Home 2020 Rx Drug Prices Up 3X Faster Than Inflation

Rx Drug Prices Up 3X Faster Than Inflation

Medicines capsules on dollar bills close up

Over the course of the past 10 yrs, the net cost of Rx drugs in the United States rose more than 3X faster than the rate of inflation, a new study finds.

The increase affects all Americans.

The net cost of a drug refers to the sticker price minus manufacturer discounts.

Researchers in the University of Pittsburgh’s Center for Pharmaceutical Policy and Prescribing (CP3) conducted the analysis on net drug cost trends for brand-name prescriptions in the United States.

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 study author Inmaculada Hernandez, an assistant professor of pharmacy at Pitt. “This is the 1st time we’ve been able to account for discounts and report trends in net prices for most brand name drugs in the US.”

The team used revenue and usage data for over 600 brand-name drugs from 2007 to 2018. When adjusted for inflation, list prices skyrocketed 159%, while net prices increased by 60%m more than 3X the rate of inflation.

Although net prices leveled off in Y 2015, the authors pointed out that this isn’t a reflection of affordability for consumers.

Net prices are not necessarily what patients pay,” said senior author Dr. Walid Gellad, an associate professor of medicine and health policy at Pitt and director of the CP3. “A lot of the discount is not going to the patient.

Most discounts are rebates paid to public and private insurers. The amount paid by consumers is largely unaffected by rebates, as copays and coinsurance are based on list price, not net price.

Additionally, the study revealed that discounts are larger for Medicaid than others, which may be a reflection of regulation.

Mandatory Medicaid rebates are based on price increase over inflation, whereas other payer discounts are negotiation-based.

We are seeing a lot of discussion that net prices have stabilized over the last few years, and that does appear to be the case,” Dr Gellad said in a university news release.

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,” he noted.

The study was published on 3 March in the Journal of the American Medical Association.

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S. Jack Heffernan Ph.D. Economist at Knightsbridge holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reach a peak market cap of $15b. He has managed and overseen start ups in Crypto, Mining, Shipping, Technology and Financial Services.