Drug Price Trends
Drug list prices have risen at 10–15% annually for brand drugs over the past decade — far faster than inflation. Specialty drug prices have risen even faster — 15–20% annually. Generic drug prices have declined — but generics represent only 10% of drug spending despite 90% of prescriptions. The net price of drugs (after rebates) has risen more slowly — but still at 5–8% annually.
The List Price Spiral
The rebate system creates a list price spiral: manufacturers raise list prices to maintain rebate value; PBMs negotiate higher rebates to offset the list price increase; manufacturers raise list prices again to maintain net revenue. The result is ever-increasing list prices and ever-increasing rebates — with the employer paying more each year.
The Employer's Response
IQ Insight
The employer's response to rising drug prices must be proactive: transparent PBM contracts, formulary management, specialty drug management, biosimilar adoption, and international drug sourcing. Passive acceptance of annual drug price increases is not a strategy — it is a guarantee of unsustainable cost growth.