I'm Sure I've Written This Headline Before, but Drug Prices Aren't Skyrocketing

Scheduling Note: Cost Curve is off tomorrow, back Thursday.

“Drug prices are not skyrocketing” is something that we say around here a lot. That doesn’t quite get at the truth, which is that drug prices are flat or falling modestly, but pushing back against the “skyrocketing” myth feels important. 

All that to say, there is new data out from SSR Health that shows … drug prices are not skyrocketing. Indeed, net prices for branded pharmaceuticals fell 2.2% in the third quarter (list prices were up about 5%). That this is happening is almost not news. This has been the reality, every quarter, for the past five years. 

The phenomenon is being driven by the ever-rising percentage of rebates as a share of the drug market. Last quarter, we hit an all-time high in that department. The SSR post on the topic suggests that Humira discounting played a role here, but that’s clearly not where the trend started. We didn’t start the fire. 

Look, I know none of this is shocking to you all, who willingly subscribe to a daily newsletter about drug prices. But the continued erosion of net prices really is incredible, and it’s hard not to look at these numbers and wonder when -- or how -- this trend is arrested.

One of the biggest flaws with ICER analyses is that they’re not particularly good at dealing with prices, especially net prices. Or, to be fair, they are forced to rely on datasets that are not remotely fit for the purpose for which ICER uses them. 

That creates occasional blind spots that render some of the work unreliable. The “Unsupported Price Increases” report falls into this bucket. And, increasingly, so does last year’s analysis of obesity medicines, which massively overestimates the net price of Wegovy (again, because of bad data, not malice). Anyway: it was good to see this Real Clear piece by John Murphy, a BIO exec, which lays out the flaws in that particular report. 

Elsewhere:

• This Washington Post newsletter about the biosimilars market is a bit scattered, but it’s worth the read. Still, I would have loved to see a whole story unpacking this one line: “I’ve been told that AbbVie has threatened to withhold rebates it pays PBMs for some of its other medicines unless they give Humira good placement on formularies, the all-important lists of drugs available to their customers.”

• PhRMA has had enough. In a new video, the group’s head, Steve Ubl, summarizes the current state of play, after the IRA, weakening international IP, and toying with march-in rights: “The Biden Administration is sending a very clear message to American innovators: ‘We no longer have your back.’”

• Spending is not the same as cost. This is another statement that won’t be shocking to you all. At the same time, Health Affairs just published a Forefront piece that consistently toggled between the two, making it an unreadable mess. The thesis is that, even after accounting for rebates, increased cost (not greater use) is driving health spending. But with one exception -- a line about per-person spending -- there is almost no effort to connect cost and spending.

• I have no idea what to make of this Gallup poll that found that perceptions of the “quality” of the pharma industry’s “care/services” have dropped 21 percentage points since 2010. My impression is that Americans are generally pretty impressed by the pharmaceutical armamentarium. They just hate paying for them. This poll suggests otherwise. Maybe it’s just that Americans will say nasty stuff about industry now, no matter what the question is. Maybe there’s some other nuance. I’m open to theories. 

• For those sketching out all the avenues where patent-law reformers might explore, here’s a new piece on “skinny labeling.”

• I talked about the National Health Expenditures data last week, but there are always interesting ways to go beyond the headline. Case in point: Adam Fein’s quick math to look at how much the national spending on providers versus drugs and comparing that to the out-of-pocket burden is related to providers versus drugs. No wonder there is so much public ire around drug prices.