Drug Cost Inflation Continues to Grow at a Rapid Pace

Drug costs have been at the forefront of the conversation in pharmacies, providers’ offices, and even during the most recent presidential election. With an increased awareness of costs, patients and advocacy groups are calling for reduced drug prices.

Some members of Congress have investigated manufacturers whose drugs have skyrocketed in price. Other lawmakers have introduced pieces of legislation to increase the transparency of drug costs and various pharmaceutical stakeholders to ensure that consumers are paying fair prices.

The Truveris National Drug Index (NDI) recently released a report that found the prices for branded, specialty, and generic drugs increased 8.77% in 2016.

This trend represents the fourth consecutive year that drug cost inflation has remained more than 8%, according to the report. Over the past 3 years, the authors found that drug costs have increased an average of 9.98% annually.

The Truveris NDI is a weighted price index, which measures the average price of prescription drugs in the United States, while the Consumer Price Index (CPI) — maintained by the US Department of Labor – measures the average change in the costs of products.

For 2016, the CPI reports an increase of 2.10%, which means that drug costs skyrocketed 318% more than other products, according to the report. In addition to outpacing other products, prescription drugs are also outpacing overall inflation at 2.33%.

The authors discovered that prescription drugs overall increased by 8.77% in 2016. This trend was largely driven by the 12.92% price increase in branded drugs alone.

Specialty drugs have largely become known for their high costs. Curative drugs used to treat hepatitis C virus and cancer can cost thousands of dollars per treatment, placing a financial strain on the patient and the health care system.

The report found that specialty drugs are increasing at slightly over half the rate of branded drugs. In 2016, specialty drugs only increased by 7.93%; however, the high initial cost of the drugs should be accounted for when comparing price increases.

In 2016, generic drugs increased only 0.32%, according to the report. This small increase backs up payer initiatives to increase the utilization of the drugs for cost-containment.

“This continued trend reflects a growing concern about the affordability of prescriptions,” said AJ Loiacono, co-founder and chief innovation officer of Truveris. “The actual inflation of drug prices is softened by insurance carriers and benefit managers who report overall trends. The underlying price inflation is masked by rebates, reduced compound dispensing, and lower utilization of hepatitis C drugs. Actual drug price inflation hurts the patient the most, especially individuals with high deductibles, coinsurance or no insurance at all.”