Big Pharma lobbyists claim that medical treatment is expensive and high prices are needed to fund research and development. Yet, research shows profits often significantly outpace R&D costs. Pharmaceutical companies contend that other players in the supply chain, such as pharmacy benefit managers, absorb much of the price increases.
Dr. Roy Guharoy—Ascension Health's vice president of clinical integration and chief pharmacy officer for the Resource Group, an Ascension group purchasing organization—agreed that price hikes should be limited to the CPI. "High drug prices are a huge challenge to deliver care to patients in need," he said. "Sanofi's commitment is good, but we're still far from where we need to be."
Systems, including Ascension, have had to shift treatment strategies to avoid overuse of high-cost drugs—some of which have no viable alternatives.
National healthcare spending grew 5.8% to $3.2 trillion in 2015, in part due to a 9% increase in prescription spending to $324.6 billion.
Branded drugs with no generic alternatives, or single-source drugs, are the main culprit, according to a recent Blue Cross and Blue Shield Association study. They are rising at an average annual rate of 25%, a total of 285% since 2010. These patent-protected drugs now make up 63% of total drug spending, up from 29% of total spending in 2010, despite the fact that they make up less than 10% of total prescriptions filled.
In a column on the company's website, Sanofi CEO Olivier Brandicourt said that its average list price increases were 4%. The company will explain hikes if they outpace medical inflation and will disclose its aggregate gross and net price increases.
Many branded drugs have increased at a much faster clip, including Sanofi's insulin drug Lantus, which increased 13% annually from 2010 to 2016.
Botox maker Allergan said last fall that it would stick to single-digit price increases. Novo Nordisk, AbbVie, GlaxoSmithKline and Takeda Pharmaceuticals followed suit. Eli Lilly and Co. said it would lower prices for most of its insulins by up to 40%.
"Competition is the answer to a lot of these huge price spikes," said William Woodward, senior director of sourcing operations for pharmacy at the GPO Vizient. "New drugs are priced at whatever the market will bear—it has little or no relation to costs for production or research and development."
There are several bills moving through Congress that aim to reduce drug costs. Two bills, with the shorthand names CREATES Act and FAST Generics Act, target alleged anticompetitive behavior that stifles generic drug development. That alleged behavior includes preventing generic developers from accessing samples of branded products to demonstrate that a generic is equivalent and participating in blocking access to safety protocols needed to gain federal approval. It's estimated the bipartisan FAST Generics Act would reduce drug costs by $5.4 billion a year .
Experts also supported reducing or even eliminating direct-to-consumer and direct-to-physician marketing. The pharmaceutical industry spent more than $24 billion to market directly to physicians in 2012 compared with $3 billion that year to consumers, according to a study published that year by Pew Charitable Trusts.