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Specialty Drug Pricing

By September 19, 2017Commentary

Specialty drugs may be a bright spot in clinical advances in medicine, often offering dramatic improvements in outcomes, but they are a blight on efforts to control health spending and frequently reflect the worst in price-gouging.  An AARP regular survey looks at trends in specialty drug pricing.   (AARP Study)   The AARP study, as you might expect, focuses on medications commonly used by the elderly and covers pricing through 2015.  For 101 specialty drugs that fall into this category, prices increased by an average of 9.6% from 2014 to 2016.  The average annual cost for therapy per drug was $52,486.  That is simply astounding. It is also about 9 times more than the average annual therapy cost for brand name drugs, which also tend to be expensive and 100 times more than the cost of generic therapy.  For 29 chronic use specialty drugs that have been on the market since 2006, the cumulative price increase through 2015 averaged 177%.  From 2006 to 2014 annual specialty drug price increases averaged at least 3.3% and as high as 9.4%.  Always much, much greater than inflation.  There is no cost reason that would cause these increases, it is pure pursuit of profit.  I could go and on with examples from the report, but you get the picture.  Drug manufacturers have no hesitation in raising prices, regardless of the pain it causes patients and payers.  They can do this only because of a government-granted patent monopoly.

The drug industry tends to respond to reports like this by claiming they ignore rebates and other discounts and assistance the manufacturers provide to patients.  This is simply nonsense.  Even if someone could ever understand the actual net price paid for a drug and who gets what part of it, a task made hard by the convoluted distribution and payment chains, which PBMs, wholesalers and others have a vested interest in keeping opaque, that net price would still be outrageously high and those alleged discounts don’t keep up with the price increases.  And patient assistance programs are only designed to ensure that the manufacturers can push their drugs, with their very high prices, to as many patients as possible, whether they need them or not.  Losing copay revenue means as little to the manufacturers as giving some discount.  The prices are so high profits aren’t dented by these actions.  Just look at the financial statements of the public medication firms.  As we see more and more complex medications and cell therapies, this is going to be a bigger problem, so policymakers need to get their act together and find some way to constrain this pricing behavior.  As I have suggested before, adjusting the length of those government-granted patent monopolies is the best stick for this purpose.

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