A study published Tuesday shows that the prices for new drugs in America have increased more than ten years.
A research letter published in the Journal of the American Medical Association found that the launch price of brand-name drugs rose by almost 11 percent each year between 2008 and 2021.
“These prices are rising far out of proportion with other health care services,” stated Dr. Benjamin Rome, the lead author, who is a researcher at Brigham and Women’s Hospital in Boston.
Rome and his colleagues observed increases in prices for all kinds of drugs, including non-cancer drugs, cancer drugs, injections, pills, and pills, he stated.
“Ultimately,” he stated, “all health-care costs are borne entirely by consumers. This includes direct out-of-pocket expenses, higher premiums and taxes for public health insurance. Insurance companies also have the option of requiring prior authorization for costly new drugs, or refusing to cover them at all.
The net price, also known as the negotiable sticker price, was calculated by the researchers in the study. These prices were adjusted to account for inflation and included rebates offered by drugmakers for the drugs. The researchers also took into account that many new drugs introduced during the study period were intended for rare diseases and biologic therapies. These are generally more costly to produce.
Researchers limited their search to drugs sold by public companies. The net price averages covered nearly 400 new drugs.
The median drug price for a year increased from $2115 in 2008 to $180,000 in 2021. The highest price increases occurred for rare diseases and cancer drugs. These drugs are more expensive to produce. In 2008, 9 % of drugs cost $150,000 per year or more, while 47 percent were in 2021.
The researchers found that 65 per cent of the new drugs contained active ingredients that were not available in the U.S. 25 percent were biologics which are larger molecules that cost more to produce than their predecessors. 22 percent were cancer drugs.
Rome stated that prices rose regardless of drug type. He also said that it was unclear if a new drug is better than an existing one.
He said that only 1 out of 3 new medications have shown significant benefits over the existing treatments.
Researchers did not examine how prices have changed since their initial launch. Rome says that new drugs are typically on the market for 12 to 17 years, without any competition from generic drugs. This eventually leads to lower prices for brand-name drugs. The study authors found that drug manufacturers increase their prices in the absence of competition over time.
Karen Van Nuys is a research assistant at the University of Southern California Schaeffer Center for Health Policy and Economics. She says that drugmakers set the price high to protect themselves, and because they can.
Van Nuys, who wasn’t involved in the research, said that the biggest price increases were observed in 2020 and 2021. Half of all new drugs on the market in 2020 and 2021 cost more than $150,000 annually, but the price increase in 2021 was driven largely by two new cancer drugs that cost $1.6million and $3.2million respectively.
She suspects that the substantial increase in drug prices was due to federal regulation.
Van Nuys stated that Congress was considering a law in 2021 to reduce rising drug prices. However, it could have had unintended effects. This provision is part of the Biden administration’s stagnant Build Back Better Act. It would require drug companies pay Medicare rebates if their drug prices rise by more than the rate inflation.
She stated that you can launch at any price you like, but you cannot raise the price more than inflation after you launch. If you are a manufacturer who is facing such a restriction after your launch, you will increase the price of your product.
Van Nuys stated that “it’s still increasing drug prices, but it’s just how or the mechanism by which prices increase changes.”
