Drug Prices Increase 5.6% as Government Ramps Up Pressure to Lower Costs

Among the drugs that now list for more are Skyrizi from

AbbVie Inc.

and Cosentyx from Novartis, both multibillion-dollar sellers treating psoriasis. 

Drugmakers usually begin a new year by raising the list prices of their products. After several years taking increases of 10% or more on certain medicines, the companies have moderated their moves more recently. 

“The industry doesn’t want to stick its neck out and make itself a target of politicians, particularly given the lessened support in the Republican Party for the industry compared to 5 or 10 years ago,” said David Risinger, an SVB Securities analyst. 

Companies cited a number of factors behind their price increases, including their investments in research. Some said that their pricing reflects the value provided by their drugs and that they still cost less than competing products.

This year the federal government has begun implementing the Inflation Reduction Act, which gives Medicare, the country’s biggest buyer of prescription drugs, the authority to negotiate how much it pays for certain high-price therapies. Later this year the federal government will disclose the first 10 drugs whose negotiated prices would take effect in 2026.

The law also requires drugmakers to pay Medicare rebates on treatments whose prices rise by more than the rate of inflation. 

Because inflation has been running unusually high, analysts expected drugmakers would lift list prices higher than usual. 

The new increases affect drug list prices, which aren’t what patients with health insurance usually pay. Patients tend to pay some out-of-pocket sum each month set by their plans, such as a monthly copay, a deductible or a percentage of the drug’s cost.

List prices aren’t typically what pharmaceutical companies are paid for their products, either. Companies that manage drug benefits, known as pharmacy-benefit managers or PBMs, often negotiate discounts and rebates off the list price, in exchange for agreeing to cover a medicine.

Discounts and rebates can cost pharmaceutical companies as much as 70% off the list price of a medicine, sums that can go to drug-benefit managers and health plans. 

List prices for U.S. branded drugs increased by an average of 5% from 2018 to the third quarter of 2022, while the sums that pharmaceutical companies were paid fell on average about 1.5%, according to the research firm SSR Health. 

A big reason why pharmaceutical companies raised list prices, analysts and pharmaceutical companies said, was to give bigger discounts and rebates. Larger markdowns can help drugmakers win a position on formularies, the lists of drugs that PBMs agree to cover, because the PBMs get those savings and can pass them on to their clients.

“There is so much competition,” said Yaron Werber, an analyst at Cowen & Co. “Formulary placement is critical.” 

AbbVie raised the list prices in January of the psoriasis therapy Skyrizi and the rheumatoid-arthritis treatment Humira by 8% each. Both drugs are multibillion-dollar sellers in one of the biggest, most competitive pharmaceutical markets for drugs treating immune conditions. Humira has begun facing competition from a less-expensive version known as a biosimilar. AbbVie declined to comment.

Amgen Inc.

increased the list price of its rheumatoid-arthritis drug Enbrel by 7.4%. The company said it needed to raise prices partly because payers and other groups have continued to ask for more rebates and fees.

The Swiss drugmaker Novartis took list-price increases of an average of 7.6% on 75 products including Cosentyx and the multiple-sclerosis therapy Gilenya, a spokeswoman said. After rebates and discounts, the average net price increase across its products is negative, she said.

Pfizer increased the price on its rheumatoid-arthritis drug Xeljanz by 6%, and on its breast-cancer medicine Ibrance by 7.9%

In all, Pfizer raised prices on its drugs and vaccines by an average of about 3.6% this year, and the price paid to the company will fall for the fourth consecutive year because of rebates and discounts, a company spokeswoman said.

Most of the more than 100 list-price increases taken by Pfizer were for drugs used in a hospital and injected, many of which cost less than $1 a unit and some of which the company sells below what they cost to make, the spokeswoman said.

The average list-price increase this year is slightly higher than last year, when drugmakers raised prices on medications by an average of 4.96%, according to 46brooklyn. 

Most drugmakers kept their price increases at 10% or lower this year to date, though increases for fewer than 10 drugs exceeded that amount. 

Among the highest to date was taken by

GE HealthCare Technologies Inc.,

which was recently spun off from

General Electric Co.

It raised the list price of Omnipaque, which patients take before CT scans to help improve the images, by 26.8%.

The company took the increase because of inflation and company investments in expanding production capacity to meet future demand, a spokeswoman said. 

The median price increase since 2019 has remained at around 5%, according to 46brooklyn.

Drugmakers sometimes would raise prices twice a year. Now most take one increase in January, because PBMs and government programs have contracts that can protect them from some of the impact of midyear price increases, 46brooklyn Chief Executive Antonio Ciaccia said. 

Companies for years had raised list prices at the start of January, but some now wait until later in the month, partly to avoid the scrutiny that the early increases get, according to Mr. Ciaccia and analysts. 

Germany’s Merck, which isn’t affiliated with the U.S. drugmaker

Merck

& Co., and

Horizon Therapeutics

PLC, which Amgen has agreed to buy, were among drugmakers raising prices on 15 drugs during the week of Jan. 23, 46brooklyn said. 

A spokeswoman for Germany’s Merck said the price represents the clinical benefit of their medicines for patients and their overall value to the U.S. healthcare system. A Horizon spokesman attributed its price changes to factors including inflation, investments in patient-support programs and research costs.

Several companies and analysts said a reason companies raised prices for certain drugs was a federal program, known as 340B, which allows certain hospitals to buy drugs at a discount but sell the medicines for more. The price increases help drugmakers offset revenue that they would otherwise lose from the discounts, according to the companies and analysts. 

Exelixis Inc.

said it took into account the growth of 340B and the need to offset the impact on revenue in raising the price of its cancer drug Cabometyx by 7.5%, a company spokesman said. The main factor, he said, was funding research.

Write to Jared S. Hopkins at jared.hopkins@wsj.com

Among the drugs that now list for more are Skyrizi from

AbbVie Inc.

and Cosentyx from Novartis, both multibillion-dollar sellers treating psoriasis. 

Drugmakers usually begin a new year by raising the list prices of their products. After several years taking increases of 10% or more on certain medicines, the companies have moderated their moves more recently. 

“The industry doesn’t want to stick its neck out and make itself a target of politicians, particularly given the lessened support in the Republican Party for the industry compared to 5 or 10 years ago,” said David Risinger, an SVB Securities analyst. 

Companies cited a number of factors behind their price increases, including their investments in research. Some said that their pricing reflects the value provided by their drugs and that they still cost less than competing products.

This year the federal government has begun implementing the Inflation Reduction Act, which gives Medicare, the country’s biggest buyer of prescription drugs, the authority to negotiate how much it pays for certain high-price therapies. Later this year the federal government will disclose the first 10 drugs whose negotiated prices would take effect in 2026.

The law also requires drugmakers to pay Medicare rebates on treatments whose prices rise by more than the rate of inflation. 

Because inflation has been running unusually high, analysts expected drugmakers would lift list prices higher than usual. 

The new increases affect drug list prices, which aren’t what patients with health insurance usually pay. Patients tend to pay some out-of-pocket sum each month set by their plans, such as a monthly copay, a deductible or a percentage of the drug’s cost.

List prices aren’t typically what pharmaceutical companies are paid for their products, either. Companies that manage drug benefits, known as pharmacy-benefit managers or PBMs, often negotiate discounts and rebates off the list price, in exchange for agreeing to cover a medicine.

Discounts and rebates can cost pharmaceutical companies as much as 70% off the list price of a medicine, sums that can go to drug-benefit managers and health plans. 

List prices for U.S. branded drugs increased by an average of 5% from 2018 to the third quarter of 2022, while the sums that pharmaceutical companies were paid fell on average about 1.5%, according to the research firm SSR Health. 

A big reason why pharmaceutical companies raised list prices, analysts and pharmaceutical companies said, was to give bigger discounts and rebates. Larger markdowns can help drugmakers win a position on formularies, the lists of drugs that PBMs agree to cover, because the PBMs get those savings and can pass them on to their clients.

“There is so much competition,” said Yaron Werber, an analyst at Cowen & Co. “Formulary placement is critical.” 

AbbVie raised the list prices in January of the psoriasis therapy Skyrizi and the rheumatoid-arthritis treatment Humira by 8% each. Both drugs are multibillion-dollar sellers in one of the biggest, most competitive pharmaceutical markets for drugs treating immune conditions. Humira has begun facing competition from a less-expensive version known as a biosimilar. AbbVie declined to comment.

Amgen Inc.

increased the list price of its rheumatoid-arthritis drug Enbrel by 7.4%. The company said it needed to raise prices partly because payers and other groups have continued to ask for more rebates and fees.

The Swiss drugmaker Novartis took list-price increases of an average of 7.6% on 75 products including Cosentyx and the multiple-sclerosis therapy Gilenya, a spokeswoman said. After rebates and discounts, the average net price increase across its products is negative, she said.

Pfizer increased the price on its rheumatoid-arthritis drug Xeljanz by 6%, and on its breast-cancer medicine Ibrance by 7.9%

In all, Pfizer raised prices on its drugs and vaccines by an average of about 3.6% this year, and the price paid to the company will fall for the fourth consecutive year because of rebates and discounts, a company spokeswoman said.

Most of the more than 100 list-price increases taken by Pfizer were for drugs used in a hospital and injected, many of which cost less than $1 a unit and some of which the company sells below what they cost to make, the spokeswoman said.

The average list-price increase this year is slightly higher than last year, when drugmakers raised prices on medications by an average of 4.96%, according to 46brooklyn. 

Most drugmakers kept their price increases at 10% or lower this year to date, though increases for fewer than 10 drugs exceeded that amount. 

Among the highest to date was taken by

GE HealthCare Technologies Inc.,

which was recently spun off from

General Electric Co.

It raised the list price of Omnipaque, which patients take before CT scans to help improve the images, by 26.8%.

The company took the increase because of inflation and company investments in expanding production capacity to meet future demand, a spokeswoman said. 

The median price increase since 2019 has remained at around 5%, according to 46brooklyn.

Drugmakers sometimes would raise prices twice a year. Now most take one increase in January, because PBMs and government programs have contracts that can protect them from some of the impact of midyear price increases, 46brooklyn Chief Executive Antonio Ciaccia said. 

Companies for years had raised list prices at the start of January, but some now wait until later in the month, partly to avoid the scrutiny that the early increases get, according to Mr. Ciaccia and analysts. 

Germany’s Merck, which isn’t affiliated with the U.S. drugmaker

Merck

& Co., and

Horizon Therapeutics

PLC, which Amgen has agreed to buy, were among drugmakers raising prices on 15 drugs during the week of Jan. 23, 46brooklyn said. 

A spokeswoman for Germany’s Merck said the price represents the clinical benefit of their medicines for patients and their overall value to the U.S. healthcare system. A Horizon spokesman attributed its price changes to factors including inflation, investments in patient-support programs and research costs.

Several companies and analysts said a reason companies raised prices for certain drugs was a federal program, known as 340B, which allows certain hospitals to buy drugs at a discount but sell the medicines for more. The price increases help drugmakers offset revenue that they would otherwise lose from the discounts, according to the companies and analysts. 

Exelixis Inc.

said it took into account the growth of 340B and the need to offset the impact on revenue in raising the price of its cancer drug Cabometyx by 7.5%, a company spokesman said. The main factor, he said, was funding research.

Write to Jared S. Hopkins at jared.hopkins@wsj.com