HC Statistics Pharmaceuticals

Branded pharmaceutical prices rise, but rebates making up a larger share of drug costs

A paper by Hernandez et al. (2020) in JAMA examines trends in branded drug prices using data from SSR Health between 2007 and 2018. The authors find the following:

From 2007 to 2018, list prices increased by 159% (95% CI, 137%-181%), or 9.1% per year, while net prices increased by 60% (95% CI, 36%-84%), or 4.5% per year, with stable net prices between 2015 and 2018. Discounts increased from 40% to 76% in Medicaid and from 23% to 51% for other payers. Increases in discounts offset 62% of list price increases.

In short, the headline number for some is ‘drug prices increased by nearly 10% per year’ However, the real story is that because rebates have been increasing by so much, branded drug prices have only risen by 4.5% per year. The latter figure is above inflation, but not unreasonable. Further, this change in branded drug prices does not take into account the decreasing cost of drugs after they go generic.

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