Drugmakers have firm grasp on drug pricing power

Drug companies have maintained power to raise prices amidst heightened scrutiny from the health industry, government and general public, according to The Wall Street Journal.

More than two-thirds of the 20 biggest drug companies reported growing sales of their biggest products following price increases in the first quarter of 2016.

However, many drugmakers' shares have taken a small nosedive this year due to investors' fears of government price regulation or companies willingly decreasing prices to satisfy general public demands.

Despite slow economic growth, drug companies have still managed to control price hikes.

From May 2015 to May 2016, price margins for U.S. drug manufacturers rose by 9.8 percent. This is the second-highest increase among the 20 largest products and services monitored by the Bureau of Labor Statistics' Producer Price Index.

Drug prices are hard to accurately track in the U.S., because drug companies offer rebates and discounts to insurers and pharmacy-benefit managers, seemingly reducing the price of drugs while still maintaining high revenue.

While drugmakers' pricing power is strong, it isn't absolute. Medicaid programs limit drug price increases to the rate of consumer inflation. Drug companies have also had to increase the rebates they pay commercial insurers for drugs used to treat diseases like hepatitis C and diabetes.

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