SUMMARY: One area where Republicans and Democrats agree is that drug pricing is out of control. Retail price increases for widely used brand name prescription drugs consistently exceeded the rate of general inflation between 2006 and 2020. In 2020, retail prices for 260 brand-name prescription drugs widely used by older adults increased by an average of 2.9 percent. In contrast, the general inflation rate was 1.3 percent over the same period. The US Federal Trade Commission is taking a more aggressive antitrust approach as eight US antitrust bills targeting the pharmaceutical industry have been recently introduced.
AARP recently found that the average annual cost for one brand name medication used on a chronic basis was $6,604 in 2020, more than $1,500 higher than the average annual cost of therapy in 2015. For the average older American taking 4.7 prescription drugs per month, the annual cost of therapy would have been more than $31,000 for 2020—more than three and a half times the cost seen 15 years earlier. This amount exceeds the median annual income of Medicare beneficiaries ($29,650).
Between January 2006 and December 2020, retail prices for 65 chronic-use brand name drugs that had been on the market since
AARP Drug Pricing
the beginning of the study period increased cumulatively by an average of 276.8 percent. The cumulative general inflation rate in the US economy was 32.0 percent during the same 15-year period.
The true risk to pharma in response to unacceptable drug pricing may come from growing bipartisan support to increase industry antitrust scrutiny and penalties. Eight US antitrust bills targeting the pharmaceutical industry have been recently introduced, addressing a gamut of alleged anti-competitive activity. These cover areas such paying for the delay of launches of generic products and “product hopping”, where companies make minor changes to extend the exclusivity of drugs.
Senator Amy Klobuchar has proposed the Competition and Antitrust Law Enforcement Reform Act. If enacted, the bill would mean many proposed biopharma deals would be presumed to be anti-competitive, with an obligation on the sponsors to disprove. The bill would also lower the bar in demonstrating how a given acquisition would be deemed anti-competitive. The Financial Times reports “given ongoing waves of patent expirations, these proposals could not have a come at a worse time for the industry. Between now and the end of the decade, a record-breaking amount of more than $150bn of US major pharma revenues will be exposed to generic or biosimilar competition”.
Drug pricing remains a top-three issue among the electorate ahead of the 2022 House and Senate elections, while industry consolidation arguably has led to greater unemployment.
Financial Times
A perfect example of industry pricing issues is insulin. While the US represents only 15 percent of the global insulin market, it actually generates a whopping 50 percent of the industry’s insulin revenue. While the rest of the world has embraced the necessity to give diabetics free or at least cheap access to what they need, around a third of the 35 million Americans who have diabetes and require insulin to manage the disease find themselves facing very real, very practical financial dilemmas each month.
After AbbVie’s disastrous appearance last month in front of Congress, you can bet that politicians up for reelection are salivating at the opportunity to lower drug prices.
Right now it seems that the drug industry is throwing more money into lobbying and using a “get it while we can” strategy but it’s liable to change as the perfect storm is on the horizon.