proposals in the past, warning against intrusive government action that would discourage research and development and prevent job-creating expansion. Trump had nothing more to say about his drug importation and Medicare price negotiation proposals following his meeting with the drug company CEOs.
Instead, he issued a statement supportive of the drug industry and vowing to “oppose anything that makes it harder for smaller, younger companies to take the risk of bringing their product to a vibrantly competitive market,” as The Washington Post reported.