AHIP Blasts Pharmaceutical Industry as Drug Prices Increase

Update 1/15/2021: This article has been edited to reflect that GoodRx included newly approved drugs in its calculations, which accounted for the change in the number of drugs that the company studied each year. A previous version of this article incorrectly speculated that the increase in pharmaceutical companies that were raising their drug prices could be a result of the fact that GoodRx looked at more drug brands in 2021 than in previous years. That sentence has been deleted.

The tension between payers and pharmaceutical companies over drug pricing has carried into 2021, as evidenced by a press release from America’s Health Insurance Plans (AHIP) criticizing pharmaceutical companies for January 2021 drug pricing increases.

“Americans are being hurt by out-of-control drug prices, which are set and fully controlled by Big Pharma alone,” Matt Eyles, president and chief executive officer of AHIP, said in a related blog post.

“The incoming Biden-Harris administration should focus on bipartisan, workable solutions to protect patients, taxpayers, and all Americans from higher drug prices, especially in the midst of the ongoing COVID-19 crisis.”

The payer organization pointed to a recent GoodRx report as proof that pharmaceutical companies are not backing down their drug prices even as the pandemic continues.

The report tracked 4,594 drugs on a daily basis. The sample was a mix of brand and generic drugs with more brand drugs represented than generics.

A little more than 15 percent of all of the drugs studied (722 drugs) would be increasing in prices at the beginning of 2021. Prices would rise approximately 4.5 percent on average.

Pharmaceutical companies raised prices on drugs for rheumatoid arthritis, cancer, and other conditions. Pfizer, alone, raised prices on over 130 drugs.

As of January 13, 2021, drug manufacturers increased their official drug price for 715 brand drugs by 4.5 percent on average. Another seven generic drugs’ official drug price rose by 2.7 percent on average.

In comparison, drug manufacturers raised the prices on 639 drugs by 6 percent on average in January 2020. In January 2019, manufacturers raised their drug prices for 486 drugs by 5.2 percent on average.

Thus, while the average drug price increases are fluctuating, the number of pharmaceutical companies raising their drug prices might be growing year-over-year.

AHIP added that 65 drugs increased in price during the summer of 2020, when the pandemic was still gaining strength.

The payer organization acknowledged payers’ role in negotiating lower prices for their consumers.

“But when pharmaceutical companies keep raising their prices year after year—even multiple times a year—negotiations can only do so much good,” AHIP asserted.

Apart from negotiating prices, some payers have responded to soaring drug spending by implementing drug price transparency tools to help lower members’ out-of-pocket drug spending. They also reformed formularies to incentivize using lower-cost drugs. Some payers emphasized treatments and preventive care services that do not involve as many medications.

AHIP is not alone in its rebuke of the pharmaceutical industry for high drug pricing.

The Trump Administration found that rebates offered misaligned incentives to raise drug prices.

“Drug companies defend themselves by pointing out that these annual increases are on the ‘list price’ of drugs.…But Americans know better, because increases in list prices hit their pocketbooks,” HHS Secretary Alex Azar explained in January 2019.

“Higher prices allow drug companies to make bigger rebate payments, which go to pharmacy benefit managers, insurance companies, and employers, rather than to patients. In a functioning free market, competition drives down prices. Most drugs, including branded drugs, have competitors. But in the broken drug market we have, prices keep rising to make more room for bigger rebate payments. Drug companies’ press releases about this year’s price increases laid out this dynamic explicitly, pointing that many price increases are entirely captured by rebates.”

The Trump administration responded with the attempted drug price transparency rule, which was struck down in court, and the Most Favored Nation model, which requires that high-cost Medicare Part B drugs and biologicals be priced no higher than the lowest price in comparable countries.

The incoming Biden administration has hinted that its own prescription drug price policy would involve developing a panel to review high-cost drugs that see little or no competition. It may also favor strategies in the House of Representative’s bill, “Lower Drug Costs Now Act of 2019”, which would tie drug prices to other countries.

Additionally, the new administration may implement rebates on any manufacturer whose price growth exceeds inflation. Under Biden, Americans might be able to purchase other countries’ drugs with HHS approval. The administration is unlikely to support the Trump administration’s policy that rebates pass pharmacy benefits managers and apply to the consumer’s costs.