2022 Drug Price Increases
- Brand: 509 brand drugs have increased by an average of 5.0%
- Generic: 8 generic drugs have increased by an average of 4.2%
- Total: 517 drugs in total have increased by an average of 5.0%
*Price increases are based on the list price, which is the official drug price set by the manufacturer. Updated on 1/4/2022
Show Me the Data
We’ve got the list of medications, excluding over-the-counter products, here in the Resources section: CLICK HERE
That Time of Year
While many people are ringing in the New Year with resolutions, pharmaceutical companies welcome January with price increases. This year is no different.
As we look at the early data, it appears that the average price increase is 5%. Considering recent inflation data in the United States, this number won’t set off a flurry of complaints except for those in the full anti-pharma social set that find the negativity in any headline.
Pfizer is observed to be most active with changes showcasing an average of a 4% increase across 97 products.
The good news, Biogen’s Adulhelm hasn’t appeared yet, probably because of their recent massive decrease in pricing bringing 2021’s most talked-about product launch pricing from $56,000 per year to $28,200. Someone check the employment status of the pricing and forecasting teams; needless to say, their annual performance reviews will be an interesting read at minimum.
Of note, Bristol Myers Squibb product price changes, if any, are not captured as of this writing.
Obvious and Unavoidable
We cannot have any level of discussion about pricing without being conscious of the public perspective on drug pricing in general. Senior biotech and pharmaceutical executives need to keep this in mind as they shape their comments about the value of both their companies and brands, especially as we enter into the JP Morgan Healthcare Conference and the earnings season.
While it is impressive to see the financial statements of many pharmaceutical companies where the Cost of Goods Sold (COGS) can often be a small single-digit percentage of revenues, it can leave the layperson in shock. Consider the many news articles that point to this when talking about the dollars the industry makes when a product finally makes it to market. Selling, General, and Administrative expenses (SGA) and Research and Development (R&D) are typically very high resulting in a limited number of companies actually being profitable.
What is most often discussed by the pharmaceutical lobby is the cost of product development and the massive risk associated with bringing a medication to market. As we review many of the press releases outlining a failed product, we rarely read the estimates of the dollars lost as the research program gets shuttered. With the numerous disappointing readouts in the last few months, we couldn’t find a biopharma company disclosing the investment loss when they shared the bad news.
Vote for Votes
Staying on the topic of drug pricing, the industry needs to appreciate the discussion momentum in the marketplace. Politicians, regardless of party, universally agree that some elements of drug pricing, think insulin, is worth reigning in. Since politicians “vote for votes”, you can count on this subject being bull-horned throughout the election season later this year.
Like most industries, a few bad actors take the shine off the good work by the many. That said, there are many companies that have engaged in several substantial increases over time that add up to dramatically big numbers over the lifecycle of the brand.
An increasingly referenced report on this came out in November 2021 from The Institute for Clinical and Economic Review (ICER). ICER’s report is a worthwhile read if you are leading any function of a biopharmaceutical company. It does bring forward much of the evidence that will be referenced from those looking to shape a narrative, potentially punitive, around the escalation of drug pricing. The PDF report is found on ICER’s website: HERE
Price to Value
The fallback phrase in pharma and biotech when justifying their drug cost, “price to value”. There is a case to be made when valuing a therapeutic intervention that can dramatically extend and improve patients’ lives. For example, gene therapies have some clinicians and patients calling them cures. Adding years, avoiding surgical interventions, and the like have tangible value to the system. This reasonable calculus goes into the price modeling and may have substantial merit.
But then there’s the voodoo math. That’s when the consulting firms come in and present ranges of pricing that lay on a bed of good calculations but are often massaged to figure out what the market might bear. You know that the executive team is self-soothing their pricing when they talk about, “price to value”. Like most presentations that are not compelling, this one usually requires so much context and explanation that no one intuitively understands or believes the message.
About the author
Frank F. Dolan is the Founder and CEO of ARSENAL ADVISORS. He is a twenty-year veteran of the biopharmaceutical industry having served as a charter member of the commercial leadership teams at Takeda, Amylin Pharmaceuticals, and Acadia Pharmaceuticals. To learn more about ARSENAL ADVISORS please visit www.arsenal-advisors.com