Drug Prices on the Rise: What Can Physicians Do?

Inflation-adjusted drug prices are up 60% in 10-years, amidst continued pharma profitability.

When I was a resident rotating in the ICU, a 25-year-old came in after a v-fib arrest in the setting of DKA. A known diabetic, he had been rationing his insulin due to the high price of the medication – taking half doses, skipping doses, sometimes going without for days at a time. We restored circulation, but the damage was done. He lived another 7 days.

This is not an unusual story. The price of drugs is a hot button issue for phsyicians, patients, politicians, and insurance companies. Everyone really, except perhaps the one industry that seems to think everything is fine.

Part of the problem in addressing the rise in prices is that we’ve had limited data. Most studies use list prices for drugs and, as physicians we all know the list price ain’t the price.

Enter this study, appearing in JAMA which uses an interesting technique to figure out what’s really going on. Using data from publicly-traded pharmaceutical companies, researchers compared the total sales of a given drug to the total revenue generated from the drug.

Revenue divided by sales? That gives you a good metric for how much pharma is really charging for the drug, after discounts, rebates, coupons and all the other reasons no one pays the list price.

It’s possible, that though list prices have risen steadily, the net price of a drug has remained steady, due to increasing discounts for various payers.  It’s possible, but you didn’t really think that was the case, did you?

From 2007 – 2018, net pricing for drugs increased 4.5% per year, for a total of 60% overall even after adjusting for inflation.

With increased scrutiny on drug pricing, one encouraging stat – net prices were more or less stable over the last three years of that period, reflecting higher discounts in the face of increasing list prices.

Of course some people actually are paying the list price. Those without insurance, or with high-deductible plans may pay those crazy rates before discounts cut into them.

There’s a simple explanation for these price increasse, and it has nothing to do with R&D or marketing. Pharmaceutical companies increase the prices of drugs because they can.   

Price increases vary depending on if there is competition in the market

This is highlighted in this graphic, showing the difference in price increases when drugs are single-source, vs when there is a generic competitor on the market.

Another article in this week’s JAMA demonstrates that this pricing strategy, for pharma, at least, is successful. Profit margins after all expenses for the 35 largest publicly-traded pharmaceutical companies average 13%, making them essentially the most profitable companies in the US.

We don’t want to over-read that data, of course – there is a bit of survivor bias at play. And profit margins integrate revenue and expenses – maybe pharma is great at keeping expenses low. But I doubt that’s the full explanation. And if a drug is priced out of reach for a patient who may benefit, that’s a problem, regardless of who is to blame.

But what can we, as physicians do about the problem? Most of us aren’t pharmaceutical executives or politicians. But we’re not totally powerless. I polled some folks in this area and we came up with a few things regular docs like us can actually do.

1)      Don’t prescribe the new, expensive drug, when an older drug will work just fine

2)      Use generics whenever possible

3)      Ask our health systems to integrate drug price information into the electronic health record – many of us have no idea what the drug will cost the patient until we get a call from their pharmacy telling us they can’t afford it.  

And finally, and probably most importantly, speak up. Patient advocates have been sounding the alarm for years now. Messages coming from physicians may have a higher impact. It’s time to get on board.

This commentary originally appeared on medscape.com.