Rising out-of-pocket drug costs linked to increase in brand-name prices

Rising out-of-pocket drug costs for consumers are linked with increases in charges for brand-name drugs, a new study has found. File Photo by Billie Jean Shaw/UPI
Rising out-of-pocket drug costs for consumers are linked with increases in charges for brand-name drugs, a new study has found. File Photo by Billie Jean Shaw/UPI

May 4 (UPI) -- When drug manufacturers raise prices for brand-name prescription medications, consumers see a corresponding increase in out-of-pocket costs above and beyond their insurance co-pays, an analysis published Tuesday by JAMA Network Open found.

Increasing the "list price" of a brand-name drug by 17% rose the "net price" -- the cost after co-pays, rebates or discounts -- by more than 5%, the data showed.


This, in turn, elevated the out-of-pocket costs paid by consumers, or charges after those paid by Medicare, Medicaid or private insurance, by nearly 4%, the researchers said.

These increases affected more than 50% of consumers, who saw their out-of-pocket costs for medications increase by an average of roughly 15% between 2015 and 2017.

"Drug manufacturers have long argued that rising list prices for their drugs are not meaningful or important, because they are offset by ... rebates," study co-author Dr. Benjamin Rome told UPI in an email.

"But we show that patients are not benefiting from these rebates [and] one in four report that high out-of-pocket costs prevent them from taking their prescription drugs as prescribed," said Rome, an internal medicine specialist and instructor at Harvard Medical School in Boston.


For this study, Rome and his colleagues analyzed pricing trends for 79 highly prescribed brand-name prescription medications over a three-year period.

Fourteen percent of the drugs included in the analysis were used in cancer treatment, while 11% each were antimicrobial agents and medications for diabetes. Heart and gastrointestinal medications each accounted for 10% of the drugs included.

Average revenue per drug earned by the manufacturers increased to about $400 million in 2017, up from roughly $330 million in 2015, the data showed.

List prices for a 30-day supply of the drugs increased, on average, to about $390 in 2017, from roughly $330 in 2015.

About 54% of consumers were affected by these increases, and they saw their out-of-pocket costs increase by an average of roughly 15% over the three-year period.

Among these patients, there was no evidence that manufacturer rebates offset out-of-pocket expenses, according to the researchers.

While researchers said rising out-of-pocket costs paid by consumers could be offset by allowing for the substitution of generic products where available, this is not always possible.

However, in 2018, the most recent year for which data is available, people in the United States spent $476 billion on prescription drugs, with 80% of those costs associated with brand-name products, according to recent studies.


"Generic drugs are often much less expensive than their brand-name counterparts, and this can be reflected in lower out-of-pocket costs," Rome said.

"[But] new drugs in the U.S. are granted monopoly periods that typically last 12 to 17 years, [and] it's during this monopoly period that drug companies tend to raise list prices each year, which can lead to higher and higher out-of-pocket costs for patients," he said.

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