Drug Prices Keep Rising Amid Political Pressure, But Not As Fast

September 18, 2019

Original Article - Leah Rosenbaum, Forbes

Prices for the majority of drugs in the U.S. have started to rise more slowly, likely a result of public and political pressure, according to a five-year study released Tuesday by drug pricing startup GoodRx.

Analysts at the company, which tracks drug prices and offers online discounts, found the price for the majority of drugs has increased by 32% in the past five years, with the biggest increases occurring on average between 2015 and 2017. Some medications experienced even sharper increases—drugs that treat anaphylaxis and drugs used in the management of rheumatoid arthritis each increased over 90%. Yet in recent months, the pace of price hikes has cooled as politicians have ramped up pressure by mandating that drug companies list prices in direct-to-consumer advertisements and threats of a cost-cutting White House executive order.

“Even though prices have not stopped going up, the pace has slowed as the political attention has gotten hotter,” says Thomas Goetz, Chief of Research at GoodRx.

The new research, the first of its kind from the Santa Monica-based startup, echoes similar findings published by the Associated Press last month, which found that several big drug companies, including Pfizer, Novartis and Amgen, skipped their midyear price increases. Last year, drug companies Pfizer and Novartis agreed to freeze drug prices, but that practice ended in the beginning of 2019.

Some medication prices did fall, according to GoodRx. Anxiety and depression medications were the only class of drugs to get cheaper, dropping 18% over the five-year period.


The white paper looked at the list price of both name-brand and generic drugs for 11 common conditions, including anaphylaxis, asthma and diabetes. The list price is set by drug companies and is the price that a noninsured patient pays, not including discounts or rebates. While the relationship isn’t linear, Goetz says, “generally a higher list price does cause a higher out-of-pocket cost.” But, he says, “it’s a very messy process.”  

That is because one of the main issues facing drug pricing is a lack of transparency. Peter Bach, the Director of Memorial Sloan Kettering’s Center for Health Policy and Outcomes, says the actual cost of many prescription drugs is “easy to triangulate, [but] very hard to actually observe.” For some less expensive generic medications, the prices that pharmacies charge “have nothing to do with the list price.” For brand-name and specialty drugs, the list price can have more impact on patients. Rebates, negotiated discounts between insurance companies and drug makers, and different out-of-pocket costs can all affect how much each person pays for a specific drug.

Pharmaceutical companies have defended escalating prices, saying more money is needed to continue drug innovation and research. Last May, a study conducted by the Campaign for Sustainable Rx Pricing found that the ten largest drug makers in the U.S. spent an average of 22% of their revenue on research and development in 2017, STAT reported, which is half the amount they spent on corporate overhead, advertising and profits.

Drug companies aren’t the only ones responsible for current high prices. “The problem is not just the price of the drug, but how it’s being covered by insurance,” says Stacie Dusetzina, a health policy professor and cancer researcher at the Vanderbilt School of Medicine, “we’ve also seen this general trend towards insurance benefits being less generous.”

Goetz says changing patent protections and allowing more generic drugs to enter the market can help lower prices—as they did with anxiety and depression medications. “When the generics become available, the prices come down,” he says.

Dusetzina and Bach both say that some sort of government regulation may be necessary, and Democrats, including House Speaker Nancy Pelosi, have been pushing to increase government involvement in drug price negotiations. Similar types of regulation is why many other countries, including Canada, have lower drug prices than the U.S.

Public pressure alone won’t do it. “I don’t think prices will go down based on publicly shaming them,” Dusetzina says. “No one really wants to change, because people are making money on the system as it exists.”