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New or existing drugs? Both fuel price inflation



Inflation in existing drugs’ prices and the debut of new drugs are both contributing to the overall rising costs of pharmaceuticals.

Pills and capsules atop a spread of $100 bills Kenishirotie/Thinkstock

According to new research, the costs of oral and injectable brand-name drugs increased annually during 2008-2016 by 9.2% and 15.1%, respectively, largely driven by existing drug prices.

For oral and injectable specialty drugs, costs increased 20.6% and 12.5%, respectively, with 71.1% and 52.4% attributable to new drugs. Costs of oral and injectable generic drugs grew by 4.4% and 7.3%, also driven by entrants into the market.

Researchers looked at monthly wholesale acquisition costs of 24,877 National Drug Codes for oral drugs and 3,049 injectable drugs from 2005 to 2016. They compared them with pharmacy claims from the UPMC Health Plan, which offers insurance products to more than 3.2 million members across the spectrum of private and public arenas.

“Our analyses yielded three main findings,” explained Inmaculada Hernandez, PharmD, PhD, University of Pittsburgh, and her colleagues in a report published in the January 2019 issue of Health Affairs.

“First, costs increased considerably faster than inflation across all drug classes, and increases were highest for oral specialty drugs and lowest for oral generics,” Dr. Hernandez and her colleagues wrote.

“Second, rising costs of brand-name drugs were driven by inflation in the prices of widely used existing drugs,” they added. A combination of new products and price inflation in existing drugs drove the rising costs of specialty drugs, with new drugs accounting for a larger share of the price increases.

Third, “existing generics tended to decrease the average cost of generic drugs,” Dr. Hernandez noted. However, new generic products cost more than those already on the market, which fueled the annual increases in average costs.

The authors noted that their estimates demonstrate the role of inflation on pharmaceutical cost increases and support policy efforts to control that inflation.

“In the current value-based landscape, increasing drug costs attributable to new products can sometimes be justified on the basis of improved outcomes,” Dr. Hernandez and colleagues stated. “However, rising costs due to inflation do not reflect improved value for patients.”

The researchers noted that the data are limited by the lack of rebate information, which is generally proprietary. Thus, “the contribution of existing drugs may have been lower than we estimated,” they noted. In addition, “because the magnitude of rebates has increased in the past decade, our findings likely overestimated cost increases for brand-name drugs.” The researchers also didn’t examine the effect of drugs transitioning from brand to generic offerings.

The authors provided no disclosures.

SOURCE: Hernandez I et al. Health Aff (Millwood). 2019 Jan 2019. doi: 10.1377/hlthaff.2018.05147.

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