Tuesday, July 23, 2024

Gross-to-Net Bubble Update: 2023 Pricing Realities at 10 Top Drugmakers

It’s time for Drug Channels’ annual update on pricing at the largest pharmaceutical manufacturers.

This year’s review includes the following 10 companies: Bristol Myers Squibb, Eli Lilly and Company, Genentech, GlaxoSmithKline, Merck, Novo Nordisk, Sanofi, Takeda, Teva, and UCB. You can find links to each company’s data below.

These data remain inconvenient for drug pricing flat earthers (#DPFE):
  • When rebates and discounts were factored in, brand-name drug prices again declined—or grew slowly—in 2023. For the companies that experienced net price gains in their portfolios, net prices grew more slowly than—or only slightly faster than—the overall inflation rate.
  • Rebates and discounts reduced the selling prices of brand-name drugs at the biggest drugmakers to less than half of their list prices.
  • For the eight companies with multiple years of data, the gross-to-net difference in price changes remained sizable. See the second chart below.
As I noted last week, multiple forces are poised to pop the gross-to-net bubble for high-list/high-rebate products. Insulin has been the first to deflate—and the Humira biosimilar market may be next. Journey with me to Bikini Bottom as we delve into the murky waters of gross-to-net drug pricing at the biggest drugmakers.

READ ME

If it’s your first time visiting Drug Channels, I suggest you review the following two recent articles: For complete details, see Chapter 9 of DCI’s Economic Report on U.S. Pharmacies and Pharmacy Benefit Managers.

You can also click here to read all Drug Channels’ articles related to the gross-to-net bubble.

BUBBLETASTIC DATA

The following 10 companies publicly reported the 2023 list and net price changes for their U.S. product portfolios. Most also reported average discounts from list price. As always, I encourage you to review the original source material for yourself. Here are links to the relevant reports: There are three notable omissions from this year’s list:
  • Pfizer reported the change in its average net price for 2023, but did not report a corresponding figure for the change in list price. See Pfizer: ESG Performance 2023, page 7.
  • Unfortunately, Johnson & Johnson Innovative Medicines (formerly known as Janssen) did not publish a 2023 update to its U.S. Pricing Transparency Report. This report has historically been the most detailed and useful resource in the marketplace.
If I have missed reports from other companies, please email me.

BLOWING BUBBLES

Brand-name manufacturers earn far less revenue than list prices suggest. The table below summarizes 2023's year-over-year changes in list and net prices for the brand-name product portfolios of the 10 large manufacturers, along with average discounts.

[Click to Enlarge]

Consistent with our previous analyses, these data show significant gaps between list and net price changes:
  • List prices for brand-name drug prices grew slowly. For 2023, brand-name drug list prices grew by 5% or less at 9 of the 10 companies. The unweighted average increase was 4.2%.
  • Drugmakers sold their products for less than half of the list price. The unweighted average discount off list was 52.1%, i.e., less than half price. The weighted average brand-name portfolio had list-price discounts of −37% to −74%.
  • Average discounts from list prices have been deepening for some (but not all) manufacturers. Four of the six companies reporting average discounts from list prices showed deeper discounts in 2023 compared with 2022. For example, UCB’s average discount rate went from −48.9% in 2022 to −51.5% in 2023, while Lilly’s rate went from -65% to -66%. However, two companies—Merck and Novo Nordisk—saw a positive change in the average discount rate. In general, such disparities reflect differences between product portfolios.
  • Net prices at most manufacturers grew more slowly than overall inflation. The unweighted average change in net prices was −1.2% for 2023. Net prices declined at four of the 10 manufacturers, but rose at six manufacturers—Eli Lilly (per our estimates), Genentech, GlaxoSmithKline, Merck, Takeda, and UCB. Overall U.S. inflation was +3.4% for 2023, so net price increases were below inflation for four of the six manufacturers.
  • The unweighted average gross-to-net gap in price changes was −5.5%. For 2023, list prices grew by 4.2%, but net prices declined by −1.2%. Gross-to-net differences ranged from −0.1% (Merck) to −20.0% (Sanofi). The gross-to-net difference was negative for all 10 companies, indicating that net prices grew more slowly than list prices for all manufacturers.
Many of the manufacturers' reports are filled with other fascinating details about the drug channel.

BUBBLICIOUS

The chart below summarizes price changes from 2017 through 2023, for the eight companies that consistently provided these data over this period.

[Click to Enlarge]

Observations:
  • Average net prices at the large drugmakers have declined for the past seven years. The time series data clearly contradict the overheated and misleading rhetoric from DPFEs.
  • The gross-to-net bubble keeps inflating. We estimate that in 2023, the total value of gross-to-net reductions for all brand-name drugs was $335 billion, up by about $70 billion (+45%) compared with the 2017 figure. The list and net price changes shown above sustain ever-increasing rebate dollars.
  • The average gap between changes in list and net prices has remained 5% to 8%. For 2017, the average gap was −6.9% [+6.7% vs. −0.2%]. For 2023, the gap shrunk to −6.2% [+4.5% vs. −1.7%]. As we note above, this shrinkage reflects multiple company-specific factors related to product portfolios, payer mix, patient assistance program management, channel strategies, and more.

POPPING BUBBLES!

The gross-to-net bubble’s significant impact on patients—especially when they are exposed to the undiscounted list price of their prescriptions—remains an issue for many products.

Consider insulin, which has long been one of the most dysfunctionally priced products in the drug channel. Brand-name insulin products provide third-party payers with deep rebates and have therefore created a massive gross-to-net bubble for insulin products. Consider Lilly’s disclosure that from 2018 to 2022, the list price of its brand-name Humalog insulin was unchanged, while its net prices declined by $22 (−35%). Consequently, each vial had a net price of $40, but generated $235 in rebates and discounts. Diabetes patients need multiple vials, so the total annual value of rebates and discounts is likely to be more than $5,000 per patient.

But the bubble has started to pop for insulin. The three major manufacturers of widely prescribed insulin products—Eli Lilly, Novo Nordisk, and Sanofi—have all reduced the wholesale acquisition cost (WAC) list price of many brand-name insulin products. As you can see below, Humalog’s net price dropped to $26 (−35%). However, Lilly lowered its list price to $66, which shrank the gross-to-net spread from $235 for 2022 to just $40 for 2023.
[Click to Enlarge]

Last week, I outlined four crucial trends that will deflate the gross-to-net bubble. When I review the manufacturer-specific gross-to-net data for 2024 (sometime during 2025), expect to see more signs of change. Just consider the accelerating Humira biosimilar price war.

I expect our friend Mr. SquarePants to be popping more bubbles soon.

No comments:

Post a Comment