Price Of Brand-Name Drugs Has Increased 3X Faster Than Inflation

Mar 25, 2020

A new study from the University of Pittsburgh shows that over the past decade, brand-name drug prices rose three times faster than the rate of inflation, even after factoring in discounts.

When questioned about the high cost of pharmaceuticals, drug manufacturers often argue that the discounts they offer to insurance companies and consumers are not taken into account. But Pitt pharmacy researchers found that the discounts haven’t kept up with the rate of inflation.

“We are showing really where the money's flowing,” said Inmaculada Hernandez, the study’s lead author.

Manufacturers often offer discounts, though the amounts of which are generally not publicly shared or readily available. Researchers preformed their analysis with aggregate data that compared sales reports of publicly-traded pharmaceutical companies to the units of medications sold in the U.S.

Hernandez said what’s concerning about her findings is that discounts are often paid directly to insurers. This means people who are uninsured, or under insured, generally don’t benefit for the markdowns, so the costs are even higher.

“This is probably increasing disparities in health care access, because the patients that probably have the most access barriers are the ones that are exposed,” she said. “We are not doing a good job of protecting patients against increases in co-pays, out-of-pocket costs and certainly those that don’t have insurance.”

The study found a variation in price increases among different medications. For example, drugs that treat multiple sclerosis, and some high-cholesterol medications saw the greatest increases.

An emailed statement from the Pharmaceutical Research and Manufacturers of America, a trade group representing the pharmaceutical industry pointed out that generic medications can cost significantly less than brand-name drugs, which was the study's focus.

The group also said, "We agree that the status quo isn’t working for patients...We need to advance policies to fix these misaligned incentives in the supply chain to lower costs for patients.” 

The study was published this month in the journal JAMA.

WESA receives funding from Pitt.