Drug companies have raised prices on hundreds of brand-name drugs this year as the federal government seeks to rein in drug prices.
An analysis by drug research firm 46brooklyn Research found that companies raised prices on 910 brand-name drugs in January, although the median increase was 4.7%, the lowest drug inflation in more than a decade.
January is a critical month for consumers because more than half of the annual drug price increases over the past five years have been initiated in the first month of the year. Consumers — many of whom have buckled under the pressure of inflation that has increased rent and grocery prices over the past three years — must figure out how to fit higher drug costs into their household budgets for the rest of the year.
But drug companies appear to be limiting rising costs as they circumvent price guardrails under two new federal laws. Under the Inflation Reduction Act, drug companies must pay rebates to Medicare if they raise certain prices above the rate of inflation. The law also authorizes Medicare to negotiate prices for certain drugs.
Another federal law, the American Rescue Plan Act of 2021, could have a more direct impact on prices. Drug companies may be forced to pay Medicaid rebates this year that, in some cases, exceed the amount they collect from drug sales.
U.S. Health and Human Services Secretary Xavier Becerra stressed last week that senior Americans who rely on these Medicare-negotiated drugs will soon get a financial break, calling the drug price negotiations “historic.”
“Americans pay too much for prescription drugs, making it difficult for many to afford their medications,” Becerra said. “There are families across America who are making real sacrifices to pay for their medications.”
About 8 in 10 adults said prescription drug prices are unreasonable, according to a July 2023 survey by KFF, a nonprofit organization focused on health policy. About three in 10 adults struggle to afford their medications, the survey found.
While smaller median price increases this year may ease some consumers’ concerns about affordability, how much people pay will depend on their insurance coverage, drug coupons and complex rebates that are often hidden from public view.
Drug pricing experts say a new federal law could force drug companies to think twice before raising prices significantly. In fact, 46brooklyn’s analysis shows pharmaceutical companies seeing smaller increases. Some are choosing to slash prices rather than pay lucrative Medicaid rebates.
“Manufacturers have every reason to change the way they do business,” said Antonio Ciaccia, president of 46brooklyn.
Which drugs are seeing price increases?
Drug companies have announced price increases of 10% or more on a dozen drugs, and more than two dozen others saw price increases of 9.9% in January.
Many expensive new drugs are fairly unknown—they’re certainly not household names.
Hill Dermaceuticals had the biggest price increase, with Tolak topical cream used to treat skin lesions rising 33%. Italian drugmaker Chiesi also increased the price of oral solution Ferriprox, used to reduce iron levels in patients with sickle cell disease and anemia who receive blood transfusions, by 21% and by 13% for tablets.
The price of a new weight-loss drug called GLP-1 receptor is set to rise as patient demand soars.
Novo Nordisk, which makes diabetes drugs Ozempic and Rybelsus, raised prices on those drugs by 3.5%. Eli Lilly’s Mounjaro, also a GLP-1 weight loss drug used to treat diabetes, rose 4.5%.
Drugmakers raise prices on Medicare-negotiated drugs
For the first time, the federal government is allowed to negotiate drug prices for Medicare enrollees, the federal health program for seniors.
The Biden administration will engage in price haggling on 10 widely prescribed drugs that treat heart disease, diabetes and autoimmune diseases. On Thursday, U.S. Department of Health and Human Services officials made preliminary offers to the manufacturers of the 10 drugs, kicking off months of negotiations with drug companies. The new prices for these 10 drugs will be announced before September 1, and the negotiated prices will take effect in January 2026.
Over the next two years, an additional 30 drugs will be selected for negotiated pricing starting in 2027 and 2028.
The latest data shows that most drugs negotiated by health insurance are squeezed for price increases before negotiations begin. Pharmaceutical companies announced price increases for eight of the 10 drugs in Medicare negotiations. Prices for blood thinner Eliquis from Bristol-Myers Squibb and Pfizer increased by 6%, and prices for diabetes drugs Jardiance and Farxiga increased by 3%. Other drugs with slight increases include Januvia, Enbrel, Xarelto, Entresto and Stelara.
The list price of blood cancer drug Imbruvica, marketed by AbbVie and Johnson & Johnson, remained unchanged. Novo Nordisk has cut the price of its NovoLog insulin by 75%.
Megan West, managing director at health care consultancy Avalere, said that while initial negotiations were only for 10 drugs, Medicare’s approach to controlling drug prices in 2026 and beyond “will have ripple effects on other products.” reaction,” and the effects can last for years. Consulting firm.
Another big change: Drug companies may rethink how they price drugs from the moment they hit the market.
Insulin manufacturers slash prices
Consumers using insulin can expect to see price cuts from the three major insulin manufacturers, despite price increases for hundreds of drugs.
In March this year, Sanofi became the last of the three companies accounting for 90% of the global insulin business to announce price cuts. Plans by Novo Nordisk and Eli Lilly Co. would slash U.S. prices by 75% and 70%, respectively.
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While manufacturers have faced years of pressure from politicians and patient advocates to lower insulin prices, some analysts say mysterious federal rule changes on Medicaid rebates may also prompt drugmakers to slash prices.
For years, drugmakers paid rebates to Medicaid and states, which would then reimburse the drug companies for the drugs they distributed to Medicaid participants.
Until this year, rebate amounts were limited by a federal formula. The American Rescue Plan Act removed that cap, meaning drugmakers could face penalties for raising drug prices over the long term, according to KFF’s analysis.
Leigh Purvis, director of prescription drug policy at the AARP Public Policy Institute, said the change in federal law is an example of “how many different pressure points are needed to address drug prices.”
Purvis said major insulin manufacturers are likely to cut prices, in part to avoid paying lucrative fines.
“They definitely have a financial incentive to control those prices,” Purvis said.
Also this month, GlaxoSmithKline discontinued its widely used asthma inhaler Flovent and replaced it with an authorized generic version — a decision analysts said was likely to avoid large Medicaid rebates.
In another analysis, 46brooklyn examined the average price of the most commonly used Medicaid drugs. Because insulin and other diabetes drugs account for such a large share of Medicaid prescriptions, the price cuts for these drugs essentially mean that average Medicaid drug prices have not increased this year.
Higher listing price?
While these plans pressure companies to make more modest price increases for existing drugs, this pressure may not apply to the launch of new drugs. Siasia predicts that companies may choose to launch new drugs at higher prices.
He said that because federal law requires companies to “adhere to speed limits” on price increases for existing drugs, “some pharmaceutical companies may choose to launch new drugs at higher prices.”
“If they want to make more money, the only way they can stay ahead of the system is to take a more liberal approach to issue prices,” Siasia said.
Ken Alltucker is @kalltucker on X (formerly Twitter) or can be emailed [email protected].