Why is it so difficult to figure out drug pricing, and what is forecast to happen with drug pricing in 2023? Smith Hanley offers our interpretation.
The median wholesale acquisition cost (WAC) for brand drugs jumped 5% by mid-January 2023. According to early data from 46brooklyn Research manufacturers have raised prices on about 450 medications. This is predicted to be about 25% of the price increases in 2023. This is actually a slower rate than in 2022. Formularywatch.com reports that the weighted overall average WAC drug pricing in 2023 based on Medicaid utilization is 1.3% compared with a 5.1% increase in 2022.
Antonio Ciaccia, CEO of 46brooklyn said, “The ambiguity of the actual costs of medicines is what enables the entire drug distribution channel to harvest hidden markups on prescription drug claims at the expense of plan sponsors, taxpayers and patients. This opacity further obfuscates our ability to determine the actual value a medicine provides. The inability to objectively determine what a fair price should be for the products and services offered by drug channel participants hinders the ability for true market forces to pressure margins and promote quality and efficiency as we seek to balance drug accessibility with affordability.”
A Pfizer spokesperson went on to say, “For the past four years, our net prices – the prices we actually receive for our medications – have fallen due to higher rebates and discounts paid to insurance companies and pharmacy benefit managers. Any increase in patient costs is likely the result of increased cost-sharing, through co-insurance or deductibles, or increased use. Pfizer is dedicated to growing through expanded use of our medicines, not price increases.”
FTC Inquiry into PBMs
This sentiment is probably one of the things driving the FTC’s expanding focus on the role of Pharmacy Benefit Managers (PBMs) and manufacturer rebating practices that include rebate agreements concerning drug formulary coverage. Do these violate antitrust laws? On June 7, 2022 the FTC announced an inquiry into the PBM industry. They have concerns about the use of clawbacks, steering patients to PBM-affiliated pharmacies, administrative restrictions on coverage and the effect of manufacturer rebates on formulary design and drug costs.
Medicare Price Negotiations
The August 2022 Inflation Reduction Act (IRA) allows the Department of Health and Human services (HHS) to “negotiate” drug prices on a narrow set of innovator products that have been approved for the last seven years for small-molecule drugs or eleven years for biologics under Medicare Part B and D. HHS can also impose civil fines and an excise tax of up to 95% for noncompliance. Manufacturers believe this will curb innovation and have plans to challenge it. The drug selections begin in 2023 with prices set to become effective in 2026…so look for legal action by manufacturers soon.
