Decoding Big Pharma’s Secret Drug

Pricing Practices
Robert Langreth, Michael Keller and Christopher Cannon
Bloomberg © 2016
0 pages
[@]
Report: getab.li/27643

Rating Take-Aways

8
9 Importance • List prices for name-brand drugs don’t reflect the adjusted prices health care providers
pay.
9 Innovation
7 Style • Discounts for health care providers change over time as costs rise and as individual
drugs face more or less competition.

• In an analysis of 39 medications, 30 drugs increased in price “more than double the rate
  of inflation from 2009 to 2015.”
Focus • Between 2009 and 2015, the list prices for many drugs far outpaced the discounts
available.
Leadership & Management
Strategy • In certain instances, companies have been able to shrink discounts, even as they raised
Sales & Marketing
prices for a drug.
Finance
Human Resources
IT, Production & Logistics
Career & Self-Development
Small Business
Economics & Politics
Industries
Global Business
Concepts & Trends

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getabstract

getabstract
Review
getabstract
Given that the list prices for brand-name medications don’t reflect the negotiated prices insurers pay drug
manufacturers, how can Americans get a true sense of the cost increases of drugs over time? Bloomberg reporters
Robert Langreth, Michael Keller and Christopher Cannon attempt to answer this question via statistical analysis of
drug price increases between 2009 and 2015. In the course of their research, the authors examine the degree to which
price increases track with discounts and inflation. getAbstract recommends their findings to consumers and those
working in the health care industry.
getabstract
getabstract

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Summary
getabstract
Drug manufacturers raise the prices of their brand-name products year after year. That said,
most Americans understand that the list prices for name-brand drugs can differ vastly from
the adjusted prices which health care providers negotiate. Given the disparity between list
prices and paid prices – and pharmaceutical companies’ reluctance to make the details of
getabstract
“Health insurance their pricing practices public – how can you calculate the actual cost of brand-name drugs
companies buy over time?
prescription drugs the
way US consumers
buy cars: There’s the Bloomberg researchers used data on drug discounts provided by investment research firm
sticker price (which
few people actually
SSR Health to analyze the negotiated prices of 39 medicines “with global sales of more than
pay) and there’s the $1 billion a year” between 2009 and 2015. This data allowed Bloomberg to ascertain how
negotiated price.” rising drug prices track with rebates, discounts and general inflation. The overall results
getabstract
of the study show not only that drug price increases have far exceeded inflation rates, but
also, that discounts haven’t kept pace. Specifically, while discounts increased on average
by around 17% between 2009 and 2015, of the 39 drugs examined by Bloomberg, 27 “had
discounted prices that rose at rates of 25% or more” during this time period.

Discounts to health care providers change over time as costs rise and as drugs face more or
less competition. The drug Humalog, for example, has several competitors, necessitating
that Humalog’s manufacturer Eli Lilly & Co. keep discounts high and at pace with price
getabstract increases. Drugs with less competition, however, don’t need to provide discounts that track
“Discounts vary
dramatically, depending with price increases. Take, for example, the rheumatoid arthritis drug Humira; between
on disease type and 2009 and 2015, Humira’s list price increased 127%. After discounts, Humira’s price
how much competition
exists.”
increase went up 111%. By comparison, inflation raised overall prices by 9.5% during
getabstract this period.

In many cases, companies with little competition have shrunken discounts, even as they
raised prices for a drug. In certain instances – Amgen’s drug Enbrel for example – discounts
didn’t even keep pace with inflation. From 2009 to 2015, Enbrel’s list price increased by
140%, while its discounted price rose 142%.
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About the Authors
getabstract
Robert Langreth is a science and health reporter, Michael Keller is an interactive news reporter, and Christopher
Cannon is a data journalist and graphic designer for Bloomberg.

Decoding Big Pharma’s Secret Drug Pricing Practices                                                                                                                                   getAbstract © 2016 2 of 2
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