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US drug prices rise over 4% in 2021 reversing multi-year trend of slowed growth

Usually in January, every year, a large number of pharmaceutical companies update product prices - a trend that often receives public attention in the media, for better or for worse. We examined US branded drug prices last year in more detail around that time using our IHS Markit POLI database. We found that the average annual list price increases were dropping steadily over the past few years, even without factoring in any additional rebates and discounts. This year we looked again and have found that we may be seeing this trend slowly reverse, as the average annual price increase in January 2021 jumped 4.24% compared to a 3.39% increase the year before.

A much larger proportion of branded drugs saw price increases between January 2020 and January 2021 (60.6%) compared to the year before (48.0%). This was by no means a full rebound however, as it still falls short of the average price increase in 2017-2018 of 6.92% y/y, as well as the proportion of branded drugs with price increases that year (71.9%). Of the drugs that saw price increases over the past year, the majority (46.3%) were under 10%, with around 150 drugs (12.3%) recording prices increases of 10% or higher. This suggested that both the number and proportion of drugs with 10% or greater price increases had swelled nearly 3-fold in January 2021 relative to January 2020.

Breakdown of annual WAC price changes 2020 and 2021

The case of outliers and pandemic drugs

We decided to have a closer look at the full manufacturer pricing history for the drug with the most pronounced 230% price hike in January 2021 compared to the previous year - Jaguar Health (US)'s anti-diarrhea drug Mytesi (Crofelemer). Mytesi's substantial price increase in May 2020 seems to have been made a few days after the company submitted an emergency use authorization for use of its drug to treat diarrhea in COVID-19 patients. This has prompted an investigation by the House Oversight and Reform committee as well as New York's Department of Financial Services newly formed Office of Pharmacy Benefits (OPB). There is currently no evidence that the price increase of Mytesi was unlawful or unjustified, however the investigations could lead to referral of the case to "legal authorities", according to the New York Governor's statement.

Manufacturer price for Mytesi 2016-2021 price change

A new era… a new challenge

The proportion of drugs with 10% or higher drug price increases has swelled in January 2021. However, outliers continue to highlight the dangers associated with a free-pricing system. It is often these outliers that are featured in political/advocacy campaigns to lower or control drug prices in the US, as we saw happening for Mytesi. Worryingly these outliers serve to speed up the introduction of reforms to an often self-regulating system that ebbs and flows based on various market dynamics - including public perception as we have seen happen between 2017 and today. At the peak of elevated public scrutiny during the Trump administration, and without the introduction of any legislative or administrative drug pricing policies, the pharmaceutical industry seemed to collectively slow down price increases.

We determined in our report last year that much of the ongoing criticism targeted against the pharmaceutical industry in recent years was in fact misplaced. Particularly given that there was clear evidence of rebates significantly increasing even as drug list price increases were slowing down suggesting net prices were in fact declining. We also found that favorable steps were already being taken towards improving access to affordable treatments as major firms had pledged to keep price increases within self-imposed limits and have largely distanced themselves from firms that have attempted to boost profits with predatory pricing. In fact, a recent analysis we conducted found that prices for important drugs being used off-label for COVID-19, such as azithromycin, ciclosporin, clonazepam, and dexamethasone actually dropped in the US on average between February 2020 and June 2020. the only exception was one version of dexamethasone that realized a price increase during that time. The US findings which contrast with significant price increases for the same drugs in places like the United Arab Emirates (UAE) and Canada, highlight the impact of political pressure and public scrutiny on the pricing strategy in the US. This was likely further amplified by the public health crisis during the pandemic.

President Biden is not anticipated to shy away from attempting to introduce pharmaceutical pricing and reimbursement reforms to help lower drug costs for consumers. However he recently delayed implementation of Part D rebate reforms that would have disproportionately impacted PBMs and insurers and will likely be reviewing all of the previous administration's pricing and reimbursement reforms including the Most Favored Nation (MFN) rule. Biden generally supports allowing Medicare to directly negotiate drug prices, the reimportation of drugs from Canada, introduction of international reference pricing (IRP) to prevent excessive pricing, and capping price increases to inflation rates among other measures to control drug spending. It will be very challenging for President Biden's administration to push through any major pricing reforms without bipartisan support. Right now his priorities are also expected to focus on ending the pandemic - but healthcare reform is anticipated to follow, it is only a matter of time.

Posted 08 February 2021 by Floriane Reinaud, Director, Healthcare Research and Analysis, IHS Markit and

Margaret Labban, Ph.D., Life Sciences Senior Analyst

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