It’s almost July 4th, and for most Americans, that means breaking out the red, white and blue streamers, firing up the grill and securing a good viewing spot for the local fireworks. Pharmaceutical companies observe a different July tradition — the midyear bump — when many of them raise drug prices. This year was no exception.
On Monday, prices went up on 104 drugs (including different doses and package sizes of the same medicines), according to RX Savings Solutions, a company that sells software to help health plans save money on prescriptions. These include drugs used by hospitals and antibiotics that are in short supply, as well as prominent cancer drugs.
The number of increases is down from last year, which saw 318 hikes on July 1. Good news, right? Not necessarily. Drugmakers have just gotten a bit less obvious about price increases. And despite growing political scrutiny, more bumps are likely on the way.
It was just last year that President Donald Trump called out Pfizer Inc. on Twitter for its July 1 price increases, prompting the pharmaceutical giant to roll back and postpone them, and giving other drugmakers pause. Six months later, on Jan. 1 — another popular date for increases — a number of them chose not to ring in the new year with higher prices, perhaps fearing reprisals.
That didn’t mean that pharma stood pat; companies just waited a few extra days or weeks in many cases before pushing through new hikes. Even Pfizer went ahead with new-year hikes — but not until Jan. 15. In fact, notwithstanding the slower start, there have been more overall price rises in the first six months of this year than there were in 2018.
The same pattern may repeat itself in the next few weeks. Many of the largest drugmakers held off on July 1 price increases, with most boosts coming from smaller firms. There’s a good chance that the big guns are just biding their time. “Instead of an avalanche of price increases in a day or a year or a quarter, we’re seeing a more staggered approach,” RX Savings solutions CEO Michael Rea said in a telephone interview.
Avoiding the dates everyone is watching isn’t a bad strategy, and the average price hike has been a bit lower this year in a likely bid to avoid attention. Smaller, more scattered price hikes are less likely to draw presidential wrath. Still, increases are substantially outpacing inflation, and will add plenty to health care costs over time. Many of these hikes come on top of years of compounded price inflation. There’s no real mechanism for halting them besides the bully pulpit, and we can see the limits of what hearings and tweet storms can accomplish.
There are policy changes in progress aimed at more bringing down drug costs in a more formal way. The Trump administration is trying to change how Medicare pays for drugs to reduce the incentive to boost prices. It also wants to index the cost of certain expensive drugs to the lower prices available on other countries.
These rules still have to make it through a gauntlet of lobbyists and potential lawsuits before gaining the force of law — which is far from a sure bet. And the benefits may be limited to Medicare beneficiaries, unless Congress steps in. Until then, expect the tradition of the midyear bump to endure.
Max Nisen is a Bloomberg Opinion columnist covering biotech, pharma and health care. He previously wrote about management and corporate strategy for Quartz and Business Insider.