Prescription drugs play a critical role in helping to prevent, manage, and cure disease, yet they are a key factor in rising healthcare costs and have become a hot-button issue with consumers and policymakers.  One in four people taking prescription drugs report difficulty affording their medication and recent Kaiser Family Foundation opinion polling has found bipartisan support for government action to lower prescription drug costs. 

 

In 2017, per capita prescription drug spending slightly decreased (down 0.3%) for the first time since 2012. In 2015, pharmaceutical spending grew 8.1% on a per capita basis and in 2014 these costs had grown 11.5%, particularly because new specialty drugs came to market. According to an analysis by IQVIA (formerly the IMS Institute for Healthcare Informatics) net spending on drugs in 2017 was driven largely by the introduction of new brands and price increases for existing drugs still under patent protection. Compared to the previous years, the price of generics had a downward effect on overall drug spending. Looking ahead, CMS projections suggests growth in per capita drug spending will be moderate through 2027.

 

Prescription drugs had represented a shrinking share of total health spending through 2013, but increased in 2014 and 2015 with the introduction of some high cost specialty drugs. In 2017, drug spending did not grow as much as spending on other services, however, CMS projects drug spending as a portion of overall health spending will remain consistent over time.

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There are three types of prescription drugs: generic, brand, and specialty:

• Generic medications are defined as drug products that are comparable to a brand drug product in dosage form, strength, route of administration, quality and performance characteristics, and intended use.

• Brand medications are defined as medications that have a trade name and are protected by a patent (and can be produced and sold only by the company holding the patent).

• Specialty drugs are generally defined as high-cost prescription medications that treat complex conditions, are bioengineered using a living source, and require special handling and administration.

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KEY FACTS​​

Between 2009 and 2014, there was a fundamental shift in spending trends in the US market toward high-priced medicines used to treat substantially smaller patient populations. According to an analysis of the top 100 selling drugs, a new report known as the “Budget-Busters: The Shift to High-Priced Innovator Drugs in the USA” revealed that:

• The median price of the top 100 drugs increased from $1,260 in 2010 to $9,400 in 2014, representing a sevenfold increase

• The median patient population size served by a top 100 drug in 2014 is 146,000, down from 690,000 in 2010.

• There are now seven treatments priced in excess of $100,000 per patient per year in 2014, versus four in 2010.

 

Generic Drugs

While the cost of generics is increasing due to fewer generic drug manufacturers (from consolidation), shortages of active ingredients, and fewer blockbusters going generic in the next three to five years, generics are still a good option compared to brand name alternatives. In addition, for every 1% increase in generic medication mix as a total percentage of one’s brand-generic-specialty mix, a health plan can see from $500,000 to $1 million in savings (depending on total population in the health plan).

 

Specialty Drugs

Specialty pharmacy is the fastest growing sector of pharmacy spending today, with spending trends of 18.3% in 2012 and 15.6% in 2013. Much of the spending on specialty pharmaceuticals is concentrated in just four therapy classes: inflammatory conditions, multiple sclerosis (MS), cancer, and HIV.  Drugs to treat these four conditions account  for almost 70% of the total per member per year (PMPY) spending on specialty pharmaceuticals.  In addition:

• Over the last 20 years, the number of specialty pharmaceuticals increased from 10 to more than 900.

• Although less than 1% of the US population uses specialty drugs, they account for more than 25% of total pharmacy spending.

• Specialty drugs are generally very expensive compared to traditional medications, costing tens of thousands of dollars per treatment.

Given these facts, it is understandable why the health insurance industry is campaigning against the high prices of specialty drugs. For its part, the brand-name pharmaceutical industry insists that health insurers often put these specialty drugs on the most expensive tier of their formularies, requiring patients to pay high out-of-pocket costs. However, any government policy forcing insurers to cover a higher share of the price of a specialty drug will not reduce the cost of medications; instead, they will shift the cost to patients’ premiums, further burdening the consumer.

 

Impact and Consequence When Affordability Is Not Optimized Based on a recent survey by Consumer Reports, 33% of Americans are paying an average of $39 more out of pocket for their regular prescription medications, and 10% are paying as much as an extra $100 per month. Among the drugs that have seen the highest increases are medications for asthma, high blood pressure, and diabetes, which went up by more than 10% in 2014. For low-income and many fixed-income Americans, paying the rising cost of prescription drugs means cutting back on daily expenses like groceries and rent payments.  According to the survey:

• One out of four people who had an increase in their prescription drug costs were unable to pay their medication bills.

• One in five report difficulty affording their medication (including 15% who say it is somewhat difficult and 9% who say it is very difficult to afford their prescriptions). 

• Seven percent said they missed a mortgage payment.

• One in four people stopped getting their prescriptions filled.

• One out of five skipped scheduled doses.

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This is hardly a prescription for good health. These price increases also affect employers and insurers, who are transferring some of these costs to consumers; state Medicaid programs for the poor; and Medicare programs. So, despite the number of people who have health insurance or qualify for government-assisted programs for medical care, an increasing number of people are unable to pay for the medications they need.

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For More information about Medication Affordability, see the resources below:

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