2020 Drug Pricing Survey, 25th Annual

THE COWEN INSIGHT

The majority of respondents expect U.S. brand drug prices will continue to rise over the next 3 years at a mid-single digit rate, similar to the past. An outlier response from a large purchaser predicted declines leading to a weighted average of zero. Clearly, there is some uncertainty. Price controls are unlikely, but rheumatology, oncology, and diabetes drugs may be vulnerable to price erosion.

Survey Of Buyers Captured One-Fifth Of U.S. Retail Drug Purchases

Cowen and Company conducted its 25th Annual Drug Pricing/Purchasing Trends survey of U.S. buyers to gain insight into the direction of U.S. drug prices over the next 3 years. Our survey results are based on responses from 26 U.S HMOs, PBMs and hospitals. Collectively, they purchased $52B+ of drugs in 2018, or over one-fifth of total U.S. retail drug purchases.

Zero To Mid-Single Digit Rise In Brand Acquisition Prices Projected

This year’s sample of purchasers anticipate that brand drug acquisition cost per unit will increase by an average of 7% annually over the next 3 years, but projections are flat on a weighted average basis. The average is slightly higher than last year’s 3-year forecast of 3-5% annually, although the weighted average represents a reversal in a decades-long trend. This change is driven primarily by one respondent, a very large purchaser. Thirty-eight percent of respondents attribute a substantial (75%) portion of the anticipated increase over the next 3 years to a mix shift to higher-priced, newer therapies vs. 13% last year. Average generic drug acquisition cost per unit is expected to increase 1%, but on a weighted average basis decline 6%, over the next 3 years.

Biosimilar Substitution Expectation Tempered, Assuming 30% Discount

Respondents indicate that an average of a 30% price discount would be needed to switch from a brand to a biosimilar product. For molecules for which one biosimilar is available, an average of 25% of dispensed prescriptions are likely to be biosimilar substitutions in three years. This rises to an average of 34% when three biosimilars are available, down from the 47% forecast of last year.

Price Controls Still Unlikely In Next Three Years

Forty-two percent of respondents believe there is a 10% or less chance that price controls on pharmaceuticals will be implemented in the U.S. in the next three years (vs. 50% of respondents last year). Only 12% of these respondents believe there is a 50%+ chance (vs. 23% of respondents last year). When asked how the likelihood of price controls has changed in the last five years, 35% indicate no change, 54% believe the likelihood has increased somewhat, while only 12% feel the likelihood has increased significantly. Thirty-two percent thought the likelihood had increased significantly when asked last year.

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