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Prescription Prices Rise Sharply Despite Discounts, Rebates

Net cost of name-brand drugs jumped 60 percent in last decade

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Tom Werner/Getty Images

It's common for drug manufacturers to offer rebates and discounts to offset the sticker shock of prescription prices. But even those attempts can't mask the reality: Drug prices are on the rise.

List prices for brand-name drugs shot up 159 percent between 2007 and 2018, a study in the Journal of the American Medical Association found — that's 9.1 percent per year. After accounting for rebates and discounts, the net prices of these drugs still soared 60 percent during the same 11-year period, about triple the rate of inflation.

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"This comes as no surprise and is consistent with AARP's own research findings. That is why the time is now for Congress to take action to lower out-of-control drug prices,” says David Certner, legislative counsel at AARP.

Researchers looked at 602 branded drugs in the U.S. and found:

  • The list price for multiple sclerosis medications increased 439 percent between 2007 and 2018, while prices in the economy generally rose 21 percent; the net price for these drugs rose 157 percent.
  • Lipid-lowering agents, used to treat high cholesterol, saw a 278 percent hike in list prices and a 95 percent increase in net prices between 2007 and 2018.
  • Insulin is another drug that cost far more in 2018. Its list price spiked 262 percent, while net prices rose 51 percent.
  • Drug discounts increased from 40 percent to 76 percent in Medicaid, and from 23 percent to 51 percent with other payers, offsetting 62 percent of increases in list prices for drugs.

Though rebates and discounts “may have an important role in offsetting increases in list prices of drugs,” discounting practices have “unintended and unfavorable consequences,” the study's authors wrote.

"We know that often copayments are based on list price, not on the discounted price,” says study corresponding author Inmaculada Hernandez, an assistant professor of pharmacy and therapeutics at the University of Pittsburgh School of Pharmacy.

Uninsured non-elderly patients (who account for nearly 28 million Americans) and those with high-deductible plans are also exposed to list prices, which rose more than seven times as fast as inflation between 2007 and 2018.

"So this widening gap between list [price] and net [price] is exacerbating disparities in access for lifesaving treatments,” Hernandez says, pointing to insulin as an example. The drug's net price dropped between 2015 and 2018, while its list price skyrocketed.

The rising cost of prescription drugs is a main driver behind health care's affordability problem, especially for older Americans. An AARP report found the average annual cost for widely used prescription drugs used to treat chronic conditions was nearly $20,000 in 2017. And prices for widely used prescription drugs consistently increased faster than general inflation every year from 2006 to 2017, according to the AARP Public Policy Institute.

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