Mar 18, 2019

Competition doesn't always drive down drug prices

Data: Centers for Medicare & Medicaid Services; Chart: Harry Stevens/Axios*

Competition doesn't always lead to lower drug prices, at least in the class of drugs administered by a doctor, according to new Medicare payment data. Most of the drugs with the biggest price increases from 2016 to 2017 had at least 2 versions on the market.

Why it matters: This data only captures one year of price changes, but casts doubt on the idea that competition is a foolproof way to constrain drug prices.

Yes, but: Most drugs with more than 5 competing products did see price decreases in 2016.

  • Of the 17 drugs covered by Medicare Part B with more than 10 competing products on the market, just 5 of them — or 29% — saw price increases. And only 35% of the drugs with 6-10 competing products saw a price increase.
  • By contrast, of the 162 drugs with just 1 product on the market, 69%, saw price increases from 2016 to 2017. And of the 125 drugs with 2-5 products, prices increased for 58% of them.
  • This analysis excludes drugs that were used by fewer than than 300 patients. It also doesn't take into account drugs picked up at the pharmacy counter, or price decreases that may have occurred when competition for a drug first entered the market, as it looks at only one year of data.

While some of these drugs cost mere pennies per dosage, each insurance claim can include multiple doses.

  • Insulin delivered through a pump — which had 16 competitors — cost on average $9.45 per dosage in 2017, but the average claim was $958.65.

The bottom line: Drugs with monopoly power aren't the only ones that can raise their prices.

  • Even with competition, "you can’t count on continual price decreases," said Vanderbilt's Stacie Dusetzina after reviewing the data.

*Editor's note: An earlier version of this chart included colistimethate sodium, a drug with 15 beneficiaries in 2017. This chart has been updated to only include drugs with at least 300 beneficiaries in 2017.

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