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Net prices for prescription drugs are rising three times faster than inflation, study finds

Even after discounts, researchers say consumers are feeling the pinch

Photo (c) digicomphoto - Getty Images
Prescription drug prices have skyrocketed in recent years, an issue that has galvanized both Republicans and Democrats.

Drug companies have defended themselves by saying the posted price of a drug is rarely what consumers pay since health benefit policies pay the rest. But a new study questions that claim.

A study published in the Journal of the American Medical Association (JAMA) claims that the net cost of prescription drugs — meaning the sticker price minus manufacturer discounts — rose over three times faster than the rate of inflation over a 10-year period. 

The study is the work of researchers in the Center for Pharmaceutical Policy and Prescribing (CP3) at the University of Pittsburgh’s Health Policy Institute.

“Previously, we were limited to studying list prices, which do not account for manufacturer discounts,” said lead author Inmaculada Hernandez, assistant professor of pharmacy at Pitt. “List prices are very important, but they are not the full story. This is the first time we’ve been able to account for discounts and report trends in net prices for most brand name drugs in the U.S.” 

Prices after discounts

The researchers showed that the prices of prescription drugs have rapidly increased over the last decade. Their new findings used data for 602 brand-name drugs to track both the list and net prices from 2007 to 2018. 

Accounting for inflation, they showed that list prices rose by 159 percent. Net prices, paid by consumers after all discounts were taken into consideration, rose by 60 percent.

The research turned up one bit of good news. In 2015, the net price paid by consumers began to level off. Still, the authors say, it doesn’t mean prescription drugs are any more affordable.

“Net prices are not necessarily what patients pay,” said senior author Walid Gellad, an associate professor of medicine and health policy at Pitt and director of the CP3. “A lot of the discount is not going to the patient.” 

The authors suggest that the overwhelming majority of the discounts on prescription drugs are probably going directly to public and private insurers. Rebates don’t usually affect the amount patients pay through copays or coinsurance, which are based on the list price, not net. 

Prices of some drugs rise faster than others

The study found that the net price of some drugs is increasing faster than others. For example, insulins or TNF inhibitors saw a widening gap between list and net prices. For other drugs, such as cancer medications, list and net prices increased at about the same rate. 

Multiple sclerosis treatments seemed to increase in price the fastest. Even after discounts, the authors say net prices more than doubled over the decade in inflation-adjusted dollars. 

“We’re seeing a lot of discussion that net prices have stabilized over the last few years, and that does appear to be the case,” said Gellad.

He also notes that the net price of many medications continues to rise, even for products that have not changed or been improved.

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