How small price increases for prescription drugs from pharmaceutical companies could hurt more than your wallet.
Earlier this month, Pfizer, one of the world’s largest drugmakers, announced it was raising prices on around one hundred of their drugs as of July 1.
That list included big name brands like Chantix (a smoking-cessation aid), Lyrica (a nerve pain medication), Lipitor (a treatment for high cholesterol and triglyceride levels), and Xalkori (a lung cancer drug).
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Even the famous little blue pill, Viagra, saw a price hike.
The news was met with harsh criticism from many organizations and people, including the president of the United States.
This was the second time Pfizer increased prices in 2018. The first being for another list of drugs in January.
Shortly after criticism over the company’s most recent price hike began, Pfizer announced it was temporarily suspending the increase.
However, another price hike appears to be inevitable and the continually rising cost of prescription drugs are draining wallets and negatively impacting healthcare for millions of people.
Profits over patients?
For Americans, annual or even biannual price increases from pharmaceutical drug companies are nothing new. In fact, Pfizer did the exact same thing in 2017.
Pfizer isn’t alone either. Other major pharmaceutical companies, such as French manufacturer Sanofi, also follow similar schedules. Biannual price hikes in the United States are in fact commonplace.
“What you’re seeing from Pfizer and other companies is a pretty consistent practice. They raise retail prices, but they might simultaneously be offering rebates on the products,” says James Hodge, professor of public health law and ethics at Arizona State University Sandra Day O’Connor College of Law. “Americans face drug price increases constantly, on drugs that have been on the market for years. So, exactly why drug prices have increased for a drug that’s been around, that well-exceeds inflation increases, is rather profound.”
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Most recently, the average price increase of Pfizer’s drugs was around ten percent. But there were also notable exceptions including Chantix, which saw a price increase of 17 percent; and over the course of this year Viagra’s price has jumped 27.5 percent.
To their credit, Pfizer decreased prices for a handful of their drugs this year as well. The company also maintains that despite double-digit increases in list price for many drugs, the net price increase would only be in the “low single digits.
“The list price remains unchanged for the majority of our medicines,” the company said in a statement. “We are modifying prices for 10 percent of our medicines, including some instances where we’re decreasing the price.”
Drug companies say that because of rebates and discounts, they don’t profit much from price hikes. Instead the discounts offered by pharmaceutical companies go towards winning over contracts with pharmacy benefit managers (PBMs) and insurance companies.
Still, for the average person, a price hike is still a price hike. While the potential health impact may not be severe for drugs like Viagra, the increased expense becomes a more serious issue when the medication in question is required for life-saving treatment — especially when people experience a lapse in medical coverage.
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“Price increases to Americans feel like what they are: I’m going to be paying more for these drugs because my insurance company won’t reimburse at the same level and rate,” says Hodge. “When we’re talking $2 a pill for something you need once a month, that’s a whole different story as contrasted with pills you might need every day and paying 2$ to 3$ more per pill. Take that across an entire level of people where many are on multiple drugs from multiple companies. They might experience multiple price increases.”
Drug price increases also greatly outpace healthcare inflation costs, which have been comparatively low in the past few years.
These price increases affect insurance premiums and out of pocket expenses, but it’s hard to say exactly how much.
However, Jonathan Gruber, a professor of economics at the Massachusetts Institute of Technology and president of the American Society of Health Economists, says the overall direction is clear.
“Higher drug prices translate to higher health insurance costs for all of us,” he says.
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He notes the convoluted system of rebates and discounts between pharmaceutical companies, pharmacy benefit managers, and insurance companies makes things even more murky.
“Obviously, if they raise the price, that’s going to pass through to some extent to consumers. Whether PBMs are helping or hurting is still unclear, it all depends on how these rebates play through,” says Gruber. “We just don’t know yet. When they raise the price, how much of that is actually making its way to consumers?”
PBMs in particular fell under heavy public scrutiny last year when a woman in California discovered that by using her insurance co-payment, she was actually paying nearly double for a generic drug than if she would’ve paid out of pocket.
Class action lawsuits have since been filed in several states against national pharmacies including Walgreens and CVS for these practices.
Several congressmen, senators, and President Trump have all been outspoken about the need to control price increases from pharmaceutical companies. In his State of the Union address in January, President Trump stated, “You’ll be seeing drug prices falling very substantially in the not-too-distant future, and it’s going to be beautiful.”
His public shaming of Pfizer on Twitter after their most recent increase, and the company’s subsequent backpedaling, will likely be seen as a victory for some. Yet, little is being done to change the underlying problem.
Despite the President’s tough talk, his administration’s current “blueprint” — several proposals the administration is evaluating on the issue — seems to be much weaker.
“They’ve had a real opportunity to put their money where their mouth is and they didn’t,” Gruber says. “The one chance that they’ve had to put their foot down in a major way, they haven’t done so.”
He adds the failure to follow words with action has only served to fuel criticisms of the current administration’s stance on the issue.
One of those critics is Peter Maybarduk, director, Public Citizen’s Access to Medicines Program, who issued the following statement after the president’s public spat with Pfizer:
“You can’t fix a systematically corrupt industry by tweeting. Trump’s online quarrel with Pfizer reveals the weakness of his efforts to lower drug prices so far. The administration’s “blueprint” fails to discipline Big Pharma in any meaningful way. Instead, the administration aims to protect manufacturers and help them survive a public health and public relations crisis.”
He added, “Even Pfizer’s alleged concession to Trump is a sham. Pfizer is only deferring price increases, not canceling them, and certainly not lowering its prices.”
The bottom line
Time will tell if the current administration’s plans will have any meaningful impact. However, left unchecked, the rising cost of prescription drugs could cripple healthcare, as well as raise health risks, for millions of people in America.