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Here's why drug prices are so high (2018)
01:45 - Source: CNN Business
CNN  — 

President Donald Trump and Democratic lawmakers alike are pressuring drug makers to lower prices, but they don’t seem to be listening.

Sixty pharmaceutical companies kicked off 2019 by raising list prices on nearly 300 drugs, according to an analysis by Rx Savings Solutions. And more drug manufacturers are expected to quietly follow suit in coming weeks a delay experts say appears calculated to avoid attracting undue attention from Washington.

“Companies are becoming more savvy about having the administration feel like they have a win,” said Stacie Dusetzina, a health policy researcher at Vanderbilt University.

Trump, who has made controlling drug price increases a priority, continues to insist that he can get drug makers to lower prices. He noted at Wednesday’s Cabinet meeting that the Department of Health & Human Services is “almost ready to make that big final push” to address the issue.

“We’ve done an incredible job,” the President said. “I think you’re gonna see a tremendous reduction in drug prices.”

Administration officials rolled out a 44-page blueprint last May that laid out the President’s vision for increasing competition, reducing regulations and changing incentives for players in the industry.

Much of what the Department of Health & Human Services has done so far consists of putting forward proposals, largely involving what Medicare will pay for medications.

One of the more significant plans would set the reimbursement level for certain drugs administered in doctors’ offices and hospital outpatient centers based on their cost in other countries, which typically pay far less. The so-called International Pricing Index model has already faced blow back from many quarters, including Republican lawmakers.

But so far, most of the efforts have been on the margins.

“The rhetoric they are using is out of scale with their proposals,” said Rachel Sachs, an associate law professor at Washington University who studies drug pricing.

Congressional Democrats plan to hold hearings on high prices and have pledged to pass legislation seeking to make medications more affordable.

Democrats contenders for the 2020 presidential nomination are also trying to make their mark in the health care arena.

Massachusetts Sen. Elizabeth Warren last month proposed having the federal government manufacture certain generic drugs and sell them at a more affordable price.

“The solution here is not to replace markets, but to fix them,” said Warren, who announced her presidential campaign exploratory committee earlier this week. “The Affordable Drug Manufacturing Act will introduce more competition into the prescription drug market, and bring down prices for consumers.”

Few consumers actually pay the full list price of drugs, though many do feel the increases because their payments at the pharmacy are tied to the medications’ list cost. This is particularly true of those who have high-deductible health insurance plans or pay a share of the price rather than a flat co-payment, as well as some on Medicare.

The heightened focus on prices is leading some companies to alter when they announce increases. About one-third fewer drug makers announced hikes on January 1 than a year earlier, and industry observers say that’s likely because they want to scatter them out over time to avoid attention.

Pfizer, for instance, is not on Rx Savings Solutions’ list. That’s because the company announced in November that it would raise prices on 41 drugs, but not until January 15. The manufacturer temporarily walked back hikes last summer after Trump tweeted that it should be “ashamed” for raising prices and taking advantage of the poor.

Last year, there were approximately 2,100 price increases with a median increase of 9%, compared to just under 1,400 hikes with a typical jump of 9.1% a year earlier, according to David Maris, a Wells Fargo Securities analyst, citing pricing data from Wolters Kluwer, an information company.

Companies do appear to be tempering their hikes in 2019, according to Michael Rea, CEO of Rx Savings Solutions, which sells software to employers and insurers to reduce drug costs. The average increase was 6.3%, down from nearly 9% a year ago, taking into account different dosages of the same drug. Many of the hikes were close to 10%, though others were smaller.

Allergan raised prices on 51 drugs on January 1, just over half its portfolio. Some 27 medications saw a 9.5% jump and the rest a 4.9% increase. The company, however, said it does not expect to see any net gains since it is also providing higher rebates and discounts to insurers, pharmacy benefit managers and the government.

“Allergan further expects that the rebates and discounts will be passed on to patients to reduce their out of pocket expenses for these medicines,” said the drug maker, which promised in 2016 to raise prices only once a year and limit the increase to less than 10%.

Teva Pharmaceuticals upped the price of more than a dozen products, many by more than 9%. The company did not return a request for comment.

The drug industry’s trade group called the Rx Savings Solutions analysis “flawed and inaccurate,” saying that it did not take into account that 40% of the medicines’ list prices are given as rebates or discounts. PhRMA cast blame on insurers, pharmacy benefit managers and others for not passing along those savings.

“We need to change the incentives in the supply chain that fuel higher rebates and prices and do more to ensure rebates are used to lower costs for patients at the pharmacy counter,” it said in a statement Wednesday.

Meanwhile, drug makers are continuing to consolidate. Bristol-Myers Squibb announced Thursday a $74 billion deal to buy Celgene, in one of the biggest mergers in pharmaceutical industry history.

CNN’s Augusta Anthony contributed to this report.