Manufacturers Quietly Increasing Drug Prices Across the Board

Top 3 Things You’ll Learn

  • The number of drugs targeted for price increases in 2020
  • How price hikes impacted all drug categories during the U.S. economic slowdown
  • Why your clients need an annual market check to keep up with these changes

A couple of recent industry news reports paint a discomforting picture of the state of drug prices as millions of people across the country continue to face the economic hardships:

Politico reports that drug manufacturers have been increasing drug prices since January, prior to the pandemic hit, and they continued those increases steadily over the first and second quarters of 2020. In all, their reporting found that “pharmaceutical companies logged more than 800 price increases this year and adjusted the cost of 42 medicines upward by an average of 3.3 percent so far in July.” Drug price increase are not uncommon practices taken by drug manufacturers over the course of a year; they usually occur at the beginning of the year and again mid-year. In fact, the report states that the size of the price increases is not out of line with previous years – justified or not. What’s alarming is the greater number of name-brand drugs that were targeted for price hikes.

A second report in The Hill cites an analysis conducted by a consumer advocacy group that shows prices spiked on 245 drugs since Jan. 20, when the first novel coronavirus case was reported in the U.S. The report found that “44 inpatient drugs have seen price increases during the pandemic, including 20 drugs commonly used in intensive care units,” such as sedatives, steroids, blood pressure medications and blood thinners. As more consumers stocked up on medications for chronic conditions, drug manufacturers raised prices “118 drugs to treat chronic conditions, including 25 cancer drugs and 23 cardiovascular medications.”

It’s important to note that the drugs targeted for price hikes were not just those related to COVID-19 treatments, nor were these drugs related to any new clinical innovations. These analyses show that while the world slowed down significantly as consumers focused on surviving the new virus, drug manufacturers saw no reason to slow down the chance to capitalize on the opportunity to continue to raise prices. Plan sponsors also should be aware that the new drug pipeline continues to focus on manufacturer investments in developing high-cost brand and specialty/orphan drugs.

Drug makers raised 800 drug prices so far this year, impacting 245 drugs and counting. It is critical that plan sponsors evaluate their pharmacy benefits contract annual to ensure it reflects the most competitive pricing and rebates available in the market.

The Bottom Line for Plan Sponsors

With pharmacy as the most utilized benefit, plans will continue to be impacted by new, expensive drugs in the market. For most plans, less than 2% of their members are driving more than 40% of plan costs, while 1 in 5 people reported not being able to afford their medications before the pandemic hit. Depending on the medication, it could take just one utilizing member to see this impact. Will the plan be able to sustain the price increases? Do the contract’s pricing and rebate terms reflect the latest market rates? Will members be able to afford their medications?

RxBenefits’ analysis shows that since March, when much of the country shut down, our clients have seen fewer pharmacy claims for acute medications overall. Most prescription drug spending centered around medications for chronic conditions, which is attributed to relaxed restrictions on early refills during that timeframe. Now, as much of the country has reopened, those numbers are expected to shift closer to normal ranges, although there is the potential for an upward spike in non-chronic medication utilization and spending as members return to the doctor and resume their elective procedures. When those situations occur, plan sponsors and their members will see the impact of the recent drug price increases.

This points to why it is critical that all plan sponsors — your clients – evaluate their plan performance and claims data regularly to assess their utilization and spending patterns, as well as the impact of these market changes. As their consultant, you can help your clients by conducting a market check of their current pharmacy benefits contract and ensuring it reflects the most competitive pricing and rebates available in the market.


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