Pitt Researchers Find Cost Of Brand-Name Medications Increasing Faster Than Inflation

Jan 14, 2019

A new study from University of Pittsburgh researchers finds the price of brand-name medications is growing five times faster than the rate of inflation.

Researchers examined list prices for FDA-approved medications from 2005 and 2016. 

Lead author Inmaculada Hernandez, a Pitt assistant professor who specializes in pharmaceutical economics, said these steep increases stem from a lack of competition.

“Pharmaceutical manufacturers realize our health care system is very fragmented, and payers don’t have, in many cases, much leverage,” she said. “So, they take advantage of that.”

Hernandez said since there are not often enough generics to force costs down, government regulations are needed to cap annual price increases. While some might argue this would hinder innovation, she points to the fact that inflation is also affecting older medications.

“In some cases, they present [price] increases in the double digits,” said Hernandez. “If a drug has been around for 12 years, research and development should probably be already covered.”

A spokesperson for the Pharmaceutical Research and Manufacturers of America said via email that the study’s analysis is flawed. That’s in part because researchers didn’t factor in rebates and discounts.

“These rebates and discounts exceeded $150 billion in 2017 alone and grow every year,” said the spokesperson. “However, these savings are often not shared with patients whose out-of-pocket costs continue to soar.”

Hernandez agreed not factoring rebates is a shortcoming of the study. But said it's “virtually impossible” to find that information since it’s confidentially negotiated between manufacturers, insurance companies and pharmacies through an intermediary, called a pharmacy benefit manager.

“It’s not reasonable to expect research with that type of data because it’s not available,” she said. “We are as thorough as possible.”

To fully appreciate the how a lack of competition drives drug prices, data on these confidential agreements is needed.

The study was published in the journal Health Affairs.

WESA receives funding from the University of Pittsburgh.