We've heard plenty of anecdotal reports about expensive drugs, from the long-running brouhaha over Gilead Sciences' ($GILD) hepatitis C drugs to the consternation about pricey new cancer meds. Big price increases? Yes, indeed. Just check out Jazz Pharmaceuticals' ($JAZZ) serial price hikes on the wakefulness drug Xyrem.
But occasionally, there's a broader view--and not surprisingly, that shows some impressive price inflation, too.
According to a new report from analysts at Credit Suisse, drug prices increased by more than 12% during the second quarter, looking at year-over-year inflation. Sequentially, from the first quarter to the second, prices went up by 230 basis points--and that was the highest such increase for a second quarter since the firm started tracking the numbers.
"We are noting a continued acceleration in the pace and magnitude of year-over-year and quarter-over-quarter branded-drug price inflation," analysts Glen Santangelo, Jeffrey Bailin and Tyler Harris wrote in a Barron's blog post.
Plus, the increases aren't limited to a few outlier drugs making big leaps upward. Out of the top 140 drugs the analysts track, almost one-third saw a price increase during the second quarter. That's another record for the period.
Comparing last year to this, the overall increase has been bigger so far, too. The exact increase in the first quarter was 12.3%, and in the second quarter, 12.1%. That's an average of 12.2% for the first half. For all of 2014, the average increase was 11.5%.
Who's doing the most, markup-wise? Among the companies selling the top drugs in the U.S.--those with at least 6 products in that group--Eli Lilly ($LLY) and Pfizer ($PFE) topped everyone else for price hikes, at 17.6% and 17.4%, respectively. AbbVie ($ABBV) came in third with 15.1%.
The Credit Suisse analysts don't see these price increases going away, because drugmakers are continually looking for ways to offset patent-expiration sales losses and to quickly monetize newly approved meds. That's good for drug distributors, the analysts point out. Everyone else? That's the big debate.
List prices don't include discounts and rebates, drugmakers are quick to point out. And some pricey drugs are that way for a reason; ultrarare disease treatments, for instance. Others, not so much. We should also point out that generic drug prices have been rising, too; it's not just on the branded side of things. We'll leave you with one parting anecdote, from a Wall Street Journal investigation into pre- and post-M&A pricing.
After the famous dealmakers at Valeant Pharmaceuticals ($VRX) bought two heart drugs earlier this year, the company hiked their prices by 525% and 212%, respectively. "Our duty is to our shareholders and to maximize the value" of the products that Valeant sells, company spokeswoman Laurie Little told the newspaper at the time. "Sometimes pricing comes into it, sometimes volume comes into it."
- read the Credit Suisse post (sub. req.)
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