Despite calls from the American Medical Association, Congress and the presidential candidates to control the costs of prescription drugs, many of the biggest pharmaceutical companies have continued to raise their prices, according to The New York Times.
Here are five things to know on the increasing prices.
1. Drugmakers have raised the prices on brand name drugs by double-digit percentages since January, executives from Express Scripts and CVS Caremark, two drug benefit managers, told The New York Times. A report from IMS Health found that in 2014, drug list prices increased by upwards of 12 percent, similar to growth rates over the five preceding years.
“It used to be the drug companies only took one price increase a year,” said Steve Miller, MD, CMO at Express Scripts. “Now what they’re doing is taking multiple price increases multiple times a year.”
2. However, list prices don’t tell the full story, as they don’t include the rebates and other discounts obtained by insurers and pharmacy benefit managers, which lowers drugs’ net costs. In the same IMS Health report, researchers found that while list prices increased by 12 percent in 2015, the price insurers and employers actually pay for drugs went up just 2.8 percent, one of the lowest increases in years, according to the report.
3. Unfortunately, the uninsured — those who cannot afford the list prices most of all — often must pay the list price of a drug, as they do not have access to the discounted prices offered by insurers and pharmacy benefit managers. According to The New York Times, a growing proportion of the insured population is being held responsible for a percentage of the list price.
4. Despite the fact that pharmaceutical companies’ list prices are not representative of the true cost of a drug, the companies continue to raise the prices. According to the report, this is because many rebates and discounts are tied to a percentage of the list price, so a higher list price still yields higher profit. Some of the recent price hikes might be due to drugmakers trying to profit while they can, before congressional or other actions potentially limit them from doing so, Geoffrey Porges, an analyst at investment bank Leerink, told The New York Times.
“When you see this type of very aggressive pricing action across many products, then you start to scratch your head and say, is this the industry preparing for a more challenging price environment?” said Mr. Porges, according to the report. “There’s just a general fear of the unknown.”
5. Despite the increased attention on the drug industry, pharmaceutical companies say drug costs account for approximately 10 percent of total healthcare spending, and proportion that has remained relatively consistent over the years.
“Pharma is looking at these lower numbers and saying, ‘We’re not as bad as you’re hearing in the marketplace,'” said Dr. Miller, according to the report. However, he said actual drug costs are still on the rise. “The main point is this is still faster than your income is growing. You’re falling further and further behind, and it’s not sustainable.”
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