Anyone following the U.S. drug pricing debate knows that “drug prices” are complicated. Most brand-name prescription drugs sold in the U.S. actually have multiple prices, separated into two categories – list prices and net prices – which can differ significantly.
Pharmaceutical manufacturers have full control over the list prices of their drugs. They set list prices as high as they want, and often increase them—sometimes multiple times per year. To lower these list prices, negotiators like pharmacy benefit managers (PBMs) use their purchasing power to drive deep discounts on drug companies’ high prices for the businesses, government programs and public sector employers they work with. The lower prices that result from these negotiations and discounts are called “net prices.”
The partnership between PBMs and employers, unions and government programs helps keep those net prices low. But a recent study in JAMA provides empirical evidence that Big Pharma’s rising list prices are resulting in higher net prices for prescription drugs.
The study found that between 2007 and 2018, the list prices set by pharmaceutical manufacturers rose by 159%, more than doubling over the course of a decade. PBM efforts have helped to mitigate the impact on consumers by negotiating discounts but at that rate of list price increases, purchasers and patients will still face higher costs. The study found that net prices increased by 60% over the same time period.
Why does this matter? The data demonstrates that Big Pharma’s list price hikes have a significant downstream effect on the prices that U.S. patients pay for drugs. It shows that Big Pharma’s constant list price hikes are pushing drug costs up, directly impacting patients who need prescription drugs, and making it harder for employers, government programs, and other organizations that provide health care to figure out how to keep drugs affordable.
Americans shouldn’t suffer from Big Pharma’s anticompetitive games, tall tales and increasing prices. Instead, it’s time for policymakers to focus on the root cause of the problem: Big Pharma’s high prices. One of the best ways to curb Big Pharma’s ability to inflict this kind of pain is to stop the anticompetitive tactics that brand manufacturers use to extend their monopolies and prevent generic manufacturers from bringing competitive products to market.
To get more facts about the drug pricing debate, check out our fact sheet on how drug rebates help lower drug prices. And for ideas on how to bring down the cost of drugs for patients, don’t miss CAPD Executive Director Debra Barrett’s op-ed in The Hill.