ARI SHAPIRO, HOST:
Drug companies often increase prices at the start of the new year, and 2024 seems to be no exception. Here to talk to us about prescription drug price hikes is NPR pharmaceuticals correspondent Sydney Lupkin. Hey there.
SYDNEY LUPKIN, BYLINE: Hi.
SHAPIRO: What's this year looking like so far?
LUPKIN: So there have been about 600 price hikes so far in January. But overall, they're not terrible. That's according to the drug price nonprofit 46brooklyn Research, which analyzed the data. In the 2010s, drug price hikes were actually much bigger - up to 10% on average. Here's 46brooklyn's CEO Anthony Ciaccia (ph).
ANTONIO CIACCIA: Since 2016, the pedal to the metal has been kind of pulled back a little bit, where we typically see the weighted average impact of a price increase and the median price increase hovering at around 5%.
LUPKIN: And that's what he's seeing this year. He expects another couple hundred more drug price increases before the end of the month, and that will account for most brand-name price hikes this year. However, there is another kind of price to think about called a net price, and that's what the drugmaker takes home after rebates it has to pay back to third parties, discounts, etc. And on the whole, those rebates have been going up, so the net prices have been going down for about six years now. Richard Evans, a pharmaceutical industry veteran who runs SSR Health, says net prices went down a little faster in 2023 than in previous years.
RICHARD EVANS: As of September 30 last year, the average discount in the marketplace was about 52%. So manufacturers are getting about 48 cents on the dollar.
LUPKIN: So even if a drug's sticker price is going up, that doesn't mean the drugmaker is taking all that money home.
SHAPIRO: Were there any surprises this year?
LUPKIN: Yes, actually. There was also huge list price decreases according to 46brooklyn. These were for insulins and inhalers, and they weren't tiny cuts. We're talking 70, 80% list price cuts for these drugs. GSK says it plans to cut Advair's list price by up to 70%, for example. Ciaccia says the cuts are so significant that they actually cancel out the increases when you're doing weighted averages of price changes.
SHAPIRO: Why is that happening?
LUPKIN: So the big factor is legislation passed in 2021 under President Biden called the American Rescue Plan Act. It was mostly a COVID-era stimulus bill, but it also included a part that affects Medicaid. Prior to that law, drugmakers had to pay penalties for increasing prices faster than inflation. But there was a cap on those penalties. The American Rescue Plan lifted the cap in 2024, and now drugmakers would have to pay such huge penalties for raising prices faster than inflation that they'd owe the government more than the value of the drugs. They would make negative money. Here's Ciaccia again.
CIACCIA: The end result is drug manufacturers crushing the prices of many of these old products or pulling those products from the marketplace altogether to avoid having to pay the steep penalties to Medicaid programs.
SHAPIRO: OK, so prices are going up, but some are going down. What does all of this mean for consumers?
LUPKIN: Usually what someone pays at the pharmacy counter is related to the list price. So if a list price goes up, the copay will probably be more. But a price cut doesn't necessarily mean savings at the pharmacy counter. The copay could wind up being more because it causes the drug to move to a different tier of the menu of drugs your insurance provides. And this has a lot to do with the behind-the-scenes payments that happen between the drugmaker and your insurance's middleman called a pharmacy benefits manager. So the short answer, I'm really sorry to say, is that it really depends.
SHAPIRO: That's NPR pharmaceuticals correspondent Sydney Lupkin. Thanks.
LUPKIN: You bet. Transcript provided by NPR, Copyright NPR.
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