In the news, we often hear of pharma companies dramatically raising the price of off-patent but sole-sourced drugs. For instance, Martin Shkreli–formerly of Turing pharmaceuticals–raised the price of Daraprim, an antiparasitic drug, from $13.50 to $750 per pill. Is this a common occurrence or is the news media blowing it out of proportion?
A recent article by Alpern et al. (2020) in JAMA Network Open finds that large price increases are the exception rather than the rule. The authors use 2008-2018 wholesale acquisition cost (WAC) by drug from First Databank. Using these data, they find that:
Of the 300 drug products and 2242 observations analyzed, the overall inflation-adjusted mean increase in drug prices was 8.8% (95% CI, 7.8%-9.8%) per year. Ninety-five drugs (31.7%) increased by 25% or more during any calendar year, and 66 drugs (22.0%) increased by 50% or more during any calendar year.
An 8.8% price increase may sound a bit steep, but the figures are skewed by a few outliers. Further, a large share of the “big” price increases were for drug’s whose WAC was <$2 per pill. If we look at this in absolute terms, we see that the absolute price increases are fairly modest. More than 80% of “large” price increases of 50% or more were actually increases of only $0-$19; the figures are similar when a “large” price increase is defined as a 25% or more price increase. While the mean price increase for drugs with more than a 50% price increase was an increase in cost of $137, this cost is greatly skewed by a few outliers, name Shkreli’s decision to increase Daraprim’s price by 5300% in a single year. The median absolute price increase among sole-sourced, off-patent drugs with a 50% price increase was only $3.80…or only $2.40 if a “large” price increase is defined as 25% or more price increase.
In short, while there have been a few egregious cases of very large price increases for off-patent, sole-sourced medications (e.g., Martin Shkreli), in the vast majority of cases price increases for these treatments have been fairly modest.
- Alpern JD, Shahriar AA, Xi M, et al. Characteristics and Price Increases Among Sole-Source, Off-Patent Drugs in the United States, 2008 to 2018. JAMA Netw Open. 2020;3(8):e2013595. doi:10.1001/jamanetworkopen.2020.13595