By Jonathan D. Rockoff
The $1,000-a-day price of a new hepatitis C pill has put more
attention on the rising cost of drugs.
Yet the hefty price tags of new medicines like Sovaldi from
Gilead Sciences Inc., weren't the only culprit in higher drug
costs, according to drug-industry analysts. Price increases on
older drugs played a big part, too--and the costs are expected to
keep soaring.
Brand-name drug prices surged 14% in the 12 months through the
end of the third quarter in 2014, adding $32 billion to drug
spending, said Elliot Wilbur, a Needham & Co. analyst. Generic
drugs, which are supposed to be an instrument for cutting drug
spending, have also increased.
"If anything, 2015 list prices will grow more quickly than in
2014," said Richard Evans, a former drug-industry pricing official
now an analyst at SSR Health LLC.
Drug companies say they are being unfairly criticized on prices.
Medicines account for only a 10th of overall health-care spending
in the U.S., and drug treatments save on larger expenses like liver
transplants, said Robert Zirkelbach, a spokesman for the industry's
trade group, the Pharmaceutical Research and Manufacturers of
America.
A big reason for the drug-price inflation, analysts say: Health
insurers and pharmacy-benefit managers have lacked the wherewithal
to stop it. Their tools tend to be blunt instruments such as
raising copays, which drug companies have been able to counteract
by offering subsidies to many patients.
The payers are trying. Express Scripts Holding Co., the largest
manager of drug benefits in the U.S., moved in late December to
restrict access to Gilead's hepatitis C drugs after negotiating a
discount for a rival regimen from AbbVie Inc.
Yet such steps are only possible when there is competition,
which is often not the case. And in some previous instances, drug
companies still found ways to raise prices, Mr. Evans said.
The payers may gain more leverage eventually, at least for
generic drugs. Big drug distributors and pharmacies--such as
Amerisource Bergen Corp., Walgreen Co. and Alliance Boots
GmbH--have been linking up to use their combined drug-buying volume
to press for lower prices.
But it will probably be harder to stop doctors and patients from
sticking with brand-name drugs whose prices are boosted, especially
if patients are doing well on a medicine.
The trajectory of Sovaldi in 2014 illustrated the generally
favorable pricing climate for drug companies. Doctors and patients
flocked to the cure, making it the best-selling launch of a new
drug with $8.55 billion in sales during the first nine months of
2014.
Prescriptions for a new Gilead hepatitis C pill, Harvoni,
suggest a similarly strong launch into 2015, though the Express
Scripts move will limit some sales. Harvoni's price-tag for a
typical patient treated for 12 weeks: $94,500.
Write to Jonathan D. Rockoff at jonathan.rockoff@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires