Drug spending in U.S. tops the world. Translation: No pricing-headache relief soon

Print 25 July 2017
Beth Snyder Bulik / FiercePharmaMarketing

What will it take for pharma to get the drug-pricing monkey off its back? A research report this month laid out the pricing landscape, tensions and problems pharma companies face. At the top of the list? The unrivaled access U.S. patients enjoy comes at a cost.

Annual per capita spending on prescription drugs in the U.S. is $1,112, about one-third higher than neighboring Canada, which ranked second in the world at $772 spent per person every year. Germany ($741), France ($646) and Spain ($547) rounded out the top five in per capita drug spending, according to a report from Datamonitor Healthcare.

And there's little sign of a slowdown. The price of branded prescription drugs in the U.S., at invoice level, increased at double-digit rates from 2012 to 2015. The hike was more than 9% in 2016, according to the report.

With so many variables, a clear and simple—or imminent—solution to drug pricing is unlikely. Along with the tradeoff between access to the latest medications and their cost, the pricing quagmire covers the current administration’s still-in-the-works plan, expensive breakthrough drug launches, the ongoing rebate debate, still-rising price hikes on existing medicines, and patients’ broader exposure to drug prices through increased deductibles and copays.

Even though debate has gone very public in recent years, pricing in the U.S. is an old issue. Datamonitor calls it “a familiar problem that never went away.” The cost of drugs was a hot political topic in the ‘90s and early 2000s; some 45 bills were introduced in Congress in 2003-2004 alone. Pricing woes lessened after drug spending slowed down during the patent cliff, when cheaper generics flooded the market.

But the issue came roaring back in 2013 after ground-breaking new drugs and price hikes on existing ones drove spending higher—and as pricing scandals broke one after another, from Turing Pharmaceuticals and Martin Shkreli's enormous Daraprim price rise to Valeant's repeated buy-and-hike moves to Mylan's EpiPen debacle and beyond.

Industry consultant Bob Ehrlich last week echoed the likelihood of persistent pricing problems, thanks to the potential demise of the Trumpcare health bill. On his blog DTC Perspectives, Ehrlich wrote that the blame for healthcare costs are now likely to fall on “everyone’s favorite scapegoat, the drugmakers. We all know that healthcare costs would be dramatically lower (not) if only those drug profiteers sold their lifesaving medicines just a bit above cost.

"Most in Congress know that is not true," he went on, "but so what. It sounds good and will get lots of support for Medicare price negotiation, reimportation, shorter patent life, and restricting those pesky DTC ads which are believed to be a main driver of health costs. We all know DTC has the hypnotic power to convince gullible doctors to prescribe whatever patients request.”

Indeed, Democrats started the week with a new "Better Deal" economic plan designed to reclaim the title of little-guy champion. Among its headline provisions? Moves against higher drug prices, including Medicare price negotiation.

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