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A New Year Brings New (Higher) Prescription Drug Prices

By: David Ostrowsky

It must be January. W-2 forms are hitting the mail. Fitness centers are packed to the brim. The NFL playoffs are in full force.

And, yes, pharmaceutical companies are hiking prices on their drugs. This time of year, when insurance plans turnover, Big Pharma unveils its list of new (aka elevated) prices for drugs, which, particularly concerning newly launched ones, sparks sticker shock for consumers. Certainly, January 2024 does not appear to be an exception to this unpleasant trend.

On December 29 -- as many were making last-minute New Year’s Eve plans – the unsettling news dropped: globally recognized drugmakers, including Pfizer, Sanofi, and Takeda Pharmaceutical (all multibillion-dollar, publicly traded companies), were gearing up for price hikes on over 500 drugs, including over 140 different brands of drugs. For the second consecutive year, Pfizer declared the most price hikes in January as the New York-based drugmaker is responsible for more than a quarter of all the drugs with anticipated price hikes. Meanwhile, Takeda-owned Baxalta released the second-highest number of price increases, with 53 hikes planned thus far, and Sanofi plans to elevate prices on its typhoid fever, rabies and yellow fever vaccines each by 9% this month.

Why the markup for an exceptionally large number of medications this year? The expected culprits – lingering high inflation and supply chain backups, largely stemming from a drawn-out Middle East Conflict – account for some, but certainly not all, of the issues. At this moment in time, there are also notable political forces at play, namely Big Pharma bracing for the profound impact of healthcare cost reduction measures in President Biden’s Inflation Reduction Act (IRA) coming into effect. (This past August, the U.S. Department of Health and Human Services (HHS) publicly released the first ten drugs covered under Medicare Part D for negotiation; the negotiated prices will become effective beginning in 2026.) Not to oversimplify the matter, but Big Pharma is essentially anticipating lost revenue in the not-so-distant future and it feels it needs to compensate for the shortfall somehow, hence the hefty volume of upticks this month.

In other words, in the coming weeks, millions of Americans, many of whom are of advanced age and living below the federal poverty level, will be walking up to their local pharmacy counter to pay for their respective medications and learn that their co-pays and/or out-of-pocket expenses have gone up at least moderately, and in some cases, dramatically. And they will be faced with the gut-wrenching decision: do they fork over the extra cash for life-altering or even life-prolonging medications at the expense of cutting back on groceries and turning off the heat in single-digit temperatures?

Of course, this conundrum does not only apply to January as throughout the calendar year, Americans grapple with such dilemmas. But it’s certainly a problem that becomes particularly acute this time of year – one that already presents considerable challenges to many people’s physical and mental health.

While geopolitical events and policy decisions may be uncontrollable and unpredictable, there are cost containment techniques that employer-sponsored health plans can employ to alleviate said burden on their respective participants. There are, in fact, viable methods for lowering prescription drug costs even when the titans of the pharma industry inflate their prices. Certainly, prescription (and overall healthcare) cost containment programs are not necessarily easy to execute. They require ingenuity, extensive data benchmarking, and widespread participant engagement. But they do represent one effective means for countering what continues to be a dreaded January tradition: a surge in prescription drug prices across the board.