It’s that time of the year again – January is the most prominent time for drug companies to increase list prices of their medications.
With a global pandemic, rising inflation, and continued political pressures, drug pricing will undoubtedly remain a big focus in 2022. This underscores the need for biopharmaceutical companies to be able to clearly communicate the factors behind the price of their medicines to avoid negative scrutiny from policymakers and media that could lead to reputational harm.
Drug price increases this year vs. last:
- Drug companies appear to be keeping increases in check this January at a time when the industry is under broad scrutiny.
- Thus far as of January 20, 765 drugs have increased in price by an average of 5.0%.
- 734 brand drugs increased by an average of 4.8%.
- 19 generic drugs increased by an average of 12.6%.
- Among the first 554 increases disclosed this year, nearly 25% exceeded the inflation ratefor the 12-month period that ended in November.
- In 2021, price increased by an average of 4.6% with 832 drugs – the greatest number of drugs in recent history.
Why this matters:
- Sustained increases keep drug pricing in the news and political pressure high to address rising prices via reforms in the proposed Build Back Better Act, including Medicare direct pricing negotiation, inflation penalties, Part D out-of-pocket spending caps, and the removal of the Orphan Drug Tax Credit (ODTC).
- At the state-level, this attention continues to fuel calls for drug price transparency laws that have already been adopted in 12 states.
- Drug pricing watchdogs continue to add pressure through analysis, commentary, and public reports targeting unsupported price increases (UPI).
- Patients and advocacy groups calling for price reductions are not afraid to exercise influence to impact change over affordability.
What can life science companies do:
Manufacturers can continue to develop and refine the value story for their medicines to substantiate pricing. More specifically:
- Companies that have made promises on price increase limits will need to rethink their approach as caps are introduced for certain products.
- Pricing and access philosophies need to revisit those promises in the context of the new (or proposed) rules and consider whether they are indeed meaningful now.
- Companies with therapies at the cusp of approval need to consider pricing and access in this new context – and rethink their commercial access programs accordingly.
- Industry leaders wanting to be on the forefront of meeting policymaker demands may want to consider transparency measures now and not wait until they are required to do so. If they are already trailblazing on this front, they may want to subtly remind stakeholders that they have always been championing patient access and price transparency.
The Syneos Health Reputation & Risk Management team has successfully guided numerous biopharmaceutical companies on how to contextualize and communicate the price and value of their medicines to a broad array of external stakeholders (including those that, importantly, influence policy decisions). To learn more, please reach out to ReputationRiskManagementPractice@syneoshealth.com.