Prescription drug costs steadily soar, yet price transparency is lacking

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After reviewing tens of millions of insurance claims for the country's 49 most popular brand-name prescription drugs, a team from Scripps Research Translational Institute found that net prices rose by a median of 76 percent from January 2012 through December 2017—with most products going up once or twice per year.

The substantial price increases were not limited to drugs that recently entered the marketplace, as one might expect, or to those lacking generic equivalents. In addition, the increases often were "highly correlated" with price bumps by competitors.

The researchers concluded that the current rebate system, which incentivizes high list prices for drugs and relies heavily on privately-negotiated rebates to pharmacies, plays a central role driving up costs for consumers. The byzantine and secretive rebate system, they noted, prevents consumers from making informed decisions about purchasing medications.

The study appears in the latest issue of JAMA Network Open.

"It's no secret that health care prices are growing exponentially in the United States, but what has been less clear is the extent to which certain prescription drugs are contributing to that trend—especially when prices are clouded by a complicated rebate system," says lead author Nathan Wineinger, Ph.D., director of biostatistics at Scripps Research Translational Institute and assistant professor in Scripps Research's Department of Integrative Structural and Computational Biology. "By looking at price data for the most popular brand-name drugs, we found striking and consistent price increases occurring at regular intervals, regardless of competition in the marketplace."

The Scripps Research team obtained the prescription data from a proprietary Blue Cross and Blue Shield data set known as BCBS Axis, which includes commercial from more than 35 million Americans covered by independent Blue Cross and Blue Shield companies in the United States.

With a focus on the 49 most popular brand-name drugs with pharmacy claim data available for the entirety of their five-year research window, Wineinger and his team, led by Eric Topol, MD, conducted a high-dimensional data analysis to examine each claim's total price. This was represented by the total out-of-pocket costs paid by the insured consumer and the amount paid by the insurer.

Researchers determined that prices of top-selling branded increased by a median of 9.5 percent annually, which equates to a doubling in price every seven to eight years. And they found that pairs of brand-name drug competitors that treat similar conditions—such as Humira and Enbrel, both for rheumatoid arthritis—demonstrated highly correlated price increases.

"It's bad enough to see the relentless increase in drug prices, but this work underscores it is occurring without transparency or accountability," says Topol, founder and director of Scripps Research Translational Institute and executive vice president of Scripps Research. "It is especially concerning to see drugs in the same class having increases that appear to be coordinated."

Wineinger explains that a prescription drug's list price is typically set by the pharmaceutical company that makes the drug, reflecting the payment shared by the insurer and the patient who buys the product at a pharmacy. However, drug companies increasingly offer rebates to organizations called pharmacy benefit managers, or PBMs, which negotiate with pharmacies and insurance companies to determine which drugs are offered as preferred "formulary" options to insurance plan members.

Those rebates are returned to the pharmacy at a later date, paid out by drug companies based on the total sales volume of their products, and cannot be linked directly to any individual purchase. This makes prices especially difficult to track.

Some companies have defended list price increases by reasoning that rebates have increased at a similar clip. However, the researchers found that is not the case, and concluded that increases in list and a greater reliance on rebates are making drugs more expensive overall.

"Accountability and transparency are essential to developing a better understanding of rising pharmacy costs," said Maureen Sullivan, chief strategy and innovation officer for the Blue Cross Blue Shield Association (BCBSA). "The Blue Cross Blue Shield Association developed the Alliance for Health Research to engage researchers in collaborative efforts to explore critical health care issues and enable valuable insights that can benefit consumers and the medical community."

Explore further

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More information: Nathan E. Wineinger et al, Trends in Prices of Popular Brand-Name Prescription Drugs in the United States, JAMA Network Open (2019). DOI: 10.1001/jamanetworkopen.2019.4791
Journal information: JAMA Network Open

Citation: Prescription drug costs steadily soar, yet price transparency is lacking (2019, May 31) retrieved 23 September 2019 from
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May 31, 2019
as long as there is government intervention in the marketplace you will never know the true cost of goods sold.

Jun 01, 2019
You clearly believe that you live in a totalitarian state where you have no control over government intervention. What the article suspects is that government market control is ineffective and the therefore market is rigged. Pure leze faire capitalism is approximately what we have now, and is the result of less government. The point is that Drug Companies are charging whatever the market will bear, using hidden cost tools. Since money is "Free Speech" these profit centers brain wash folks into believing "The Magic of the Market" applies to cartels. Looks like you were fooled. Sad.

Jun 01, 2019
When you have a "health insurance" swindle like Obamacare effectively mugging people for their money, something like this is unsurprising. With the Democratic Rackets essentially guaranteeing the drug companies the money, with more where that came from, the pharmaceutical industry no longer feels bound by the idea of value for the dollar. They charge what they want, knowing their partners in crime, the insurance carriers and the Democratic Rackets, will force people to pay it. And still those caught by the scam pay deductibles up to $20,000 or more and are required to pay premiums increasing at up to four times the rate of inflation or more. One can ask how much of this is going to handle health problems of illegal aliens to hide the fact of the danger the Democratic Rackets policy of flooding the country with illegal aliens presents.

Jun 01, 2019
"When you have a "health insurance" swindle like Obamacare effectively mugging people for their money, something like this is unsurprising."
My point made. Ineffective government, per partisan warfare (both parties own this) creates opportunity for racketeering. Neither party wants racketeering, but commercial interests will use any way to make a buck that they can, and not get caught. General rule is: "Better to say I'm sorry after the fact", (Opioids). A friend once said: "There is profit in chaos". Partisan bickering creates the required chaos racketeering needs to thrive.

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