President Trump vowed that drug “prices will come down” during his State of the Union address. But for now, drug companies continue to increase prices, which is a big concern for employers offering prescription benefits and consumers who pay a percentage of the costs.
Pharmaceutical companies kicked off 2018 with price increases near 10% for many popular brand name prescription medications (FiercePharma). Specialty drugs like Humira and Enbrel rose 9.7% or $430 per month, for a total of around $4,300 (Reuters). Other brand drugs, such as Viagra and Lyrica, increased in price by about 9.5% (Figure 1).
Viagra is currently available generically, at a lower cost. Lyrica’s patent is set to expire in December 2018.
Most people equate brand name drugs with rising costs, but older medications and generic drugs are not immune from steep price hikes. Generic medications, which are equivalent to the brand name products, are typically much less expensive, and are usually produced by more than one manufacturer. The competition keeps the costs down.
But lower profit margins on generic drugs cause some manufacturers to leave the market. This exodus and selling manufacturing rights of generics to another company can lead to historic price increases. One example is the drug Daraprim, which has been on the market for quite some time. In August 2015, the manufacturer raised the price for Daraprim by 5,000% (The New York Times).
Since then, the US has continued to see price hikes, some of them on life-saving medications like EpiPen®, for severe allergic reactions, and insulin, for the treatment of diabetes. Manufacturer’s responded by noting that these high price tags do not typically reflect the final cost of the drug.
Administrative middlemen in the drug distribution chain are often compensated by the manufacturer, which contributes to rising drug prices. Ultimately, pharmacy network discounts, rebates, and manufacturer copayment coupons are offered to reduce the final cost. But there is much debate on how much these cost containment tactics benefit consumers.
Advocates for both consumers and payers have pressured federal and state legislatures across the country to act. There are many new regulatory proposals aimed at controlling the rising costs of prescriptions. Some of the most interesting approaches are found at the state level (click here to view map), which are tracked by the National Academy for State Health Policy:
In the coming year, it will be interesting to see how these proposals materialize and how quickly we can better align medication costs with affordable outcomes for both payers and consumers. But for now, there are some things you can do:
You can also get gain tremendous insight from integrating and analyzing your medical and pharmacy data. You can identify:
Taking any or all these steps will help you better manage your prescription benefit costs.