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Drug prices to soar nearly 50% over next few years

Experts predict a 50 percent spike in drug prices over the next few years; 1 in 5 big companies pay no federal income tax; and the “Fight for $15” targets McDonald’s
Drug prices will be soaring, and other MoneyWatch headlines 01:35

Americans are getting sick and tired of the rising cost of their prescription medications. Unfortunately, it doesn't appear likely that consumers will get a break any time soon.

Spending on pharmaceutical drugs is expected to jump 46 percent to as much as $640 billion by 2020 based on invoice prices, or the amount paid to distributors from hospitals or pharmacies, according to a new study from IMS Institute for Healthcare Informatics. That comes after 12.2 percent increase to $424.8 billion in the past year, the study found.

Consumers are also paying more out of pocket. The study finds that patients with brand-name prescriptions spent an average of $44 per medication last year, or 25 percent higher than in 2010. While that might not seem like enough to break the bank, it's important to remember that one out of five Americans takes five prescriptions, so those costs can add up. During the same time, the consumer price index rose only 8.7 percent.

Reviled pharmaceutical CEO Shkreli outdoes himself 02:18

Lawmakers have increasingly focused on price hikes by the pharmaceutical industry, sparked partly by the case of Martin Shkreli last year. As the CEO of Turing Pharmaceuticals, Shkreli boosted the price of a six-decade old drug by 5,000 percent and in the process became the poster boy for drug price gouging. Yet the drug market is more nuanced than that, given lower-priced generics and the proliferation of coupons and vouchers, IMS Executive Director Murray Aitken said.

"It's fair to say a few companies and a few price increases have garnered a huge amount of attention," Aitken said. "Without diminishing the significance of them, it misses the broader point of what's happening in the overall marketplace."

By and large, having more prescriptions written isn't behind the rising spending. IMS found that prescription demand increased just 1 percent last year. Antidepressants and diabetes treatment prescriptions rose 3.4 percent and 4.9 percent, respectively, while 16 million fewer prescriptions were written for narcotic painkillers such as acetaminophen-hydrocodone.

Manufacturers are also increasingly providing coupons and vouchers to offset costs for consumers. IMS said about half of diabetes patients facing $50 or more per prescription were able to whittle down their costs to zero as a result.

In some cases, consumers are paying more out of pocket because of changes in their health insurance plans, Aitken said. Today about one-third of people with commercial health care coverage have pharmaceutical deductibles, but that didn't used to be as common.

New report finds prescription drug costs soaring 02:53

"When the patient goes in at the start of the year, they have to pay the full price for the drug, which is one reason we see the drugs abandoned at the pharmacy," Aitken noted.

Spending on generic drugs rose about 7.4 percent to $114.5 billion last year as prices for older generics saw slower growth, the report noted.

One area of rising costs was specialty medicines, which contributed 70 percent of the overall increase in pharmaceutical spending from 2010 to 2015, the study found. Treatments for ailments such as hepatitis, cancer and autoimmune disorders fueled the higher spending, while patients spent 18 percent more on cancer medications alone last year, IMS said.

That's not likely to stop. In the case of hepatitis treatments, there's still untapped demand for expensive medications such as Gilead Sciences' (GLD) Sovaldi, which costs $84,000 for a 12-week course of treatment. About 400,000 patients have been treated with one of the six new hepatitis medicines introduced in the last year, and many more need to be treated, said Aitken.

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