As the federal government seeks to rein in drug prices, pharmaceutical companies this year have been raising prices on hundreds of name-brand drugs.
An analysis by the drug research firm 46brooklyn Research found that companies increased prices on 910 branded drugs in January, although the median increase was 4.7% – the lowest drug inflation rate in more than a decade, the analysis shows.
January is a pivotal month for consumers because more than half of annual drug price hikes in the past five years have launched during the first month of the year. Consumers – many buckling under the weight of inflation that’s sent rent and groceries prices higher the past three years – must figure out how to fit higher drug costs into their household budgets for the rest of the year.
But pharmaceutical companies seem to be limiting cost hikes as they navigate price guardrails under two new federal laws. Under the Inflation Reduction Act, drug companies must pay Medicare a rebate if they increase certain prices above the rate of inflation. The law also empowers Medicare to negotiate prices on a select number of drugs.
Another federal law, the 2021 American Rescue Plan Act, might have a more immediate impact on prices. Drug companies this year could be forced to pay Medicaid rebates that in some cases exceed the amount they collect from the drug sales.
Older Americans who rely on these Medicare-negotiated drugs will soon get a financial break, a point Xavier Becerra, the U.S. Secretary of Health and Human Services, emphasized last week when he referred to the drug price negotiations as “historic.”
“Americans pay far too much for prescription drugs, many struggle to pay for their medication as a result,” Becerra said. “There are families throughout America who make real sacrifices to afford their medications.”
About 8 in 10 adults say the cost of prescription drugs is unreasonable, according to a July 2023 survey by KFF, a nonprofit focused on health policy. The survey found about 3 in 10 adults had trouble affording their medications.
While this year’s smaller median price increases might lessen some consumers’ worries about affordability, the amount people pay will depend on their insurance coverage, drug coupons and complex rebates often hidden from public view.
Drug pricing experts say the new federal laws are likely forcing drug companies to think twice before implementing large price hikes. Indeed, 46brooklyn analysis suggests drug companies are making smaller increases. Some have opted to slash prices rather than pay lucrative Medicaid rebates.
“The manufacturers have every reason to change the way they do business,” said Antonio Ciaccia, president of 46brooklyn.
Which drug prices are increasing?
Pharma companies have announced price hikes of 10% or more on a dozen drugs and an additional two dozen-plus raised their prices by 9.9% in January.
Many of these pricey new drugs are fairly obscure – they’re certainly not household names.
Hill Dermaceuticals had the largest price hike, increasing the price for Tolak topical cream, used to treat skin lesions, by 33%. The Italian drugmaker Chiesi also hiked the price of Ferriprox – used to reduce iron in patients with sickle cell disease and anemia who get blood transfusions – by 21% for an oral solution and 13% for a tablet.
A new class of weight loss drugs, known as GLP-1 receptors, will also see price hikes as demand from patients skyrockets.
Novo Nordisk, which makes the diabetes drugs Ozempic and Rybelsus, increased the price of these medications by 3.5%. Eli Lilly’s Mounjaro, also a GLP-1 weight loss drug used for diabetes, jumped 4.5%.
Drugmakers hike prices on drugs slated for Medicare negotiation
For the first time, the federal government is allowed to negotiate drug prices for Medicare enrollees, the federal health program for older adults.
Biden administration will bargain on prices for 10 widely prescribed drugs to treat heart disease, diabetes and autoimmune conditions. On Thursday, HHS officials made initial offers to the makers of these 10 drugs, kicking off months of negotiations with drug companies. New prices for the 10 drugs will be made public by Sept. 1, and the negotiated prices will take effect in January 2026.
Over the next two years, an additional 30 drugs will be selected for negotiated prices beginning in 2027 and 2028.
According to the latest data, most of the drugs tapped by Medicare for negotiations, are squeezing in price hikes before negotiations begin. Pharma companies announced price increases for eight of the 10 drugs selected for Medicare negotiations. Those price hikes ranged from a 6% increase from Bristol Myers Squibb and Pfizer for the blood thinner Eliquis to a 3% bump for the diabetes medications Jardiance and Farxiga. Other drugs with modest…
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