Dive Brief:
- List prices of branded drugs in the U.S. rose by an average of nearly 5% last year, according to a report released Thursday by Iqvia, a consultancy and research services provider. After accounting for the rebates and discounts pharmaceutical companies often pay insurers, however, the average increase was 1%, the fifth year in a row that net price growth has tracked below general inflation.
- Rebates and discounts on drugs don’t necessarily translate to lower out-of-pocket costs for patients, and some, such as people covered by Medicare Part D or on high-deductible insurance plans, are more vulnerable to rising list prices, often referred to as a drug’s wholesale acquisition cost.
- Overall, Iqvia tracked a significant increase in U.S. medicine spending last year due to the market entry of COVID-19 vaccines and drugs, without which the rise in spending would have been more modest. Total out-of-pocket costs also rose, although the average amount paid per prescription fell slightly to $9.41.
Dive Insight:
Iqvia’s report shows the difference in drug spending in the U.S. as measured by list prices versus net prices is large and growing, reaching $190 billion in 2021. That’s up from $118 billion in 2016, an increase driven by higher rebating in competitive markets like diabetes and immune disease drugs as well as by statutory discounts on medicines dispensed under the federal 340B program.
Pharmaceutical companies, which for years have been heavily criticized for hiking the cost of their products, frequently argue that list prices don’t reflect what patients pay or account for the money sent back to insurers.
The impact of rebates and discounts on drug prices isn’t uniform, however, and varies widely depending on who is paying and when. List prices can still impact patients indirectly or, if they’re uninsured, directly.
“These complexities mean that the price for each medicine can be unique, reflecting the drug, the insurance type, the other medicines a patient takes during the year, the time of year, the pharmacy, the coupons offered by manufacturers, and whether a patient chooses to use them,” Iqvia wrote in its report.
In some markets, rebating can be extensive. Diabetes drugmakers, for instance, pay substantial rebates to insurers, with the weighted average net price calculated by Iqvia 78% below the wholesale acquisition cost last year. In immunology, an area in which pharmaceutical companies have launched many new medicines recently, the average difference between list and net prices has doubled over the past decade, to 49% in 2021.
Extensive rebating is less common for cancer drugs, however. The average net prices of those treatments were just 7% below their list prices, which can often reach six figures on an annual basis.
Patients don’t always see the impact of rebates paid to insurers on a drug-by-drug basis, however, and their exposure to rising list prices varies by their insurance. For example, commercially insured patients with diabetes pay more than $35 for their insulin prescription about a fifth of the time, which Iqvia said was the result of high-deductible coverage.
Overall, about 8% of patients have annual out-of-pocket costs higher than $500, according to Iqvia. Among those on Medicare, though, 16% do, and 4% spend more than $1,500 per year out of pocket.
“For the millions of seniors who become Medicare eligible each year, the cost exposure difference as their insurance changes can be a significant shock as seniors have higher cost exposure than the commercially-insured,” Iqvia wrote.
When faced with high costs, many people are also forced to “abandon” their prescription. One-third of prescriptions written that have a final cost above $75 are not picked up, Iqvia found, rising to two-thirds when final costs exceed $250.
Iqvia forecasts that list prices will continue to rise between 2% and 5% each year through 2026, while predicting that net prices will either remain flat or decline by as much as 3%. However, its estimates don’t account for major macroeconomic changes, such as if inflation rises further or remains high for a prolonged period.
Iqvia’s report is based on prescription and medical claims data it collects, as well as revenue figures from companies across the industry. The report defines branded, or “protected,” drugs as those products that launched at least two years ago and remain patent protected.
