Do Market Forces Really Work on Specialty Pricing?

I was rereading a post I produced for another site just one year ago on March 28th. The intent was to show how the branded drug market is distorted by pricing that has little to do with competition and inflation. Nothing has changed about the scenario (other than prices cited here are even higher today), but I thought it would be interesting to reproduce the gist of that post here.

An article published on March 9, 2016 in the Washington Post (–and-it-keeps-getting-pricier/2016/03/09/4fff8102-c571-11e5-a4aa-f25866ba0dc6_story.html) is a case study in some weird market dynamics involving an older agent imatinib (Gleevec®) from Novartis. This tyrosine kinase inhibitor, introduced in 2001, cost $26,400 per year, and today, its wholesale acquisition cost tops $120,000 per year. Interestingly, prices for imatinib did not start to rise substantially until competition in the form of 2 other branded tyrosine kinase inhibitors entered the market around 2007. According to the Post article, instead of lowering or stabilizing prices, the cost of these agents rose and rapidly.

When Gleevec’s generic competition was introduced in February 2016, the initial price was set up to 50% lower than that for Gleevec. No one expects new biosimilars to enter the US market at these generic-level discounts, and if they did, one must wonder about the viability of the biosimilar manufacturing market.

Writing in 2017, it is increasingly clear that payers will view the currently marketed biosimilars as they would a new brand-name product, based on the relatively slight price discounts offered by their manufacturers. And the Gleevec scenario does illustrate that competition in the branded marketplace will not necessarily have the desired effect—which often forces payers to play hard ball to squeeze as much savings as possible, sometimes using for bats blunt instruments like coverage exclusions.

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