Regulatory Focus™ > News Articles > 8 > Patents and Negotiations: Three New Reports Dig in on Drug Prices

Patents and Negotiations: Three New Reports Dig in on Drug Prices

Posted 02 August 2018 | By Zachary Brennan 

Drug prices. Rebates. Middlemen. Gouging.

Buzzwords are flying and not only in the pharmacy, but on Capitol Hill, in C-suite executives’ offices and at the White House. However, the story is more complicated than just: Drug prices are too high and need to be lower.

As part of efforts to elucidate how much drugs cost and why they cost so much, three new reports released this week take a crack at explaining the details of how the government negotiates drug prices, how patents can extend the monopolies on best-selling drugs and biologics, and who exactly is reaping the benefits of those high prices.


One of the major sticking points on drug prices is: Why does the rest of the world see lower prices than the US? And one of the major differences is in how the US negotiates prices for certain government programs.

Sen. Claire McCaskill (D-MO) on Wednesday released a report on “How better negotiation could save billions for Medicare,” noting the price variations for the 20 most commonly prescribed brand-name drugs in the Medicare Part D program by contrasting negotiated federal prices for these medications with their list prices.


“Even when applying the CMS [Centers for Medicare and Medicaid Services] published average rebate amount—17.5%—for Medicare Part D brand-name drugs, and increasing negotiated federal prices by $13.46 to account for dispensing fees and other costs, Medicare and its beneficiaries could save a collective $2.8 billion in a single year under negotiated federal prices for the top 20 most commonly prescribed brand-name drugs alone,” the report found.


Similar to McCaskill, nonprofit I-MAK released a report Thursday detailing the 12 best-selling drugs in the US and how drugmakers use fortresses of patents to extend monopolies and allow for increased prices annually.

According to the report, each of the best-selling drugs has about 70 patents protecting it while prices overall have increased by almost 70% (and only one of the top 12 drugs has decreased in price).

“Four of the top twelve drugs have already been on the market for 20 years and have pending patent applications seeking to extend patent life to 2033 (Herceptin, Genentech), 2030 (Rituxan, Biogen/Genentech), 2029 (Enbrel, Amgen), and 2025 (Remicade, Janssen),” the report found. “One third of the drugs had price hikes of more than 100% since just 2012: Lyrica (163%), Enbrel (155%), Humira (144%), and Lantus (114%).”



And a new Health Affairs report took a look at whose pockets are being filled with these profits – though again, the estimates are messy to establish and open for dispute.

The authors estimate that in 2016, total US expenditures on pharmaceutical drugs, including the gross profits of all the intermediaries, were $480 billion.

Two-thirds of this total ($323 billion) was captured by drug manufacturers in net revenues, while the remaining third ($157 billion) was retained as gross profits in the supply chain. Nearly half of those supply chain funds were captured by retail and specialty pharmacies ($73 billion), about 20% ($35 billion) by providers, and pharmacy benefit managers (PBMs) and wholesalers captured about 25% ($23 billion and $18 billion, respectively).

And though the authors say their intent “is not to infer or draw conclusions on where there are outsize profits or how difficult it would be to reduce spending within the supply chain,” they do note that “a recent policy focus on the supply chain suggests that understanding those consequences will be important—particularly in light of recent calls by Food and Drug Administration Commissioner Scott Gottlieb for greater transparency in price negotiations involving PBMs, distributors, drug stores, and payers; appeals by the pharmaceutical industry and government to limit the scope of the 340B program; and deliberations by CMS to begin instituting point-of-sale rebates to reduce the out-of-pocket burden on patients.” 

Categories: Regulatory News

Regulatory Focus newsletters

All the biggest regulatory news and happenings.