Even as Prescription Drug Volume Stagnates, Prices Soar.
Total US spending on prescription drugs in 2015, at the manufacturers’ level and as measured by “invoice pricing,” jumped by 12.2% to $424.8 billion, after having already soared 14.2% in 2014! A two-year increase of 28%!
So you’d think we’d get some results for all this moolah. But no.
Life expectancy in the US, at 78.7 years at birth, ranks between 34th and 52nd place globally, depending on who does the counting, wedged somewhere between Bahrain and Cuba, and about 5 years below the top. Among US states, life expectancy ranges from 81.3 years in Hawaii or 80.8 years in California to 74.9 years in Mississippi. It’s bad. But we handed Big Pharma a ballooning amount of money to get there.
This $424.8 billion in prescription drug spending at “invoice pricing” isn’t based on what Americans or their health insurers pay. According to IMS Health, which released the report, it reflects invoice pricing by drug companies to distributors. It includes neither price concessions by drug companies nor the “mark-ups and additional costs” before these drugs get to patients.
Another metric is “net price spending.” It’s based on the same wholesale prices but after “rebates, off-invoice discounts, and other price concessions made by manufacturers to distributors, health plans, and intermediaries.” And it jumped by 8.5% to $309.5 billion.
And then there’s what IMS Health calls “average patient cost exposure,” which is what Americans pay, including copays and deductibles. We’ll get to that in a moment.
Spending on “protected brands” – protected by patents – increased by $28.3 billion at “invoice pricing.” A tiny fraction ($2.7 billion) was due to volume growth. The rest ($25.6 billion) was due to price increases.
Prices of protected brands jumped 12.4% on an invoice basis in 2015, after years of rampant and mostly double-digit price increases, amounting to a cumulative five-year surge of 72%:
But apparently these price increases hit some resistance because an “estimated” $20-22 billion were “given back” in form of price concessions, for a net $4-6 billion in price increases. IMS Health “estimated” the price increases after price concession at about 2.8%, after a 5.1% increase in 2014. IMS Health:
This reflects the heightened competition among manufacturers and more aggressive efforts by health plans and pharmacy benefit managers to limit price growth.
The irony: as Big Pharma is trying to impose monster price increases on patent-protected drugs, resistance is building up on the other side: hence, bigger invoice-price increases have led to bigger price concessions.
Spending on drugs that IMS Health defines as “specialty medicines” has doubled over the past five years to $150.8 billion wholesale at invoice pricing and soared 21.5% in 2015 alone. On a net price basis, spending on these drugs jumped 15% in 2015 to $121 billion.
They account for 70% of the growth in total prescription drug spending over the five-year period. They’re in the categories of Oncology, Autoimmune, Viral Hepatitis, Multiple Sclerosis, HIV, Antivirals, and Other Specialty. And they now make up 36% of prescription drug spending, up from 24% five years ago.
Spending on the top five prescription drugs in the US, at wholesale invoice pricing, reached $43.6 billion:
But here’s the thing: the total number of prescriptions written edged up a mere 1.0% to 4.37 billion. About in line with population growth. So it’s not like Americans are taking more medications! Or that they can afford to take more medications!
They’re just paying more. IMS Health on “average patient cost exposure”:
The average patient cost exposure for a brand prescription filled through a commercial plan has increased by more than 25% since 2010, reaching $44 per prescription in 2015. Rising use of health plans with pharmacy deductibles, co-payments, and co-insurance is contributing to this rise. The average patient cost exposure for generics, however, has remained at approximately $8 since 2010
Across all commercial pharmacy claims, about 40% of the patients are exposed to more than $50 per brand prescription. For many, the “cost exposure” is far higher.
And the future according to IMS Health?
More price increases. More spending increases. Nirvana for Big Pharma. By 2020, spending on prescription drugs at wholesale on an invoice price basis “will reach” $610 billion to $640 billion, with “steady mid-single digit growth” every year. That would be “a 46% increase in spending over the next five years, growing at a faster rate than the past five….”
Now, this is good for GDP. The US economy is bogged down. It needs some growth. Prescription drug sales are a big and growing part of the economy. There are few sectors that are booming like this.
Even if volume stagnates, like right now, price increases see to it that dollar sales continue to soar. This is good for corporate sales and earnings. They’ve been shrinking in the aggregate, and they need some help. And it’s good for the Fed because it can claim that with these price increases, it has accomplished the unique feat of beating back the evil monster of low inflation or whatever. It’s good for India and China where most of these medicines are manufactured. It’s good for everyone. Even if regular Americans cannot afford it. And even if it wrecks the rest of the economy.
Where would the economy have been without the boom in prescription-drug prices? Total business sales would have been a lot lower. They’ve already dropped to the worst level since 2012, inventories have soared to Financial Crisis levels, and the labor market is next. Read… Why This Economy Is Now Running Aground
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They have a good scam going. It’s like enemy action on the community. Teaming up with vested interests in the food sector and it’s resultant epidemics of obesity and related syndromes, there’s no end to to the “wealth creation” they can create.
It’s also very difficult to rein in. Impervious to criticism and regulation it marches on.
One wonders if there is a causal relation between increased spending on expensive (and often dangerous) drugs and medical procedures and decreasing life expectancy. It wouldn’t surprise me, but you won’t read about it in the major medical publications as no one benefits from such studies.
Also, reading about the latest super-expensive drugs my impression is that most of them have a benefit that is hardly better than placebo (which means that in reality because of yet unrecognized side-effects etc. the balance is probably negative).
See “VAXXED” and the movie “TRACE AMOUNTS”
Wonder how this ends, revolt of some kind?
Good luck!
It ends with an arbitrator dividing your estate between a drug company and a student loan servicer.
While I was reading this article, the tv news reported 4 pharmacies in my area were broken into overnight. Now every drug is going to become a street drug.
Most of the drugs my ill wife takes is already a street drug.. When we lived in AZ we could cross the border at Algodones, Mex. and pay far less for the same American made drug.. We all know the pharmacies in Mexico were making a profit but what is now happening here is nothing but extortion. We can change this and if we don’t then the shame is all ours..
“what is now happening here is nothing but extortion.”
Your money or your life. Choose wisely or they send Guido and Alphonse to advise you.
“Now, this is good for GDP. The US economy is bogged down. It needs some growth. Prescription drug sales are a big and growing part of the economy. There are few sectors that are booming like this.”
It would seem that insurance companies are adversely effected by this madness and many who have minimal insurance will be using discretionary spending to buy ‘over-priced’ drugs. And insurance premiums rising sap more consumer spending.
You’ve fallen into the economist’s trap Wolf. So what if there’s more spending on something that’s overpriced?
Are people better off because of such a mis-allocation?
So what if GDP goes up because people start buying diamonds or artwork or cheeseburgers at a $1000 a pop with hard earned cash?
GDP is largely worthless as it does not consider inequality or out-right insanity.
It’s the plutocrat’s best friend.
I think you missed the cynicism in this statement
:-]
I was going to day sarcasm?
Re: GDP – a few quarters ago, maybe 3 years- the UK narrowly missed a technical recession. The reason- it was a cold winter and fuel bills were just enough to push GDP positive.
So avoiding recessions is easy- just leave the windows open. Or build a pyramid.
Or to continue in Wolf’s sarcastic theme- we can also increase GDP if we ban exercise, encourage smoking and obesity through sugar and high blood pressure with salt. The spending for the ‘cure’ or should I say management of these conditions will far exceed the trivial cost of the sugar etc. and the GDP will benefit.
Drug companies have a very successful business model.
Create a disease. Invent a drug that cures that disease then develop a test that finds the disease.
Then create a market by putting fear into even the healthiest of people to have the test to guarantee that they don’t have the disease.
Rinse and repeat.
Wrong. Invent disease and treat it. Never cure, because that would kill the cash cow.
So, autism is a feature, not a bug?
To the possible benefit of the room..
Search: curcumin, research, cancer, and the famous cancer hospital in houston,
Then BCM-95. Amazon
My .02 worth.
Whenever Vitamins (I am not speaking of herbal supplements) look like they will be regulated like drugs, all us vitamin-takers write en masse to their congress people. Please don’t help us.
I want off this rock! ……………………………..Stat
I live 50 miles from the Mexican border, and have 16 more months until I’m on Medicare.
You can guess where I buy my brand-name blood pressure medication, and it ain’t here in the USA. I get it for 1/3 the US price by going across the border.
What’s interesting is that when I reach Medicare age, the co-pay for the name-brand medication will drop to less than what I currently pay in Mexico.
Are US drug prices a scam? You bet!
It isn’t just a US problem, in Europe the cost of prescription drug spending surged at similar rate lately.
Although some non-prescription drugs are very cheap over here, a big chunk of the health-care budget goes to extremely expensive (over $100.000 per year) prescription drugs for e.g. cancer and some ‘auto-immune’ type diseases. If I remember correctly, over 90% of the total budget – all ‘free’ for the patient because of health-care insurance – is spent on just 1% of the patients. Patient groups feel entitled to any drug that is available, whatever the benefit and the cost – so they strongly pressure politics to approve ever bigger budgets for new patented specialty drugs.
But resistance is mounting, both from citizens who get angry about the yearly increases in mandatory insurance, and from hospitals who see that a small group of extremely expensive drugs is taking an ever bigger bite out of their budget, causing declining services elsewhere.
And who controls those prescription drugs that are causing European drug costs to skyrocket? A handful of the same Big Pharma criminal corporations that extort Americans.
Waterboard the top 100 executives in each, then imprison them for life, break up the extortion rings, and make all their patents generic. Publicly fund universities and research institutes to develop new drugs, and require that all new drugs remain un-patented and available to all.
İ am an American expat living in Turkey and get my blood pressure medicine for around 4 USD a month Sure couldnt do that in the states Big pharma is taking US residents to the cleaners No doubt about it
Expat living in Africa….European/American drug companies have special import deals, drugs are 25% of the price as N.America, locally produced name brands/generics are even cheaper.
For anyone suffering in N. America, it’s worth it to fly to a place like India to get discounted drugs.
By their inaction regarding this extortion plot our own government is a co-conspirator. The Mafia would be truly jealous of this scheme that bilks the U.S. population of billions of dollars annually.
The Real Mafia went Legit (sort of) decades ago.
Who do you think runs the big pharma and the like scams????
Only Mobsters with their excellent Jewish accountants and Lawyers, could put something like that together, and make American politicians allow it.
I have a sinking feeling that this is but one more method of livestock management adopted by Neoliberal Globalist for thinning the herd; they’re eliminating the poor, the weak and the sick who are no longer profitable to maintain.
Sell over priced drugs to govt subsidized buyers. Hmm, sounds like a scam.
Like a mafia racket.
The doctors are complicit as well They get kickbacks and gifts from the drug companies in order to push their overpriced drugs when very often a much less expensive older drug or generic will do the same job at a much lower cost its a scam and i learned that after seeing a cardiologist in İstanbul who couldnt believe what my MD in the states was perscribing for me at 85USD a month and promptly gave me a equal drug for 4 USD a month
Check out what people put in their carts when shopping.
It is heart breaking!!!
An overall healthy lifestyle will knock out a lot of those money making, destructive issues.
Most of the bread alone in the USA is wrong to eat.
regarding statement: “Life expectancy in the US, at 78.7 years at birth, ranks between 34th and 52nd place globally, depending on who does the counting, wedged somewhere between Bahrain and Cuba, and about 5 years below the top.”
Pretty close to Mexico at 77.14 years (2012)
Life expectancy in Canada 81.24 years (2012) (Single Payer health system and controlled drug costs, otherwise castigated as socilaized medicine by Michael)…lower drug costs due to bulk purchases and ability of Provincial Health Plans to substitute generic if patient and doctor agrees. If Canadians would increase activity levels and lose weight this would also improve ranking.
http://www.infoplease.com/world/statistics/life-expectancy-country.html
Canada is at # 18
Mexico is at # 95
US is at # 43
Of interest:
http://www.slate.com/articles/health_and_science/map_of_the_week/2012/07/map_of_soda_consumption_americans_drink_more_than_anyone_else_.html
“If any country has a soda problem, it’s the United States. Our thirst for soda is so great that public-health advocates want to tax it and New York City wants to limit serving sizes. Americans are the biggest cola cravers in the world, by a long shot. The average American buys a whopping 170 liters of soda in the course of a year. That’s 16 percent more than the next biggest soda consumers, Mexicans. Of course, where soda is unpopular, people may indulge in other beverages, such as tea, juice, and beer.”
(Actually, recent stats indicate US pop consumption has dropped to #3 behind Mexico and Chile). But, it’s up there.
Correlation?
Having experienced both US and Canadian health care systems, I liked the Canadian one better. It worked well. The US system is dysfunctional imo.
Could someone please explain the justification for much higher drug in the US than overseas
Don’t forget that they are allowed to advertise their drugs on television here which also drives up our costs. These companies take us to the cleaners right and left.
Growing up, the big TV advertisers were beer and cigarette companies. You didn’t see Rx drugs advertised at all, just over the counter remedies for headaches, colds and the like. Now Rx drugs ads are ubiquitous and they are sold like beer and cigarettes once were. The smiling cancer patient, the fashion model with psoriasis, a golf foursome bragging about their blood thinner.
Then there are the law firms. Yep, Arnold Palmer’s ‘Plavix’ might be the greatest thing since ‘Geritol’ cured you of “iron poor blood” but you didn’t see law firms trolling for clients to sue Geritol to get their hands on a $650 million settlement like ‘Plavix’ has had to set up!
For what its worth, Walmart has a prescription drug service that offers a variety of medications for a flat fee of $10 a month. This includes one drug that I take daily for a serious but manageable condition which has quintupled in price at my local drug store during the past few years and now costs just under $1000 per month. A list of the drugs covered can be found on Walmart’s website.
Living well is the best defense.
Don’t think of yourself as an abused and exploited patient. Think of yourself as collateral damage. They do.
People die for the sake of corporate profits every day. Don’t take it personally. It’s only business.
In a sordid slime harmonious Greed was born in yonder ditch,
With a longing in his bosom and for other’s goods an itch.
As Christ died to make men holy let men die to make us rich!
Lo Greed is marching on!
“The problem of human pathological pain should not be underestimated. Currently available drugs for treating pain were developed under the assumption that neurones were the only cell type involved in the dysregulation of pain. These drugs fail to control pathological pain [34]. Even a ‘good’ drug for controlling pathological pain is one that leaves three to four of every five pain patients with no pain relief [148, 149]. The remaining patients generally receive partial relief at best. This is an abysmal profile.” from Journal of Internal Medicine article, 2005 -And then there are the side effects such as immunosuppression.
Just how good is the health care system really?
“Just how good is the health care system really?”
The purpose of a corporation is to maximize shareholder value, and the profits of the Medical-Industrial Complex are outstanding. “Health care” does not appear in the equation.
Nobody will argue with me about this.
I will argue with you about this. The purpose of a corporation is not to maximize shareholder value, and not profits either. Who’s point of view is essential? Looking into the matter, it is upper management and the board who are important, not shareholders. Shareholders have virtually no power to remove management that they disagree with. Management sheds risk onto shareholders. Management is maximizing value for themselves, not shareholders.
What management and boards want is revenues, to pay themselves with. They don’t care about shareholders, except as lip service.
Look at the real GAAP PE Wolf published for the Russel 2000. Maximizing profits??????
And health care does appear in the equation, because, customers are paying for health care. If corporations don’t deliver, customers can walk. Corporations are not delivering, and I know it. The more the public finds out about it, corporations will have revenue troubles. You can see for yourself a post on this board from someone that went oversees for health care service. The fact that the public has other options means that health care really does appear in the equation. I’ve seen various discussions by health professionals, saying that they are leaving the country for service.
It was a post by Crazy Cooter, it’s on another thread.
Thanks for taking the bait. Also for explaining that the operation of many companies amounts to sheer piracy.
All the world is prey, n’est-ce pas?
And I forgot, maximizing shareholder value is simply a slogan, cover for financial engineering like debt for stock buybacks, that is destroying shareholder value, while management is paying itself unwarranted bonuses, pay for performance. Anyone not finding out about the finance system, health care and many other things, are prey.
As is written in some economics books, production is for profit, not for use. While this to me doesn’t cover everything, it explains some types of management, and some parts of health care.
Question for those who understand the corporate world better than I: CEOs, encumbering position on the boards of other public companies… all mutually supporting each other to ratchet up the multiple of executive pay over labor to the highest in the world… is this the font, the genesis, the core of our oligarchy and its pervasive corruption? Am I missing a more significant component?
When i look back on my former diet while living in the US i realize how much healthier i am here in turkey great organic veggies fresh squeezed orange and pomegranate juices and fresh caught fish everyday and the cost is less than half the US Did i mention the avocados i pick them from the trees on my walk to the beach every morning And NO GMOs
Probably the US is the only country that allows direct marketing of drugs to consumers. The cost of marketing and the part of profits directed to buy this legislature should account for at least some of the cost increases. The other part is doctors prescribing the latest and most expensive medication in case they are sued by the patients. BTW, where is the legal industry dependent on suing the health industry accounted for in the overall GDP?
I rarely mention a product, but the book “Eat to Live” will tell you why we’re all sick and how to cure yourself through eating a plant-based diet with room for 10% of meats etc. if you want them. It’s pretty simple – eat fruits and veggies and be well. You will also naturally go to your optimal weight w/o dieting. It takes awhile to retrain your taste buds to not want sugars and fats, but after awhile, you’ll try to eat something from the standard American diet and it will taste like crap, which is generally is.
The US has a badly improvised system that mixes some socialized elements ( Medicare, ins for government employees) with unregulated price gouging and extortion. Any real reform would involve some regulation of pricing, which already exists in Medicare. The public is taught to think that socialized medicine/price controls=communism=death=godless atheism, even though probably 35-40% of US residents already have some form of socialized medicine (VA, military retirees, Medicare, most current gov employees). Essentially you have health care 2nd class citizens who are in line for unlimited price gouging. In effect this health care apartheid subsidizes massive profits for the many health care rackets.
Big Pharma need to follow the money which has gone over to the emerging market locations. America’s well has gone dry. The jobs have been shipped out. The vampire is trying to draw more blood out of a drained body.
We raise most of our own food.
Garden fruit trees & livestock, chickens
&sheep, drink no sodas, do not touch flouride toothpaste. Try to eat only healthy. Never had to darken a dr’s office for close to 20 years…now dealing with a problem of which there are only 2 drugs in the world that treats it …one costs $400 for 30 day supply… the other costs $4,700 for 54 pills!! Can’t tolerate the 1st…can’t afford the second….
İm planning to do the same thing starting this fall in Turkey LF and İm sorry to hear about your medical situation and the cost quandry you find yourself in Big pharma is evil İMO God bless
I’m sorry to hear about your troubles. However, I would like to point out to those that think doing all the right things always leads to the right outcome, that this is another example of it not being true.
As for you LF, take whatever money you have and get on a plane. If you can’t make it to a foreign country with subsidized medicine, than try a US city with a lot of illegal immigrants. Use a fake name and go to the emergency room, tell them you are here illegally from South Africa and watch what happens. You will get anything you need! No kidding!
Has it occurred to anyone that US health care is more expensive at least in part due to the fact that we subsidize the low cost of medication everywhere else with our high domestic prices?
That was a tactic used by Britain in the 19th century to get China more addicted to opium. Britain fought wars to protect their nasty though lucrative narcotics trade and ultimately had to withdraw, as did millions of Chinese who were none too pleased.
Drug pushers have a long and very unsavory history. No wonder corporatists went in for it. Given their profits from drugs of abuse alone one has to credit their marketing, not to mention their control over regulators.
Pundits agree: you don’t have nearly enough prescriptions. Nobody does.
I was aware that this is the case, although I don’t know why it needs to stay that way.
The US textbook business is also the same. The books here cost hundreds and you can buy them in India for 90% less. US college students are subsidizing education worldwide.
Michael Gorback no i doubt that İ believe its just that Americans allow the big corporations to run roughshod over them and buy off our socalled public servants and isnt that one reason why Trump is resonating so well with so many voters?
Best government money can buy:
http://www.ncpssm.org/EntitledtoKnow/entryid/2061/negotiating-for-lower-drug-costs-in-medicare-part-d
Small wonder some voters aren’t enamored with the status quo.
Wow! Vote for Putin-Putin: Human Evolution Under Threat By Big Pharma, GMO, Vaccines
The Western government-controlled people are an “intensively vaccinated borderline autistic fat man slumped in front of a screen battling a high-fructose corn syrup comedown”, claims Putin who says that Russians “must be protected … at all costs”.
Posted on January 9, 2016 by Baxter Dmitry in Weird // 78 Comments
Putin Says That Russia Rejects Western GMO, Big Pharma, Vaccines
A report prepared by the Security Council (SCRF) circulating in the Kremlin today states that President Putin has issued orders that his people must be protected from GMO “food” and Western pharmaceuticals “at all costs.”