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DrugPrice

Drug Price Increase

When a manufacturer raises the list price (WAC) of an existing drug, historically a common practice that drove much of the growth in U.S. drug spending.

How It Works

U.S. drug prices increase yearly in a way that most consumer goods do not, and the pattern is uniquely American, European and Canadian reference-priced markets typically see flat or declining drug prices over time. A GoodRx analysis of the January 2024 price-hike wave found 775 brand-name drugs with list-price increases averaging 4.5%, and ~60 drugs with increases over 9%. Humira's WAC climbed from roughly $1,300/month at launch in 2003 to $6,600/month by 2022, a 400%+ increase over the drug's patent life. The Inflation Reduction Act of 2022 introduced the first binding federal constraint on U.S. drug price inflation: Medicare Part B and Part D drugs whose WAC increases exceed CPI-U growth must pay inflation rebates to Medicare, with the rebate equal to the excess times Medicare utilization. CMS issued the first Part B inflation rebate invoices in 2023 covering 2023 Q1 utilization, and Part D inflation rebates began accruing October 1, 2022. The inflation penalty has visibly slowed Part D list-price hikes: 2024 January increases were the smallest in over a decade by median percentage. However, launch prices remain unconstrained, and drugs outside Medicare (commercial-only markets, 340B-heavy dispensing) can still raise prices aggressively. Manufacturers have also shifted from large annual hikes to smaller twice-yearly increases to stay under CPI growth.

Related Terms

  • Wholesale Acquisition Cost (WAC), The manufacturer's list price for a drug sold to wholesalers, often called the "sticker price" before any rebates or discounts.
  • Inflation Rebate Penalty, An IRA provision requiring drug manufacturers to pay Medicare rebates when a drug's price increases exceed general inflation (CPI-U) on a year-over-year basis.
  • Manufacturer Rebate, A post-sale discount paid by a drug manufacturer to a PBM or insurer in exchange for favorable formulary placement, reducing the effective net price below the list price.

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About This Definition

This definition is part of the DrugPrice Drug Pricing Glossary, 49 terms explaining how prescription drug pricing works in the United States. All definitions are written in plain language for patients, caregivers, journalists, and healthcare professionals.

this entity is one of the U.S. Medicare prescription-drug pricing concepts that recurs across this site. The definition above is the technical answer; the paragraphs below add the practical context for how the concept connects to the CMS Medicare Part D Drug Spending data data behind every per-entity page on the site.

In the CMS Medicare Part D Drug Spending data data, this concept shapes one or more of the fields that drive the per-entity grades and rankings on this site. The methodology page describes which fields feed into which output; this glossary entry documents the underlying term.

Source: CMS Medicare Part D Spending, 2026.