Prescription drug prices climbed 11% in 2016 -- but there could be a silver lining

The US prices its prescription drugs with a notoriously opaque system.

Although pharmaceutical companies set nominal list prices for drugs, there isn’t a whole lot of guidance into other factors like what discounts are applied and what cut the many players in the supply chain take that affect the actual amount of money paid by consumers.

As a result of those opaquely applied discounts, list prices can grow at a startlingly different rate than actual pharmaceutical spending.

To shed some light on how those discounts play out, Express Scripts, one of the three major pharmacy benefits managers in the US, said in a report Monday that for its clients, spending on prescription drugs was up 3.8% in 2016, far lower than growth in average list prices, which were up about 11%.

That’s below the 5.2% spending increase in 2015, the company reported, suggesting that even as list prices climb upward, spending growth is slowing. As a pharmacy benefits manager (PBM), Express Scripts is responsible for negotiating rebates based on the list prices of medications, with the intent of passing those rebates on to patients.

Increasing drug prices have hit people with high-deductible health plans especially hard, since they are often on the hook for paying what can be as much as the list price of the prescription. President Donald Trump has criticised drug prices, calling the growth in spending “astronomical.”

While Express Scripts’ report adds some colour to how much Americans are paying for prescription drugs, there’s still a lot we don’t know about the rebates drug companies provide for specific drugs. Those rebates are kept secret for competitive reasons, though some companies are starting to share average values for them.

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