The new year is supposed to be a period of refocusing. It’s a time for assessing the highs and lows of the previous year with clear eyes and finding clarity around the priorities, people, and passions that matter most in the year ahead.
If you’re one of the 131 million American adults who take a prescription medication—or simply someone selling into the pharmaceutical space—you might also be hoping to find some clarity around drug pricing in 2024.
For the average consumer, drug prices are about as transparent as a horoscope. Companies selling into the industry don’t have it any easier: Pricing often comes down to the complex relationship between provider, pharmacy, and insurer. With prices changing all the time—often for reasons obscured to the public—you might have an easier time plotting your astrological birth chart.
Luckily for patients, providers, and payors alike, the future of drug pricing is looking clearer. Whatever your star sign, you’ll want to check out our data-driven predictions for drug pricing trends in 2024.
Transparent drug pricing could become federal policy
Pharmaceutical manufacturers and payors have long left consumers in the dark about the actual cost of their medications. Convoluted pricing structures and benefits packages can make determining the out-of-pocket cost of drugs a lot more complicated than just about any other consumer good.
While the 2022 Inflation Reduction Act lowered prescription drug costs for Medicare patients and incentivized price stabilization, it didn’t make those prices any easier to understand.
The lack of clarity in drug pricing structures is not only frustrating; it can present a real financial strain on patients, particularly those with limited budgets. In response, 16 states have passed laws to create transparency around drug prices and pricing changes.
In Vermont’s law, for instance—the first of its kind to be passed—manufacturers must provide regulators with explanations for certain price hikes or the introduction of high-priced new drugs. Other states require pharma developers to issue current price information and multi-year schedules of price increases to the public via websites or regular hearings.
In 2024, these sorts of pricing regulations could become the law of the land if the Drug-price Transparency for Consumers (DTC) Act of 2023 passes. The bill would require pharmaceutical companies to disclose the list prices of their drugs in advertisements.
The U.S. is one of only two industrialized countries that allow direct-to-consumer advertising of prescription pharmaceuticals (hey there, New Zealand), and boy, do we spend a lot on it. From 2022 to 2023, U.S. drug manufacturers spent around $1.1 billion on advertising each month. On average, an American sees around nine drug ads every day, according to Congressional findings laid out in the bill.
By passing the DTC Act of 2023, Congress would help U.S. consumers understand the out-of-pocket costs of their medications—which, according to a 2019 study published in the Journal of the American Medical Association, most consumers severely underestimate. Increased transparency could dissuade consumers from seeking unnecessary medications, increase competition in the pharma market, and ultimately bring prices down.
Retail pharmacies need to hybridize to hold their market share
The organizations selling pharmaceuticals directly to consumers will likely see some changes in 2024 as well. The rise of online pharmacies, telehealth services, and mail-order prescriptions provide consumers with a variety of convenient alternatives to drug stores and grocery store pharmacy counters. To regain their edge, brick-and-mortar retail pharmacies will need to integrate digital solutions and additional in-store services that give consumers a reason to stop in.
Retail pharmacy chains represented a third of all physical pharmacies and took in roughly a third of all prescription revenues in 2021, according to a McKinsey report. But following a wave of pharmacy consolidation, retail leaders CVS and Walgreens are looking to downsize their footprints and close more than 1,100 stores collectively by the end of 2024. To accommodate for the change, these major chains are looking for opportunities in primary care, vaccine administration, virtual care, and other healthcare services.
In the short term, retail pharmacies still have the edge of brand awareness and general satisfaction: the McKinsey survey found that between 70% and 80% of consumers are satisfied with their retail pharmacy and typically only switch due to changes in insurance or residence.
These consumers are most likely to have either one monthly prescription or none at all, instead visiting to fill prescriptions for acute needs. In fact, there’s a negative correlation between a patient’s number of monthly prescriptions and their likelihood to rely on retail pharmacies. Patients with several recurring prescriptions are more likely to rely on specialty pharmacies, mail-order programs, or online services. General awareness around these alternative options is growing, too.
In 2024, we’ll likely see many retail pharmacies initiate or expand services designed to improve consumer convenience, including at-home and same-day delivery and virtual pharmacist support. They could also increasingly personalize the pharmacy experience through omnichannel engagement and other strategies to appeal to those customers with high-volume or specialty prescription needs.
Pharmacy benefit managers will get on the transparency train, too
Drug manufacturers and dealers aren’t the only ones feeling the pressure to operate more transparently.
Pharmacy benefit managers (PBMs)—the organizations that manage drug benefits for payors and certain employers—would be required to provide detailed reports about the prescription claims they fulfill and publicly list drug prices for patients if the Lower Costs, More Transparency Act of 2023 passes this year. Senator Bernie Sanders introduced a similar bill, the Pharmacy Benefit Manager Reform Act, to the Senate last year.
The LCMT Act passed in the House in December 2023 and will likely clear the Senate and President Biden’s desk later this year, but savvy PBMs should be moving toward transparency to attract payors anyway. Earlier in 2023, Blue Shield of California ended its partnership with CVS Caremark in favor of lower, more transparent drug pricing with Mark Cuban’s Cost Plus Drugs. In a maybe-not-so-coincidental move, CVS Health introduced a new pricing model that closely resembles the Cost Plus Drugs model.
Stay on top of the latest healthcare trends
What else is in store for healthcare in 2024? Way too much to mention in one blog. You can check out our overview of the top nine trends shaking up the industry in 2024. It’s easier to understand than drug pricing and a lot more reliable than astrology (don’t @ us, all you Aries).
You might also be interested in...
