Pittsburgh, PA—The high costs of research, development, and marketing is often blamed for exorbitant drug prices. A new study questions that explanation, however.
The report in Health Affairs points out that bringing new drugs to market plays a role in driving up costs but that the price of older drugs is also being steadily increased.
The University of Pittsburgh–led researchers note that, for specialty and generic drugs, new product introductions accounted for most of the rising costs, but existing product price increases were responsible for most of the higher costs for brand-name drugs.
“It makes sense to pay more for new drugs because sometimes new drugs are more effective, safer or treat a new disease you didn’t have a treatment for. Sometimes new drugs do bring more value,” explained lead author Inmaculada Hernandez, PhD, assistant professor at the Pitt School of Pharmacy. “But the high year-over-year increases in costs of existing products do not reflect improved value.”
To reach those conclusions, researchers reviewed the list price of tens of thousands of drug codes from a national database between 2005 and 2016 and UPMC Health Plan pharmacy claims over the same time period. Drugs were defined as new for the first 3 years they were available on the market, or, for generics, the first 3 years after patent expiration.
The study team determined that the price of brand-name oral medications increased by about 9% each year, which was nearly five times the rate of general inflation over the same time period. The price of brand-name injectables, meanwhile, increased by 15%, with existing drugs making up most of the increases, according to the researchers.
One example cited was Lantus brand insulin, which increased by 49% in 2014, even though it had been on the market for more than a decade.
“These types of insulin have been around for a while,” Hernandez pointed out. “Whereas the original patent for Lantus expired in 2015, dozens of secondary patents prevent competition, and it is this lack of competition that allows manufacturers to keep increasing prices much faster than inflation.”
Significant price increases also occurred with specialty drugs, 21% for oral and 13% for injectables, with study authors attributing most of that to new drug introductions. At the same time, they said, the price of generics rose 4% for oral and 7% for injectable formulations.
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The report in Health Affairs points out that bringing new drugs to market plays a role in driving up costs but that the price of older drugs is also being steadily increased.
The University of Pittsburgh–led researchers note that, for specialty and generic drugs, new product introductions accounted for most of the rising costs, but existing product price increases were responsible for most of the higher costs for brand-name drugs.
“It makes sense to pay more for new drugs because sometimes new drugs are more effective, safer or treat a new disease you didn’t have a treatment for. Sometimes new drugs do bring more value,” explained lead author Inmaculada Hernandez, PhD, assistant professor at the Pitt School of Pharmacy. “But the high year-over-year increases in costs of existing products do not reflect improved value.”
To reach those conclusions, researchers reviewed the list price of tens of thousands of drug codes from a national database between 2005 and 2016 and UPMC Health Plan pharmacy claims over the same time period. Drugs were defined as new for the first 3 years they were available on the market, or, for generics, the first 3 years after patent expiration.
The study team determined that the price of brand-name oral medications increased by about 9% each year, which was nearly five times the rate of general inflation over the same time period. The price of brand-name injectables, meanwhile, increased by 15%, with existing drugs making up most of the increases, according to the researchers.
One example cited was Lantus brand insulin, which increased by 49% in 2014, even though it had been on the market for more than a decade.
“These types of insulin have been around for a while,” Hernandez pointed out. “Whereas the original patent for Lantus expired in 2015, dozens of secondary patents prevent competition, and it is this lack of competition that allows manufacturers to keep increasing prices much faster than inflation.”
Significant price increases also occurred with specialty drugs, 21% for oral and 13% for injectables, with study authors attributing most of that to new drug introductions. At the same time, they said, the price of generics rose 4% for oral and 7% for injectable formulations.
« Click here to return to Weekly News Update.
