Newsletters: VoxCare: The surprising reason drug prices are on the rise

I know I have a problem because when this new Health Affairs study flashed across my inbox, my first thought was: Man, that sounds really cool.

Happy New Year, everybody.

—Dylan

You are not imagining it: Drug prices really are increasing. New research led by academics at the University of Pittsburgh and published Monday in Health Affairs helps us put some numbers on exactly how much and what kind of drugs are to blame.

Prices for drugs of all types and from all classes (brand-name, specialty, generics/oral or injectable) have been rising faster than inflation over the study period, from 2008 to 2016, according to the researchers' review of wholesale prices for thousands of drugs.

But the bigger surprise is that brand-name drugs in particular are seeing a counterintuitive trend: rising prices for brand-name drugs were mostly attributable to existing drugs that were already on the market. Insulin in particular was one notable offender, the study found.

"In the brand-name market, there was inflation of drugs that have been around for a while, that were exactly the same as they were the previous year," Inmaculada Hernandez, an assistant pharmacy professor at Pitt who led the study, says. "They are the same drugs they used to be. Prices are increasing because the market is bearing it."

(One acknowledged caveat for their findings: The researchers used wholesale prices for their study, which means they could not account for the rebates and discounts that health plans receive from drug makers. But list prices do set the market, so to speak.)

To get a little more granular: Prices for specialty drugs (often "biologics" that use living cells to treat conditions) rose the most, followed by brand-name drugs (your classic small-molecule medications), and then generics (the knockoff versions of drugs that have lost their patent protections).

For specialty and generic drugs, price increases went up more as you'd expect. They were driven mostly by new drugs entering the market. In the time period covered by the study, many of the big blockbuster drugs were specialty drugs — and those come with correspondingly large price tags.

That seems to make sense. Specialty drugs are more complex and treat more serious conditions. Brand-name drugs are or were also novel drugs, while the whole point of generic drugs is that they are supposed to bring down costs once a new treatment's monopoly has expired.

So the bottom line is that we now have a clearer picture of what's really happening with drug prices: "That's the main point — how fast drug prices are increasing," Hernandez told me.

If you're interested in the specific percentages, this table is handy:

Health Affairs

What's happening with brand-name drugs certainly seems counterintuitive. I asked Hernandez what would explain existing, not new, brand-name drugs driving price increases to this degree.

There seem to be two interrelated problems. First, Hernandez says, "There's not enough competition. Some of these drugs are protected under patent, but in many cases, they're not protected by patent."

But secondly, and perhaps more worryingly, "drugs are increasingly insensitive to competition," she says. That would certainly track with the study's findings.

What do we do with this information? That is the million-dollar question. House Democrats are set on doing something in the next two years to address drug prices, yet every proposal comes with tradeoffs. Still, this new data provides us with a much more granular understanding of which drugs are seeing their prices rise — a necessary data point for figuring out a way to fix it.

CHARTS OF THE DAY

Pitt/Health Affairs

Rising drug prices, in two charts. These charts from the Health Affairs break out the pricing trends for both oral and injectable drugs. You'll notice there is a lot of consistency between the two: namely, prices for every class and kind of drug is rising faster than inflation. Notably, the big dip in 2012 for brand-name oral drugs was the result of the so-called patent cliff, when a number of notable treatments lost their monopolies.

Kliff's Notes

Today's big story, from Vox's Sarah Kliff:

A $20,243 bike crash: Zuckerberg hospital's aggressive tactics leave patients with big bills:

On April 3, Nina Dang, 24, found herself in a position like so many San Francisco bike riders — on the pavement with a broken arm.

A bystander saw her fall and called an ambulance. She was semi-lucid for that ride, awake but unable to answer basic questions about where she lived. Paramedics took her to the emergency room at Zuckerberg San Francisco General Hospital, where doctors X-rayed her arm and took a CT scan of her brain and spine. She left with her arm in a splint, on pain medication, and with a recommendation to follow up with an orthopedist.

A few months later, Dang got a bill for $24,074.50. Premera Blue Cross, her health insurer, would only cover $3,830.79 of that — an amount that it thought was fair for the services provided. That left Dang with $20,243.71 to pay, which the hospital threatened to send to collections in mid-December.

"Eight months after my bike accident, I'm still thinking about [the bill], which is crazy to me," Dang says.

Dang's experience with Zuckerberg San Francisco General is not unique. Vox reviewed five patient bills from the hospital's emergency room, in consultation with medical billing experts, and found that the hospital's billing can cost privately insured patients tens of thousands of dollars for care that would likely cost them significantly less at other hospitals.

The bills were all submitted by patients to Vox's Emergency Room Billing Database, which served as the basis for a year-long investigation into ER billing practices.

Read the rest here. It's worth your time.

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