Prescription drug costs steadily soar, yet price transparency is lacking

After reviewing tens of millions of insurance claims for the country’s 49 most popular brand-name prescription drugs, a team from Scripps Research Translational Institute found that net prices rose by a median of 76 percent from January 2012 through December 2017 - with most products going up once or twice per year. The substantial price increases were not limited to drugs that recently entered the marketplace, as one might expect, or to those lacking generic equivalents. In addition, the increases often were “highly correlated” with price bumps by competitors.

The researchers concluded that the current rebate system, which incentivizes high list prices for drugs and relies heavily on privately-negotiated rebates to pharmacies, plays a central role driving up costs for consumers. The byzantine and secretive rebate system, they noted, prevents consumers from making informed decisions about purchasing medications.

“It’s no secret that health care prices are growing exponentially in the United States, but what has been less clear is the extent to which certain prescription drugs are contributing to that trend—especially when prices are clouded by a complicated rebate system,” says lead author Nathan Wineinger, PhD, director of biostatistics at Scripps Research Translational Institute and assistant professor in Scripps Research’s Department of Integrative Structural and Computational Biology. “By looking at price data for the most popular brand-name drugs, we found striking and consistent price increases occurring at regular intervals, regardless of competition in the marketplace.”

The Scripps Research team obtained the prescription data from a proprietary Blue Cross and Blue Shield data set known as BCBS Axis, which includes commercial insurance claims from more than 35 million Americans covered by independent Blue Cross and Blue Shield companies in the United States.

With a focus on the 49 most popular brand-name drugs with pharmacy claim data available for the entirety of their five-year research window, Wineinger and his team, led by Eric Topol, MD, conducted a high-dimensional data analysis to examine each claim’s total price. This was represented by the total out-of-pocket costs paid by the insured consumer and the amount paid by the insurer.

Researchers determined that prices of top-selling branded prescription drugs increased by a median of 9.5 percent annually, which equates to a doubling in price every seven to eight years. And they found that pairs of brand-name drug competitors that treat similar conditions - such as Humira and Enbrel, both for rheumatoid arthritis - demonstrated highly correlated price increases.

“It’s bad enough to see the relentless increase in drug prices, but this work underscores it is occurring without transparency or accountability,” says Topol, founder and director of Scripps Research Translational Institute and executive vice president of Scripps Research. “It is especially concerning to see drugs in the same class having increases that appear to be coordinated.”

Wineinger explains that a prescription drug’s list price is typically set by the pharmaceutical company that makes the drug, reflecting the payment shared by the insurer and the patient who buys the product at a pharmacy. However, drug companies increasingly offer rebates to organizations called pharmacy benefit managers, or PBMs, which negotiate with pharmacies and insurance companies to determine which drugs are offered as preferred “formulary” options to insurance plan members.

Those rebates are returned to the pharmacy at a later date, paid out by drug companies based on the total sales volume of their products, and cannot be linked directly to any individual purchase. This makes prices especially difficult to track.

Some drug companies have defended list price increases by reasoning that rebates have increased at a similar clip. However, the researchers found that is not the case, and concluded that increases in list prices and a greater reliance on rebates are making drugs more expensive overall.

“Accountability and transparency are essential to developing a better understanding of rising pharmacy costs,” said Maureen Sullivan, chief strategy and innovation officer for the Blue Cross Blue Shield Association (BCBSA). “The Blue Cross Blue Shield Association developed the Alliance for Health Research to engage researchers in collaborative efforts to explore critical health care issues and enable valuable insights that can benefit consumers and the medical community.”

Wineinger NE, Zhang Y, Topol EJ.
Trends in Prices of Popular Brand-Name Prescription Drugs in the United States.
JAMA Netw Open. 2019;2(5):e194791. doi: 10.1001/jamanetworkopen.2019.4791.

Most Popular Now

Amgen and Allergan's MVASI™ (bevacizumab-awwb) and…

Amgen (NASDAQ:AMGN) and Allergan plc (NYSE:AGN) announced that MVASI™ (bevacizumab-awwb), a biosimilar to Avastin® (bevacizumab), and KANJINTITM (trastuzumab-anns), a bio...

Compound found in red wine opens door for new trea…

Like to unwind with a glass of red wine after a stressful day? Don't give alcohol all the credit. New research has revealed that the plant compound resveratrol, which is ...

Mylan and Upjohn, a division of Pfizer, to combine…

HERTFORDSHIRE, England & PITTSBURGH & Mylan N.V. (Nasdaq: MYL) and Pfizer Inc. (NYSE: PFE) today announced a definitive agreement to combine Mylan with Upjohn, Pfizer's o...

HIV vaccine nears clinical trial following new fin…

A promising vaccine that clears an HIV-like virus from monkeys is closer to human testing after a new, weakened version of the vaccine has been shown to provide similar p...

Closing the door: breaking new ground related to a…

In order to sustain fast growth, cancer cells need to take up nutrients at a faster rate than healthy cells. The human glutamine transporter ASCT2 allows the amino acid g...

Leading oncologists and nutritionists pinpoint are…

An international collaborative led by Ludwig Cancer Research and Cancer Research UK has identified key areas that are central to uncovering the complex relationship betwe...

Roche and Spark Therapeutics, Inc. announce extens…

Roche (SIX: RO, ROG; OTCQX: RHHBY) and Spark Therapeutics, Inc. (NASDAQ: ONCE) ("Spark") announced that Roche has extended the offering period of its previously announced...

Rye is healthy, thanks to an interplay of microbes

Eating rye comes with a variety of health benefits. A new study from the University of Eastern Finland now shows that both lactic acid bacteria and gut bacteria contribut...

Eating more plant-based foods may be linked to bet…

Eating mostly plant-based foods and fewer animal-based foods may be linked to better heart health and a lower risk of dying from a heart attack, stroke or other cardiovas...

FDA approves first treatment for severe hypoglycem…

The U.S. Food and Drug Administration today approved Baqsimi nasal powder, the first glucagon therapy approved for the emergency treatment of severe hypoglycemia that c...

GSK completes transaction with Pfizer to form new …

The Joint Venture brings together two highly complementary portfolios of trusted consumer health brands, including GSK's Sensodyne, Voltaren and Panadol and Pfizer's Advi...

Bayer acquires BlueRock Therapeutics to build lead…

Bayer AG and BlueRock Therapeutics today announced an agreement under which Bayer will fully acquire BlueRock Therapeutics, a privately held US-headquartered biotechnolog...