Drug-makers didn’t raise list prices for as many drugs in January compared to last year and they initiated fewer hikes of 10% or more, according to analysis by Raymond James & Associates. Although 5.5% of price increases reached the 10% level in January this year, 15% did last year and 20% did 2 years ago.
However, the median drug-price increase held steady compared to last year at 8.9% – far exceeding the U.S. inflation rate of 2%.
Price increases held below 10% can still drive up total drug spending by hundreds of millions of dollars, according to the Wall Street Journal. AbbVie (NYSE:ABBV) raised the list price of its arthritis treatment, Humira, by 8.4% in January, and could bring in as much as $850 million in additional U.S. health-care spending.
AbbVie and other pharmaceutical companies, including Mylan (NSDQ:MYL), have pointed to middlemen such as pharmacy-benefit managers as contributing to a complex healthcare system where transparent drug pricing is a challenge. They claim that list prices don’t take into account discounts and rebates provided to pharmacy-benefit managers and that expanding their patient-assistance programs will help patients cover their out-of-pocket costs.
But patients with high-deductible health plans sometimes have to pay close to full price for their treatments and drug-makers face increasing pressure to explain away price hikes as dramatic as 5,500%.
After winning FDA approval for its muscular dystrophy drug earlier this month, Marathon Pharmaceuticals set the drug’s list price at $89,000 a year – 50 to 70 times greater than what most U.S. patients have paid for decades by importing the drug from Europe.
Chief financial officer Babar Ghias asserted that the company showed restraint when pricing the drug. “It’s modestly priced for an orphan drug,” he said, according to The Wall Street Journal.
Some companies, including Johnson & Johnson (NYSE:JNJ) and Merck (NYSE:MRK), have said they will issue reports detailing how much the companies have hiked the list prices of their prescription drugs.
The move comes after some pharmaceutical companies, including Allergan (NYSE:AGN) and Novo Nordisk (NYSE:NVO), have pledged to keep their annual price increases to single-digit percentages. When Allergan published its “social contract” in September, CEO Brent Saunders challenged other companies to limit price increases “before we all face the impact of government regulation that stifles innovation and patient care.”
According to Raymond James & Associates’ report, Allergan raised list prices for its drugs on average by 7.4% in January, but Saunders said his company will ultimately collect only 2 or 3% and share the rest with middlemen.