The Rebate System Spikes Drug Prices, Scripps Study Confirms

Price Increases

As concerns over the price of prescription medicine continue to make headlines as the country barrels toward another election, a new study from the Scripps Research bolsters an argument touted by the pharmaceutical industry over the rebate system.

For years, the industry has pointed out the rebate system, which is often secretive and lacks transparency, has caused a spike in prescription drug prices. A study released by Scripps Research confirms that argument. According to the study, which was published in JAMA Open Network, there was a median increase of 76% for drug prices between January 2012 and December 2017. That number was reached following an analysis of tens of millions of insurance claims for the top 49 branded drugs in the United States, Pharmaphorum reported. The report found “continual, marked, annual increases” in drug prices.

Results of the study showed that for 36 drugs that were available for the entire period of the study, 78% of those saw an increase in both insurer and out-of-pocket costs of more than 50%. Of those, 44% saw prices more than double, the report shows. The researchers from Scripps Research said the primary reason for the increase in costs was the rebate system, which “incentivizes high list prices for drugs and relies heavily on privately-negotiated rebates to pharmacies.” The researchers further noted that the current rebate system is “byzantine and secretive” and doesn’t’ provide customers with the necessary information to make the best decisions when purchasing medication.

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The report is likely to add fuel to the fire for those who are calling for an end to the rebate system, including President Donald Trump and Secretary of Health and Human Services Alex Azar, a former executive with Eli Lilly. In February, Azar floated a proposal that would encourage drug manufacturers to pass discounts directly to patients instead of insurers and pharmacy benefits managers. The proposal has received support from both Pharmaceutical Research and Manufacturers of America (PhRMA) and Biotechnology Innovation Organization (BIO), as well as executives from leading pharma companies, such as Novartis and Merck & Co. Novartis Chief Executive Officer Vas Narasimhan said if those rebates are passed directly on to patients, they will pay less in out-of-pocket expenses.

To conduct its study, the Scripps Researchers used prescription data available from Blue Cross and Blue Shield that included claims from more than 35 million Americans, Pharmaphorum noted.

While the research does land on the side of the pharma industry arguments, the researchers did raise some concerns over the “close coordination” of price increases for medications that can be prescribed interchangeably, Pharmaphorum said. Specifically, the study looked at insulins and TNF inhibitors like AbbVie’s Humira and Amgen’s Enbrel. The study pointed out that both drugs have increased costs at a similar pace. For example, Humira, which generated about $20 billion in revenue for AbbVie last year, saw increased from $1,940 in January 2012, to $4,338 by December 2017, the report said.

Questions of collusion among drugmakers have been raised in the halls of Congress, and are also the subject of a federal investigation. The investigation is focused on regular meetings allegedly held between representatives of 16 different pharma companies to discuss pricing of more than 300 different drugs.

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