Another day, another misleading PhRMA-funded study

Another day, another misleading PhRMA-funded study that attempts to deflect blame for a growing crisis of their own making – the skyrocketing cost of drugs. 

To start, PhRMA’s study focuses only on brand-name drugs sold in the U.S., which is only a subset of the total drug market. This means that sales from generic drugs and from global markets, which combine to collectively generate hundreds of billions of dollars in sales for drug companies, are conveniently excluded from the study. Total sales from drug companies result in average drug company margins that are in the teens and growing, and the top 14 drug companies collectively profited nearly $30 billion in the third quarter of 2018 alone.

On the other hand, a third of hospitals have negative operating margins and the Congressional Budget Office estimates that as many as half of hospitals could have negative margins by 2025.   

Another key point that the study omits is that drug companies alone set the prices of their drugs and that they do not negotiate pricing on single source brand drugs. Period. Earlier this month like they typically do at the beginning of each year - and then multiple times throughout the year - drug companies jacked up the list prices of hundreds of brand name drugs. On average, these price hikes were higher than the rate of inflation.

The study also relies on numerous tenuous assumptions in the estimation of gross brand drug spending and in the estimation of the magnitude of discounts and rebates flowing to various entities within the supply chain. 

While drug companies and PhRMA continue to point fingers and blame others, hospitals and health systems are doing their part to contain costs and give back to their communities while taking care of patients 24/7. It is time for drug companies to stop attacking others and come to the table with solutions on how to rein-in their out-of-control prices.