The answer to the question ‘Is Inflation Impacting Pharmaceutical Drug Pricing’ is surprisingly, no. “There are two big drivers on drug costs. One is ensuring competition. The price of a drug is greatly impacted by the extent to which there is competition. The second big challenge and one that remains more difficult to address is the initial price of new medications,” said Steven Lucio, Senior Principal of Pharmacy Solutions at Vizient in an interview with PharmaNewsIntelligence.
If there is competition for a drug, especially at initial market entry, inflation does not even come into the pharmaceutical drug pricing calculation. If no competition exists, an annual or biannual price increase is common. These price increases escalate as the product nears patent expiration or loses its exclusivity. The FDA allows exclusivity and patent protection to give drug developers some way to recover their research and development costs. But the best way to guarantee appropriate value pricing is through the development of biosimilar drugs.
Biosimilars are newer versions of FDA approved medicines offered at lower prices. It is believed as biosimilars enter the U.S. market and create more competition, medication will become 15% to 35% cheaper while providing patients with more treatment options. It is believed this biosimilar competition should save patients and healthcare in general nearly $7 billion annually.
Between 2007 and 2018 drug companies increased list prices on prescription drugs by 160%. Americans pay two to four times more than people in other countries for the same medicine. Both Democrats and Republicans have campaigned for years to decrease pharmaceutical drug pricing. In a January 2021 poll 85% of voters said that lowering prescription drug prices should be a top priority for the Biden administration.
In an early version of the Build Back Better Act Democrats wanted to penalize drug makers if they hike prices faster than inflation, but Republicans and the drug industry fought this as government overreach. New Jersey has talked about creating a state board that would study and potentially cap prescription drug prices, but business groups feel this would cause pharmaceutical companies to move to other states. Many feel Pharmacy Benefit Managers have too much control over the prices of prescription drugs creating a non-market, non-competitive driven ripple effect.
There is growing support to allow Medicare to directly negotiate pharmaceutical drug pricing on behalf of beneficiaries. This could save more than $450 billion. New polling shows that 85% of voters, including a majority of Republicans, support giving Medicare the ability to negotiate drug prices.