January’s new drug price increases take off without overcompensating for upcoming inflation-linked rebates
Pharma’s annual price increases on drugs — the vast majority of which usually occur in January of every year — didn’t noticeably spike this year (so far) when compared to recent years, and experts say it doesn’t seem like pharma is desperate yet to make up for what may be major losses in sales thanks to government negotiations for some high-earning drugs come 2026.
Analysts at 46Brooklyn published their latest 450+ available increases on list prices (not to be confused with the prices people pay out of pocket), as of Jan. 1, finding that as with previous years, most of the increases remained at or below the industry bar of 10%, and a median price increase of 5% so far in 2023.
Even still, companies are likely gearing up for a slate of incoming changes thanks to the Inflation Reduction Act, which took effect Jan. 1, and will now require manufacturers to pay rebates on certain Medicare Part B drugs if their prices increase faster than the rate of inflation. CMS has never had this kind of mechanism for enforcement before.
Former FDA commissioner Mark McClellan co-authored an article last month in Health Affairs with a Duke-Margolis colleague, warning that pharma manufacturers “will be more likely to continue to take substantial list price increases (potentially with larger rebate growth) in commercial markets for drugs that have little Medicare utilization, as their Medicare inflation penalties will be relatively small.”
So what do we see so far? Pfizer raised the prices of more than 50 of its drugs to kick off this year, including a 7.9% hike on its cancer drug Xalkori, which pulled in $493 million in 2021.
Blockbuster Xeljanz, which brought in over $2.4 billion in 2021 for Pfizer, also saw its price rise by 6% to start this year.
Breyanzi, Bristol Myers Squibb’s $400,000+ CAR-T therapy to treat lymphoma, will see a 9% price increase in 2023, which will amount to a price that’s about $35,000 more than the current list price. Breyanzi pulled in $87 million in sales in 2021.
GSK’s lupus drug Benlysta, which has a list price of more than $20,000 per year and hauled in more than $1 billion in 2021, will see a 7.7% list price increase in 2023, according to the 46Brooklyn database.
Antonio Ciaccia, president of 3 Axis Advisors who also manages Ohio-based 46Brooklyn, told Endpoints News that their numbers don’t explain the entire drug pricing story, not only because they aren’t looking at list prices, but also some companies have yet to report to the database he accesses and publishes.
As far as whether the IRA’s impact is evident with this latest crop of increases, Ciaccia said, “I don’t see it yet.” While cautioning that it’s still early in the year, he added, “It’s not anything materially different from the last five years.” He noted that companies may return to more price increases later this year too.
The percentage of a year’s overall price increases separated out by month shows that those occurring in January have risen from 32% of the total price increases in 2011 compared with more than 60% in January for the previous five years. Ciaccia said companies may turn to these more mid-year increases this year to try to mirror the rate of inflation.
Meanwhile, on the net price increase side, which is a more secretive space, Adam Fein at Drug Channels pointed out how for 2022, according to SSR Health’s list and estimated net pricing figures:
brand-name drugs’ net prices dropped for an unprecedented fifth consecutive year. What’s more, after adjusting for overall inflation, brand-name drug net prices plunged by almost 9%. The factors behind declining drug prices will remain in the coming years—and become even stronger due to forthcoming changes in Medicare and Medicaid. Employers, health plans, and PBMs will determine whether patients will share in this ongoing deflation.