Analyzing 2023 Drug List Price Increases by Pharmaceutical Companies

February 28, 2023 - In January of this year, 46brooklyn, an Ohio-based nonprofit focusing on drug pricing data in the United States, revealed its annual drug pricing data report for 2023. The organization uses and analyzes proprietary data to help shed light on drug price increases and trends in pharmaceutical prices. The data collected by 46brooklyn uses information on drug list prices, measured as wholesale acquisition cost (WAC) in January of 2023.

PharmaNewsIntelligence talked to Antonio Ciaccia, CEO of 46brooklyn Research, to discuss the organization’s report on drug list prices and how that will impact patients.

How it Works

46brooklyn collects data from a combination of publicly available and proprietary sources. According to Ciaccia, the organization has a license for Elsevier's Gold Standard Drug Database, which it uses to collect data on drug prices. He notes that the nonprofit has some limitations on what data it can provide due to licensing, but it does its best to ensure that it gives the maximum information allowed.

“Elsevier allows us some latitude to the degree with which we can derive data without giving away their proprietary compendia source. So, we're not giving points A and B, but we're giving the change between points A and B,” explained Ciaccia.

January Trends: Number of Increases

Historic data generated by this company and others note that the pharmaceutical industry raises the most significant number of drug list prices in January. The report notes that over 60% of the list price increases annually are in the first month of the year.

“We're seeing a higher amount of price increases this year than we've seen in previous ones. January of this year has had more price increases than we saw in all of 2018,” said Ciaccia.

According to the report, by the first week of January 2023, there were already 452 drug list price increases, with a net 450 increases when accounting for the two drugs that saw reduced list prices. Although this is higher than typical trends, it is lower than the number of increases in January of the last two years.

The data shows that between 2015 and 2020, the annual number of drug price increases declined. However, in 2021, there were more elevated prices than in the previous year. That trend has continued to the present. While this data is helpful, it only quantifies how many individual increases there are, ignoring the magnitude of the rise and the impact on patients.

However, Ciaccia notes that just because brands have not raised their prices yet doesn’t mean they won’t be raising prices throughout the rest of the year.

“Approximately 71% of all the drugs that Medicaid bought have already had a price change. Based on prior trends, we should expect that number to go up, but not by much, which shows how significant January is relative to other months regarding price increase activity,” he stated.

Magnitude of Increases

As the report notes — and as Ciaccia mentioned in his interview with PharmaNewsIntelligence —knowing the number of increases does little to give a complete picture of drug price trends in the US.

“We always talk about drug pricing as if it's a black box, and it is. So all we can do is move a flashlight around that black box as much as we can to understand better what might be happening inside it,” he explained.

For a better understanding of drug price trends, 46brooklyn reported on the median percent increase of WAC price and the weighted average percent increase of the WAC price based on Medicaid utilization.

Median Percentage WAC

Between 2014 and 2016, the median WAC percentage increase was nearly 10%; however, the numbers have decreased in recent years.

Ciaccia notes that although there have been changes in absolute prices, the median change since 2019 has mostly stayed the same, hovering around a median 5% increase. The median for 2023 is 5%, slightly higher than 4.8% and 4.9% in 2021 and 2022, respectively.

Weighted Average Percentage WAC

While providing additional information, the median percentage WAC increase only shows the middle point of drug price increases. It is crucial to look at the weighted average of increases to gauge the impact of increases.

“46brooklyn overlays that Medicaid utilization data to the actual price increase information, and then we can see the weighted average impact of all those brand drug list price increases,” explained Ciaccia.

For drugs that reported a price change, the weighted average WAC percentage in the first month of 2023 was 5.4%. In comparison, the 2022 and 2021 percentages were 5.6% and 5.0%, respectively.

Beyond looking at the weighted average increase for drugs with an increase in list prices, 46brooklyn looked at all medicines.

“If we want to learn what's happening with brand drug prices, we are doing a disservice to the discourse by only focusing on the drugs that increased and leaving the other ones off by the wayside,” said Ciaccia.

Looking at all drugs, the 2023 weighted average WAC percent increase was slightly lower than the average for drugs that reported a price change, which was 3.9%. As a reference point, the average weighted percent increases in 2021 and 2022 were 3.6% and 4.5%, respectively.

Looking at the magnitude of changes, it is clear that this year’s trends are similar to the previous two years.

Ciaccia clarifies that this discussion is focused on the list prices of drugs; however, this is rarely the price that healthcare facilities and patients pay for these medications. He explains that discussing list prices without acknowledging discounts and other regulations, such as the Inflation Reduction Act, causes people to miss critical parts of the narrative.

Inflation Reduction Act

The report by 46brooklyn also examines how the Inflation Reduction Act (IRA) has impacted drug pricing and what it means moving forward.

“The Inflation Reduction Act ended the Trump rebate rule, which would have essentially eliminated the anti-kickback exemption for drug makers and PBMs to engage in pay-to-play. So that means that the status quo of allowing competition to inflate the prices of drugs to create larger and larger rebates and concessions will continue to be the field of play,” explained Ciaccia.

According to an article by the Kaiser Family Foundation (KFF), the IRA does a few different things for drug pricing, including the following:

• penalize drug companies that increase prices of drugs used by Medicare beneficiaries faster than inflation by requiring them to pay rebates
• place caps on insulin copays and out-of-pocket costs
• delay implementation of the Trump administration’s drug rebate rule
• expand benefits
• negotiate drug prices for Medicare parts B and D

Impact on Pharmaceutical Industry

Ciaccia explained that the act’s impact on drug pricing and price increases might be widespread. He notes, “in an era of high inflation, which we are in right now, drug makers who don’t have a great idea of what their future might look like from a policy and an inflation perspective may be incentivized to push their foot on the gas more than they otherwise would since essentially the cap of how high they could raise their prices is at an abnormally high point.”

In addition to impacting the strategies of many drug makers when it comes to price increases, the IRA may also alter the trends in drug development based on patent exclusivity and negotiations.

“It creates differential triggers for when negotiation can occur. For small molecule products, it's nine years after patent exclusivity lapses. And for complex biologics, it's 13 years,” explained Ciaccia. “So, think of it from a drug maker's perspective. Suppose I'm being told that my drugs might be subject to negotiation in 9 years versus 13 years, depending on the type of product I'm bringing to market. In that case, any financial incentive I had to bring more small-molecule drugs to market will be minimized. I will have a magnetic pull toward those complex biologics, and we’ll have an additional 4 years to soak money out of the system.”

As the year progresses, payers, providers, and patients will continue to monitor pharmaceutical prices in the US and analyze how the changes impact overall healthcare access and spending.