Even after discounts, drug price hikes have tripled inflation rate, study finds

Drug prices rose 3.5 times faster than the rate of inflation over an 11-year period even after taking rebates and discounts into account, a study published March 3 in the Journal of the American Medical Association said. 

A group of researchers from the University of Pittsburgh looked at list and net prices of 602 drugs between 2007 and 2018 and found that net prices rose 60 percent, or 4.5 percent per year. 

Drugmakers have often said studies focused on list prices are misleading when discussing drug cost increases because they don't reflect the actual price of drugs after rebates and discounts offered by drugmakers to payers, STAT reported. 

The researchers behind this study took rebates and discounts into account and determined net prices instead of list prices, but because rebates and discounts are confidential, they had to estimate.

Merck CEO Kenneth Frazier wrote in an accompanying editorial that the estimations were "reasonable." 

The greatest increases in net pricing occurred for multiple sclerosis treatments. For insulin —  often the center of debates about rising drug costs — net prices increased by 51 percent over the 11-year period. 

One limitation of the study is that it didn't look at out-of-pocket costs patients have to pay at the pharmacy counter, so it is unclear how much people were actually affected by the increased net prices, STAT reported. 

Mr. Frazier wrote in his editorial that "the biopharmaceutical industry has a duty to be responsible in pricing practices and to contribute to solutions that address patient affordability."

"The drug rebate system must be reformed so that patients benefit directly from the discounts and other pricing concessions that currently benefit the insurers and pharmacy benefit managers," he added. 

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