Drug Costs

As Evidence Mounts, President Acknowledges Drug Prices Falling

January 15, 2019 11:59 am

If you were scrolling through Twitter last Friday, you probably couldn’t believe your feed.


After months of criticizing pharmaceutical companies – and a week after saying “drug makers are not living up to their commitments” – President Donald Trump said drug prices are declining. The tweet references data released late last year by the White House Council of Economic Advisers (CEA), which credited Food and Drug Administration (FDA) regulatory changes and generic drugs for saving consumers about $26 billion since the president took office.


The president may have oversimplified the actual pricing trends in his tweet, but his whipsaw commentary illustrates how anecdotes – not data – are driving this debate. Yes, some drug makers have increased the list price of their medicines, but a mountain of data shows patients’ actual spending on prescription drugs has slowed. Similarly, the numbers prove drug prices are not the main driver of health-care inflation.


Overall spending on prescription drugs grew by less than 1 percent in 2017. Once rebates and other discounts were accounted for, patients actually spent 2.2 percent less per capita in 2017 on their medicine. Drug-spending numbers have been moving in this direction long before the president was elected or announced his candidacy. Since 2008, per-capita spending only has increased by 1 percent annually. That trend alone debunks the president’s attacks on the biopharmaceutical industry.


Additionally, recent data from the U.S. Department of Health and Human Services, which showed the growth in overall health-care spending slowed from a 4.8 percent increase in 2016 to 3.9 percent in 2017, show spending on prescription drugs rose by less than half a percent, the slowest increase in five years. Leerink Partners found the largest 17 drug companies took only 106 price increases on existing products in 2018, the lowest number since at least 2014.


Pacific Research Institute Wayne Winegarden provides yet another way to look at the data. In a Forbes column last year, Winegarden explained that, between October 2017 and October 2018, overall consumer prices grew 2.5 percent while prescription drug prices rose just 0.8 percent. Hospital spending rose more and Winegarden concluded “if any specific health care sector is to be blamed (and no individual sector should be), hospital services are a more likely candidate than prescription drugs.”


Competition clearly is working and the price controls sought by the president and some of his advisers would threaten the system.


But don’t ask us. In a separate report from its study on generics, the White House CEA examined how European-style price controls would impact medical innovation. It found they would reduce the availability of life-saving medications.