Higher Drug Prices, Bigger Discounts

According to a recent Wells Fargo analysis, discounts offered last year by drug makers to pharmacy benefit managers averaged more than 40 percent of list prices, up from 28 percent in 2012. Eli Lilly experienced the largest increase, with discounts rising to about 39 percent in 2016 from approximately 19 percent four years earlier. Merck was close behind, with discounts rising to 41 percent from 22 percent during the same period. Horizon Pharma had one of the highest increases in discounts, which rose to 70 percent in 2016, from 18 percent in 2012.

“In reality, we believe that drug price increases are both a way to ‘feed the beast’ and a way to increase product profitability,” wrote David Maris, author of the Wells Fargo report, in a note to investors. “Many drug companies say they only net approximately half of the price increases they announce.”

Mylan made a similar argument in a September 2016 congressional committee hearing on the company’s continual list price increases for its EpiPen product.

Because insurance co-pays are tied to the list price (not the lower discounted price for a medicine), consumers still pay more at the pharmacy counter. Drug makers have lobbied for a change that requires co-pays to be based on the discounted price.

Source: STAT News, January 24, 2018.

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