New study points to a double-digit hike in branded drug prices, spotlighting a growing national debate

AJ Loiacono

Over the last few months we’ve seen a string of big and small biopharma companies make public pledges to keep their annual drug price hikes limited to modest annual increases. But looking back over 2016, one gauge of drug price inflation highlights that the trends all point to only a modest “softening” of the hard price spikes the US has been seeing for years now.

Based on their analysis of billions of prescriptions written last year, Truveris says that the drug inflation rate hit 8.77% last year. Singling out branded drugs, the increase was a painful 13%. Generic drugs continued to hold the line, with only a fractional increase overall.

“I think we’re seeing some softening in inflation, which is good news,” says AJ Loiacono, the co-founder and chief innovation officer at Truveris, which works with a variety of drug payers to get the best deal available for drugs.

But that “softening,” he adds, doesn’t really represent a material change in the trend on drug prices, which he expects to see run on at a rate of 8% to 10% per year.

In order to get below 8%, says Loiacono, there would have to be a fundamental change in the market. Right now, with a relatively short period of patent protection, biopharma companies see each marketing campaign as a sprint aimed at maximizing revenue over a finite period of time. Pharmacy benefit managers, meanwhile, keep asking for bigger rebates, which also translates into higher out-of-pocket expenses.

Tracking retail price hikes on these drugs is crucial, Loiacono adds, because it directly affects the average consumer. The drug they paid $100 for in 2015 is now about $110, as those with co-insurance and deductibles feel the pain. And that directly influences whether or not patients stay compliant with their prescription.

To put drug inflation into perspective, the Consumer Price Index rose 2.1% last year, putting drugs far ahead. The average drug price increased 10% in each of the last three years.

The number helps explain why Big Pharma continues to feel the heat of consumer ire at a time President Trump has made high drug prices a key populist issue. And it will continue to drive discussion about new healthcare legislation aimed at bringing costs down.

The debate over drug prices is just beginning.

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Research Scientist - Immunology
Recursion Pharmaceuticals Salt Lake City, UT
Director of Operations
Atlas Venture Cambridge, MA

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