Trends in Within-Class Changes in US Average Wholesale Prices for Brand-Name Medications for Common Conditions From 2015 to 2020
'Shadow pricing' describes price increases on related brands of products from competing companies that often seem to move in synchronized fashion. These price increases are not tied to healthcare inflation or cost of goods, but seemingly to the ability of insurance payers and consumers to pay.
Although one might expect that shadow pricing is anticompetitive and would come under the U.S. Securities & Exchange Commission (SEC’s) purview, on the contrary, it is perfectly legal. And, this pattern is not only found in the insulin category but omnipresent in almost all major drug markets.
This new 2021 paper via JAMA, examining 'within-class' changes in Average Wholesale Prices (AWP) for brand-name drugs between 2015 to 2020, found prices for drugs in five classes increased in 'lock-step' each year from 2015 to 2020.
These increases ranged from annual averages of 6.6% for DDP4 inhibitors to 13.5% for P2Y12 inhibitors - outpacing not only general inflation but also the 2.1% average for all prescription drugs.
In a free-market economy, competition is expected to drive down prices. Not quite so in the case of the drug industry. And while the shadow-pricing trend shows no sign of abating, it does shine an uncomfortable spotlight on drugmakers.