I know what you have read. Drug prices are soaring. In a number of important drug classes that is true. Insulin is the most egregious example. Away from the headlines, however, pharmaceutical prices have been dropping for years. Most of those price drops are for generic drugs which have been the beneficiary of cheap imports. Of course, most drugs consumed are generics.
Naturally, margin compression from cheap imports sent pharmaceutical/biopharma/biotech into products with deep moats for like those for oncology and ophthalmology, which almost always have had eye-popping launch prices. The conflicting, confusing, and counterproductive incentives for Pharmacy Benefit Managers, especially with respect to manufacturer rebates has created an environment where the negotiated price for a generic drug (and hence the one tied to cost-sharing) is higher than than the pharmacy's cash price.
The result is a public perception that obscures the reality that CPI for pharmaceuticals has been down and to the right.
In September, things reversed a bit with prices up 77bp on a MoM%. On a YoY basis, things improved from (2.72%) in August to (1.60%) in September. Could it be transitory? It was in April. Of course in April, the combined impacts of widespread Delta variant infections; the slow roll-out of vaccinations around the world; the limited efficacy of certain vaccine products, especially in Asia and Africa; and the accumulating mortality had not quite yet presented themselves.
Perhaps it will pass. Trends suggest otherwise but let's see what October turns up.
Emily Evans
Managing Director – Health Policy
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