Big Pharma Sidesteps Industry’s Own Price Hikes and Egregious Practices in Latest Bid to Evade Accountability

A recent Big Pharma study rehashes the tired tactic of blaming others in the supply chain for out-of-control prescription drug prices in a bid to evade accountability for the industry’s own egregious practices. The study, commissioned by the Pharmaceutical Researchers and Manufacturers of America (PhRMA) and conducted by Berkeley Research Group, places the blame for rising prescription drug prices on “nonmanufacturer stakeholders,” entities that include pharmacy benefit managers (PBMs), health plans, hospitals, the government, pharmacies and others in the supply chain – in other words, everybody except brand name drug manufacturers.

PhRMA’s study trots out many of the same debunked arguments the industry has pushed for years to deflect blame for prescription drug prices – especially, that negotiated discounts from PBMs drive increased drug spending in the U.S.

The fact is brand name drug companies are solely responsible for setting and hiking prescription drug list prices — and game the system to extend product exclusivity on their products, undermine competition from more affordable alternatives in the market and keep prices high. Let’s set the record straight.

First of All: What Do PBM’s Do?

PBMs’ mission is to bring down health care costs for patients. They do this in a few ways.

First, they negotiate with drug companies to secure lower prices on certain drugs – savings that patients, employers, and taxpayers realize in lower premiums and out of pocket costs. Second, they work with doctors to ensure that patients are getting medications that are right for them. Third, they work with patients to ensure they take their medication properly, so they get healthier faster and stay healthier longer.

More than 266 million Americans are served by the PBM industry. Even Big Pharma companies, who are themselves large employers, contract with PBMs to negotiate lower drug prices for their own employees. And before Big Pharma leaned into a years-long blame game strategy, the brand name drug industry used to praise the role of PBMs.

MYTH #1: Eliminating PBMs and Rebates Will Lower Drug Prices

FACT: Many High Price Drugs with No Competition Have No Rebates.

FACT: PBMs Serve as A Vital Check on Big Pharma’s Pricing Power And Are One of the Only Entities Bargaining With Drug Makers For Lower Prices.

MYTH #2: PBMs And Others In The Supply Chain Are Middlemen Who Don’t Add Value To The System.

FACT: More Than 266 Million Americans Rely on PBMs to Lower The Annual Cost Of Prescription Drugs By Up To 50 Percent.

MYTH #3: Price Savings Secured By PBMs In The Form of Rebates Aren’t Passed On To Patients.   

FACT: The Resulting Savings From PBMs Are Passed on to Patients and Consumers in the Form of Lower Out-Of-Pocket Costs, Lower Premiums and Lower Tax Dollars.

The Real Culprit: Big Pharma’s Price Hikes & Skyrocketing Launch Prices

While Big Pharma revamps its supply chain blame game strategy, the industry’s repeated price hikes and skyrocketing launch prices for new drugs have contributed to an unprecedented crisis of prescription drug affordability. The industry’s pandemic price hikes alone, while millions of Americans have continued to struggle to afford their medications, are staggering.

Pandemic Price Hikes

Skyrocketing Launch Prices

The U.S. Food & Drug Administration’s (FDA) approval of brand name drug maker Biogen’s unproven Alzheimer’s treatment Aduhelm, and the company’s subsequent pricing of the drug at $56,000 for a year of treatment, reignited the controversy around the brand name drug industry’s pricing tactics – in particular, setting higher and higher launch prices for new drugs.

After broad backlash from patients, lawmakers, drug pricing advocates and medical experts, the company reduced Aduhelm’s price — but even the reduced price tag for the drug was still approximately three to 10 times greater than what the Institute for Clinical and Economic Review (ICER) concluded would be a fair price for the treatment. ICER’s analysis found that a fair price for Aduhelm would fall somewhere between $2,500 and $8,300.

And while Aduhelm is a prime recent example, the drug is part of an increasing trend of egregious launch prices from Big Pharma companies. Researchers at Duke University’s Fuqua School of Business released a study in June of last year that found launch prices for new drugs have doubled since 2005 – driving up taxpayer spending in the Medicare Part B program.

The study found that between 2005 and 2010, Medicare Part B drug spending increased from around $13 billion per year to $16.5 billion per year, at an annual growth rate of four percent. But from 2010 to 2015, Part B drug spending increased at a nearly nine percent annual compound growth rate – from $16.5 billion to north of $25 billion over those five years.

The Duke University researchers argue that by setting higher launch prices on new drugs, Big Pharma companies are numbing people to just how high some of their new launch prices are – a process that enables them to charge even greater prices in the future.

Big Pharma’s out-of-control launch prices are also particularly evident in oncology treatments. A 2018 study from IQVIA’s Institute for Human Data Science found median launch prices for new cancer drugs more than doubled from 2013 to 2017, from around $79,000 for a course of treatment to over $160,000 for a course of treatment. The IQVIA study also found that every single new cancer drug brought to market in 2017 had a price tag over $100,000.

Big Pharma’s continued price hikes and increasing launch prices point to why lawmakers must cut through the industry’s blame game and advance solutions to lower prescription drug prices by holding brand name drug companies accountable.

Read more on how Big Pharma games the system to undermine competition HERE.

Read more on why the misguided Pharma-backed rebate rule is the wrong medicine to lower drug prices HERE.

Read more on solutions to hold Big Pharma accountable and lower prescription drug prices HERE.

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