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The Exchange How Do Drug Pricing Systems Work? If There Is More Competition, Shouldn't the List Price Go Down?

How Do Drug Pricing Systems Work? If There Is More Competition, Shouldn't the List Price Go Down?

How Do Drug Pricing Systems Work? If There Is More Competition, Shouldn't the List Price Go Down? Posted By:
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Have you ever noticed how much more expensive drug prices become every year? I think we have all noticed this increase, so this week I decided to look in to it.

In rheumatology practices, drug prices have skyrocketed. According to a JAMA Internal Medicine article published in February 2019, annual treatment costs for tumor necrosis factor inhibitors (TNFi) increased by 144% (from $15,809 to $38,574) from 2009 to 2016. This percentage increase occurred despite the entry of three new TNFi drugs—Simponi and Cimzia in 2009, and Simponi Aria in 2013. The study calculates the costs of the original TNFis Enbrel, Remicade, and Humira before 2009, and the authors estimated the annual cost would have risen over the same period by only 34% in the absence of these new entrants to the market. This increase in market competition and subsequent dramatic rise in cost defies market logic.

So who is bearing the cost of these increased prices? The study, which analyzed Medicare claims data, points out that "out-of-pocket" cost and manufacturers' coverage-gap discounts remained relatively constant over the review period. The authors said, "These increases were borne solely by Medicare, while patient out-of-pocket spending remained flat. These increases were not offset by manufacturer discounts in the Medicare Part D coverage gap. The rising costs of existing products may reflect manufacturers' opportunism in response to the payers' increased willingness to pay for TNF after market entry of new, more expensive agents."

The federal government is taking notice and called "big pharma" CEOs to Washington to testify about list prices. Seven big pharmaceutical executives were called in front of the Senate Finance Committee on February 26th of this year. CEO Kenneth Frazier of Merck stated, "I understand the dissatisfaction with our industry, but if we all bring the parties together around the table with the goal of doing what's best for the patient, I think we can come up with a system that works for all Americans."

The committee suggested that legislation will be needed to change the system. I personally do not want more legislation, but the system is clearly broken and needs fixing. This is particularly true when the Medicare population is growing so fast and the burden of paying for it is borne by fewer and fewer.

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