While the headlines of the year tend to focus on the fact that some pharmaceutical companies are raising their list prices, something not often discussed in those articles – and certainly not mentioned in the headlines – is that those same companies are also offering larger discounts on their drugs. The overall affect of the increased prices and increased discounts is lower overall drug prices, according to the Wall Street Journal.
In January 2019, Novartis AG announced that its own net prices fell in 2018 and would continue to fall in 2019. Novartis Chief Executive Vas Narasimhan said he expects the company’s net prices to decline by a low-single-digit percentage this year. “We continue to see the need for increased rebates, particularly in the U.S., across our portfolio,” said Dr. Narasimhan. “Almost every medicine has some level of rebating.”
Pfizer executives alluded to a similar sentiment on a telephone call with analysts earlier this year, noting that they are expecting flat net pricing in the United States in 2019.
Allergan PLC and Sanofi SA have also released similar statements, either not expecting any rise in net prices this year, or even falling prices for their products.
Part of the reason behind the decrease could be that even though the companies are raising their list prices, the political pressure is strong to limit those increases. Not only is the political pressure strong to keep prices low, there is competition and pressure for the companies to offer larger discounts to middlemen who manage prescriptions for health plans, in an effort to win favorable treatment of their own drugs. These two pressures, when combined, tend to result in lower drug prices at the cash register for patients.
PhRMA on Rebates
In response to the recently proposed rule by the Trump Administration to reform the rebate system, Stephen J. Ubl, president and CEO of Pharmaceutical Research & Manufacturers of America (PhRMA), released the following statement.
“We applaud the Administration for taking steps to reform the rebate system to lower patients’ out-of-pocket costs. Our current health care system results in patients often paying cost-sharing based on the list price, regardless of the discount their insurer receives. We need to ensure that the $150 billion in negotiated rebates and discounts are used to lower costs for patients at the pharmacy. This proposal would also fix the misaligned incentives in the system that currently result in insurers and pharmacy benefit managers (PBMs) favoring medicines with high list prices. These types of reforms will especially help patients with chronic diseases, such as diabetes patients who rely on insulin, who are often not benefitting from significant rebates and discounts.”