Payer hardball cuts price growth, with biggest hits in diabetes, COPD and hep C

Price tags on new drugs may be rising. Price hikes on older meds remain regular. But that's just the superficial view, a new study concludes. Rebates and discounts are taking a big bite out of drug costs--and holding down overall price growth.

Taking rebates and discounts into account, pricing for branded meds in the U.S. grew by less than 1% last quarter, compared with 4.4% during the same period last year, according to the market analysts at SSR.

Thing is, just a few hotly contested drug categories are responsible for that decline. Payers have used their formulary power to pit drugmakers against each other, aiming for price breaks. You know the ones: insulin meds for diabetes, combo drugs for chronic obstructive pulmonary disease (COPD), and antiviral treatments for hepatitis C.

The discounts payers wrung out of hep C are responsible for most of the headlines. And those discounts--which some analysts peg at 40% or more--have cut sales growth at market leader Gilead Sciences ($GILD) year-over-year. But hardball formulary negotiations on diabetes drugs have taken a big toll, too, affecting the triumvirate of the insulin world--Novo Nordisk ($NVO), Sanofi ($SNY) and Eli Lilly & Co ($LLY).

Then there's COPD, where AstraZeneca ($AZN) successfully snared some exclusive formulary placement for Symbicort. GlaxoSmithKline ($GSK) and its megablockbuster Advair suffered accordingly.

SSR expects the pain to spread--and not just to the categories payers have been most vocal in attacking, such as the new cholesterol meds in the PCSK9 class. Think erectile dysfunction, multiple sclerosis and another diabetes category, GLP-1 drugs.

"Major brand exclusions and associated net pricing declines are highly likely" in these areas, the company figures. It's "reasonably likely" that the same pressures will hit oral anticoagulants--such as the warfarin alternative meds from Pfizer ($PFE) and Bristol-Myers Squibb ($BMY) (Eliquis), Johnson & Johnson ($JNJ) and Bayer (Xarelto) and Boehringer Ingelheim (Pradaxa). Irritable bowel disease, too; several new drugs in that field have hit the market over the past couple of years, including Allergan ($AGN) and Ironwood's ($IRWD) Linzess.