[Mark Aplet/Adobe Stock]
Such attention-grabbing stats aren’t isolated cases, but part of a bigger picture. Almost 60% of the current list price for the top 25 drugs is a result of price increases post launch. “On average, the prices of the 25 top Medicare Part D drugs have more than tripled since they first entered the market,” said Leigh Purvis, director, health care costs and access at AARP, in a media briefing. “Some of the prices are more than eight times higher than they were when they launched.”
The economic impact of drug price increases on Medicare Part D
The net impact of such price increases are considerable for federal payers. Medicare Part D’s total spend on these 25 drugs hit $80.9 billion in 2021. The impact is tangible for millions of enrollees, said Glen Fewkes, director, health care access and affordability at AARP. “It’s also really important to keep in mind that the median price of new brand-name drugs are remarkably high now roughly $200,000 per year,” Fewkes said. So even a small percent increase could equate to thousands of dollars difference.
The high costs and frequent price hikes for these top drugs have major economic implications. “The top 25 Medicare Part D drugs that we looked at were responsible for $81 billion in total party spending and 2021.”
Top ten Medicare Part D drug lifetime list price increases compared to the corresponding rate of inflation. [Image courtesy of AARP]
AARP: Drug pricing increases are hard on older Americans
Drug pricing increases are hard on older Americans as well, with one in five reporting cost-coping strategies such as skipping doses or not filling prescriptions. “We do not think that anyone in twenty-first century America should be making that kind of decision,” Purvis said. Unchecked increased drug prices will “prompt more older Americans to stop taking those medications,” Purvis said.
The Inflation Reduction Act as a legislative response to Medicare Part D drug price increases
Aggressive drug price increases also translate into higher taxes or cuts to public programs, a concern voiced by AARP. “We hope that this report serves as a wake up call for everyone in America right now who’s skeptical about the importance of lowering drug prices,” Purvis said.
In response to the surging drug prices, AARP hails the Inflation Reduction Act (IRA) as a significant step forward, which Big Pharma opposes. The cost of noncompliance to the drug-pricing negotiation is steep for drugmakers. Pharma companies that choose to sit out the negotiation process face an excise tax of up to 95% of the drugs’ U.S. sales. Otherwise, they must withdraw all their medications from the Medicare and Medicaid markets.
Prominent industry associations like Pharmaceutical Research and Manufacturers of America (PhRMA) and Biotechnology Industry Organization (BIO) as well as the U.S. Chamber of Commerce opposes the Act. PhRMA has filed a lawsuit against the Biden administration and is lobbying against the pricing proposal. Similarly, BIO has argued that IRA’s drug price controls will “rip apart America’s biotech ecosystem.”
Executives from Big Pharma firms have defended the industry’s pricing strategy in recent years. In 2019 Senate hearings, for instance, representatives from major firms like Merck, Pfizer, and Johnson & Johnson defended the industry’s pricing practices. The firms argued that high rebates largely canceled out list price increases.
Bar chart showing the share of current drug prices attributed to pricing increases since market entry for top Medicare Part D drugs, along with their respective launch years. Notably, ‘Enbrel’ and ‘Lantus’ have experienced the highest increases, both at 88%. Data source: ‘Prices for Top Medicare Part D Drugs Have More Than Tripled Since Entering the Market,’ an AARP report.
AARP supports for the IRA
“One thing we can say for sure is the drug companies are profit-seeking entities. They’re here to make money,” Purvis said. “I’m certainly not one who would argue against the strongest mechanisms we have possible to encourage drug companies to price their products fairly and not take unjustified price increases,” she added.
“Thankfully, the inflation Reduction Act represents an enormous step in the right direction,” Purvis agreed.
“The new penalties for drug companies that increase their prices faster than inflation will help hold drug price increases like the ones we identified in our report in check.”
In addition, Medicare’s ability to negotiate drug prices will also “play an incredibly important role in tackling the high prescription drug prices and costs,” Purvis said.
Public perception of drug pricing and election landscape implications
The AARP report underscores the public’s growing concern over the cost of healthcare, a sentiment that could challenge the pharma industry’s arguments that current drug pricing supports innovation. With 67% of likely voters aged 50 and older seeing drug pricing a very important issue for the 2024 elections, the subject transcends partisan affiliations.
“If [drugmakers] have a product that will make them money, that product will reach the market,” Purvis said. “Anything saying otherwise is probably something we might give a higher level of scrutiny.”
AARP’s challenge to the pharma industry
The report also delves into the complexities of the pharmaceutical industry’s practices. Purvis challenges industry arguments, stating, “I think that the drug companies are going to legally throw everything at the wall to see what sticks in terms of arguments to try to say that the sky is falling.”
AARP notes that it is familiar with the pharma industry’s arguments that drug pricing cuts will harm its ability to innovate. “The reality is they use these threats a lot whenever it comes to efforts to change their pricing practices,” Purvis said.
The organization is actively engaged in legal actions to challenge the pharma industry’s stance. Kelly Bagby, Vice President at AARP Foundation Litigation (AFL), explains the ongoing legal case in Ohio, where they are seeking an injunction to prevent the pharmaceutical companies from blocking negotiations on drug pricing. Bagby argues that “the public interest is so enormous,” emphasizing that “the pharmaceutical companies are not the victims, they’re painting themselves to be.”
Filed Under: Drug Discovery and Development, Regulatory affairs
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