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June 03, 2008
Prescription Drug Prices on the Rise
Preliminary study findings from Cutting Edge Information show a notable increase in prescription drug prices over the past five years. Overall, drug prices increased by 47% between 2003 and 2007, or by 31% after adjusting for inflation. The trend toward higher industry pricing shows no signs of slowing, either - the News & Observer reports that the industry's two largest companies, Pfizer and GlaxoSmithKline, raised prices on their 10 highest performing drugs by 9% in 2007 alone.
While most therapeutic areas have seen inflation-adjusted price increases of less than 20% since 2003, and some have even been outpaced by inflation, other therapeutic areas have undergone much more significant price raises during this time interval. For example, dermatology product prices climbed by a notable 41% between 2003 and 2007. The diabetes market experienced the most dramatic increase of all therapeutic areas - on average, diabetes drug prices rose by 85% (or 64% in inflation adjusted dollars).
Multiple market factors have contributed to the steady increase in pharmaceutical prices. As long-time blockbusters near patent expiration, few up-and-coming treatments promise to fill in the gaps that those top performers will leave behind. Once-robust pipelines have become thin and slow-moving, and companies must maximize the profitability of those precious few drugs they do have on the market - which often means raising prices for new treatments as well as old ones. Complex drug development technologies translate into high development costs and ultimately result in higher prices once products reach the market. In addition, generic competitors have become increasingly aggressive and have begun challenging brand patents earlier and earlier in the product lifecycle. To help offset the losses that result from generic market entry, innovator pharmaceutical companies have begun to raise prices long before their brands' patents expire.
In addition to the data summarized here, Cutting Edge Information's full strategic pricing study, to be released later this summer, follows up on similar research conducted in 2005 to examine how the pharmaceutical industry's approach to pricing continues to evolve. The new study will delve into various aspects of companies' pricing strategies, including oversight, headcounts, costs and timelines for pricing studies. The study will also analyze pricing levels and trends by therapeutic area. To receive complementary study findings on this timely issue, please visit http://www.cuttingedgeinfo.com/studies/PH119/StrategicPricing.htm and complete a short survey.
Posted by Haley Wynn at June 3, 2008 08:22 AM