- Medicare, Medicaid and private payers cover 82% of retail prescription drug spending, according to a new Kaiser Family Foundation (KFF) analysis.
- Private health insurers represented the largest slice of the overall retail drug spend at 42%, followed by Medicare at 30% and Medicaid at 10%. Patients, through out-of-pocket costs, and other payers accounted for the remaining 18% — at 14% and 4%, respectively.
- A disproportionate amount of money went toward a relatively tiny group of drugs, KFF found, with the top five pharmaceuticals accounting for a minimum of 10% of overall drug spend across Medicare Part D, Medicaid and large employer plans. The top 50 drugs were responsible for 40%.
Estimates on the cost of prescription drugs vary, due in part to inconsistency in calculation methods. Still, players across the healthcare spectrum agree the cost of prescription drugs is unsustainably high, and the subject has been in the regulatory spotlight for some time now.
The White House unveiled a blueprint to tackle prescription drug affordability more than a year ago with much fanfare, although Wall Street and academics criticized the plan as doing little to move the needle on real reform.
Over the past several months, the Department of Health and Human Services has released more targeted (and more controversial) measures. In October, it pitched a plan to create an “International Pricing Index” that would tie Medicare Part B drug prices in the U.S. to their equivalent, often starkly lower prices in foreign countries.
The plan, which would likely be effective in lowering drug prices but slam drugmakers’ stock prices and revenue, is still in the initial stages of the rulemaking process.
And earlier this month, the department finalized a rule to require pharmaceutical companies to disclose the list price of their drugs in direct-to-consumer television ads. Though the powerful pharma lobby clapped back by emphasizing the fact that the list price is rarely what the consumer actually pays, the measure is meant to shame companies into lowering the initial price tag of their drugs, according to HHS officials.
Multiple studies have shown high prescription drug costs are linked to higher healthcare spending across the board. The hope is that if drugmakers lower their list prices, savings will trickle down across the healthcare system.
KFF found wide variation in which drugs account for the most spend across Medicare Part D, Medicaid and commercial payers, with AbbVie’s best-selling anti-inflammatory drug Humira (adalimumab) snagging the top spot for large employers and Gilead’s hepatitis C medication Harvoni (ledipasvir/sofosbuvir) accounting for the most spend in Medicare Part D and Medicaid.
Humira and Harvoni were the world’s best- and second-best selling drugs, respectively, in 2016.
KFF also found the average annual out-of-pocket spending is higher among patients covered by Medicare Part D than patients covered by their employer. However, spending in both camps was lower in 2016 than a decade prior.
The nonprofit research group chalked up the differences to demographic disparities in patient populations. Employer plans typically cover people with fewer healthcare needs than those in Medicare and Medicaid.
Each group has unique health needs reflected in their insurers’ most-paid-for pharmaceutical. For example, Medicare beneficiaries are more likely to use drugs for high blood pressure and high cholesterol, while members of large employer plans are more likely to use antibiotics and asthma or allergy medications.
Although overlap in specific drugs between large employer plans and Medicare was low, KFF found out-of-pocket drug spending per user in Medicare and employer plans was highest for drugs to treat cancer, multiple sclerosis and rheumatoid arthritis.
KFF conducted the report by looking at 2017 claims data, which doesn’t account for rebates — or money drug manufacturers give pharmacy benefit managers, payers and state Medicaid programs for including their drugs in their formularies or plans. Experts estimate rebates are larger for Medicaid than Medicare Part D or private employers, although specifics are not available.
Another HHS proposal, to end safe harbor protections for drug rebates to PBMs, would hit payers harder than big pharma. Drug manufacturers would receive a “windfall” if the plan is enacted, according to payer lobby America’s Health Insurance Plans, although patients may see some benefit as well in the form of discounts at the pharmacy counter.