Prescription drug prices are out of control (Here’s why)

SUMMARY: According to a new report from the Institute for Clinical and Economic Review released on Tuesday, combined price hikes from seven drugs, in 2017 and 2018, contributed to a $5.1 billion increase in U.S. spending. None of those drugs had new important evidence to support the price increase, the study concluded. Why is this happening?

AbbVie Inc’s rheumatoid arthritis drug Humira accounted for the biggest increase in drug spending in the U.S. between 2017 and 2018 with a 15.9 percent jump over this period. Ultimately, the drug cost patients and insurers an additional $1.86 billion more than it would have prior to the price jump.

The norm in the United States has been for most pharma companies to increase prices year after year — even accounting for the discounts they give insurers, and even for drugs that already sit at the top of the chart of spending for drugs in the US.

You may ask why is this happening?

It’s actually quite simple; price increases are part of the pharma business model in the age of 85% generic drugs. Wall Street rules when it comes to pharma performance and CEOs are doing everything they can to max out their compensation.

In its 125-page re­port, ICER iso­lat­ed nine drugs whose es­ti­mat­ed net price in­creas­es over a two-year pe­ri­od (fourth quar­ter of 2016 to the fourth quar­ter of 2018) were caus­ing con­cern — on the ba­sis of da­ta which es­ti­mat­ed the med­i­cines that would have trig­gered the great­est in­crease in drug spend­ing in the Unit­ed States, as well as nom­i­na­tions re­ceived by the pub­lic.

If drug mak­ers who don’t have new ev­i­dence of im­por­tant new clin­i­cal ben­e­fits kept their prices the same — it would dra­mat­i­cal­ly re­duce spend­ing in­creas­es year af­ter year. If you on­ly in­creased for the two drugs, even if those price in­creas­es were greater than the ev­i­dence jus­ti­fies — that would have saved a lot of mon­ey.”

Pharma and hospitals, in particular, are reaping some of the largest rewards even amid the sustained public furor over drug prices and surprise medical bills.

  • Drug companies collected almost half of all health care profits despite generating less than 20% of industry revenue.
  • 12 of the 16 most profitable companies in Q2 were pharmaceutical firms.

And what is pharma doing to defend their price hikes? Top pharma CEOs have targeted a small group of Republican senators with roughly $200,000 in campaign donations in the past year, according to a STAT review of campaign finance disclosures. No major industry executive has contributed to a Democratic presidential contender or President Trump’s reelection campaign, according to the review. Only one — David Ricks, the CEO of the Indiana-based drugmaker Eli Lilly — has given to a committee associated with Vice President Mike Pence, who once served as Indiana’s governor.

When it comes to big pharma greed AbbVie is a great poster company

Total spending by Medicare and Medicaid increased 266% on Humira between 2012 and 2016, and the average spending on Humira per person more than doubled from $16,000 to $33,000.  To help keep the cash coming in AbbVie filed 89% of the total patent applications on Humira in the U.S. after the drug was first approved and on the market.

The overpatenting of Humira and other medicines puts a strain not only America’s public health care budgets, but also undermines the health and financial well-being of individuals and families throughout the country.

Humira has generated over $100 billion in sales for AbbVie since its launch in 2002. Last year AbbVie reaped $18 billion in global sales of Humira – $12 billion of which came from U.S. payers. Humira alone is responsible for two-thirds of AbbVie’s total revenue.

The business model of prices increases is unsustainable but by the time changes are implemented CEOs will be long gone with their bundles of cash.