Pharmaceutical Industry Prepares for Price Changes as Biden's Administration Sets to Lower Drug Costs
Anticipating the Biden Administration's move to lower drug costs, major drugmakers such as Pfizer, Sanofi, and Takeda Pharmaceutical are set to increase prices on over 500 unique drugs in the United States come January. This analysis is based on data provided by healthcare research firm 3 Axis Advisors.
The impending price hikes coincide with the pharmaceutical industry's preparations for the publication of significantly discounted prices for ten high-cost drugs in September. Additionally, drug manufacturers continue to grapple with rising inflation and manufacturing costs.
President Joe Biden's Inflation Reduction Act (IRA) will grant the government's Medicare health program the authority to directly negotiate drug prices starting in 2026. Concerns are also mounting over potential disruptions to supply chains due to prolonged conflicts in the Middle East, which could force shippers to reroute or halt traffic on the world's main East-West trade route, the Red Sea.
In January, GlaxoSmithKline and two other companies are expected to lower prices on at least 15 unique drugs. This comes after several companies had already announced price decreases for insulins earlier this year to avoid penalties under the American Rescue Plan Act in 2021.
According to the law, drug companies are required to rebate the Medicaid program if medicine price increases surpass inflation. In fact, starting January 2024, these rebates could even exceed the actual net cost of the drug, potentially impacting former blockbuster insulins significantly, as noted by 3 Axis Advisors President, Antonio Ciaccia.
It's important to note that the announced changes in drug prices are based on list prices, which do not account for rebates to pharmacy benefit managers and other discounts. As of now, drugmakers have not responded to requests for comment regarding these price adjustments.
Drugmakers have generally limited increases to 10% or below, following industry practices adopted after facing criticism for excessive price hikes in recent years. Even with high inflation rates, drugmakers have not accelerated price increases for products already on the market. This trend has remained consistent over the last five years, defying expectations based on inflation and concerns surrounding the U.S. drug price negotiation plan in the IRA, according to Antonio Ciaccia.
Data from 46brooklyn, a drug pricing non-profit organization associated with 3 Axis Advisors, reveals that median price increases have averaged around 5% since 2019. For the second consecutive year, Pfizer leads the pack with the highest number of price increases planned for January. They will raise prices on 124 unique drug brands and apply additional increases to 22 brands under their Hospira arm.
Baxalta, owned by Takeda, follows with 53 planned price increases, while Belgian drugmaker UCB Pharma intends to raise prices on 40 unique drugs. Sanofi, despite pledging to cut prices on most prescribed insulin products for 2024, will raise prices on typhoid fever, rabies, and yellow fever vaccines by 9% in January.
More drug price announcements are expected throughout January, historically the month when drugmakers make the most price adjustments. In 2023, drugmakers increased prices on 1,425 drugs, slightly lower than the 1,460 drugs in 2022, as reported by 46brooklyn.
While drugmakers have scaled back price increases for established drugs, newly launched drugs have reached record levels of pricing. In 2022, the price of newly launched drugs surpassed $220,000, up from around $180,000 in the first half of 2021, indicating a more than 20% increase. This aligns with a study published by JAMA, which demonstrates a 20% annual growth in U.S. drug launch prices between 2008 and 2021.
News Agencies