“If you torture the data long enough, it will confess.” That famous line from economist Ronald H. Coase is perhaps the most apt summation of the recently released report by the insurance industry’s lobbyists at America’s Health Insurance Plans (AHIP), which claims to find that prescription drugs accounted for 22.1% of each premium dollar in 2014.
In examining the AHIP numbers, several facts omitted in the report must be highlighted. First, 2014 was an outlier year in terms of prescription drug spending, due to the introduction of transformative new Hepatitis C cures, which temporarily drove prescription spending growth noticeably higher as many patients with this debilitating, difficult to treat, and costly disease sought to take advantage of these breakthrough cures. What’s more, the more recent market entry of competing next-generation Hepatitis C therapies have driven the net prices for such drugs down by roughly half compared to their original list prices.
In addition, payors are increasingly making use of aggressive utilization management techniques to further drive spending down – including for these Hepatitis C cures. A recent Trio Health analysis showed that denials of coverage are rising despite the fact that these Hep C drugs have become less expensive. Treatment “non-starts” for prescribed Hep C drugs for patients with commercial coverage have grown exponentially, from 6% in 2014 to 39% in 2016, with 80% attributed to denials of coverage – more evidence of insurer discrimination.
Other reports cast doubt on AHIP’s 22% figure. An Avalere analysis of 2014 allowed claims in the individual and small group markets found that prescriptions accounted for only 17% of claims. And because health insurance premiums cover additional costs not described in the Avalere analysis – such as administrative costs and health insurer profits – the proportion of prescription drugs relative to all components of premium for this population is likely much lower than 17%.
Recently released data from the Centers for Medicare & Medicaid Services’ (CMS) National Health Expenditure Projections also throws cold water on the notion that prescription drug spending is growing unsustainably. CMS revised its 10-year projection of prescription drug spending downward by $18 billion, and projects that it will grow roughly at the same rate as total U.S. health care spending over the next decade. Highlighted separately from the health expenditures data, CMS also has projected that drug pricing growth in 2017 will be a mere 1.6 percent, the lowest inflation rate for drugs in a decade.
Recent reports from two major pharmacy benefit managers – comprising a majority of the employer market for prescription drugs – are consistent with the CMS findings. Express Scripps and Prime Therapeutics reported prescription spending increased last year by just 3.8 and 2.5 percent, respectively. Meanwhile, overall national healthcare spending rose 4.8 percent, according to CMS.
While net price and overall spending growth for drugs continue to moderate, insurers are under increasing scrutiny for the role they play in driving up patient out-of-pocket costs for medicines. Lawsuits against UnitedHealth and Cigna allege that their prescription benefit design can require that patients pay co-pays far in excess of the actual cost of the drug – with the insurer pocketing the difference. Insurers also have faced criticism for discriminatory formulary design, particularly against patients with high-cost health conditions such as HIV and Hepatitis C.
To learn more about the costs and value of innovative medicines – including how patient out-of-pocket costs are really determined – visit BIO’s new website, http://www.drugcostfacts.org.