The annual growth rate in per-person retail drug spending for people with coverage through a large employer was relatively low (between 0 and 5% each year for the past decade) until spiking to 13.0% in 2014. Several analyses have identified specialty drugs as a primary driver of recent drug spending. Specialty drugs are used for the treatment of complex, chronic, or rare conditions such as cancers, and hepatitis C.
Retail prescription drug spending accounted for 21% of employer-sponsored health spending in 2014, while only accounting for 10% of overall national health spending during the same time period.
Spending has increased for both retail and non-retail drugs
In addition to retail drugs, which are those prescriptions filled at a pharmacy, some enrollees in large employer plan also have non-retail drug spending on prescriptions administered in an outpatient setting such as injections and infusions, including many chemotherapies. (Enrollees with hospital stays also likely have inpatient non-retail drug spending but these costs are often grouped with other hospital claims in a way that they are not as readily identifiable). Adjusting for inflation, average spending increased faster in 2014 for both retail (11.2%) and outpatient non-retail drugs (10.4%). However, non-retail drug spending had been growing at an average of about 7.4% per year from 2004 – 2013, compared to 0.5% average growth for retail drugs over the same period.
Employees and their families with certain diagnoses tend to have higher total drug spending (amounts paid by insurance and out-of-pocket). For example, enrollees diagnosed with diseases of the blood (like hemophilia), cancers and tumors, digestive diseases, circulatory conditions, and endocrine disorders (like diabetes and obesity) on average have drug spending that is more than twice as high as the typical enrollees.
The majority of people with employer coverage have little or no retail drug spending, but about 3.9% exceed $5,000 in drug spending
After several years of fairly low growth, per capita prescription drug spending increased 11.4% in 2014 and are projected to continue increasing, but at a lower rate. Health benefit claims and encounters provided by large employers reveals that while drug costs may have increased, most people with large employer coverage have little or no prescription drug spending. About 4% of people with large employer coverage have drug costs that exceed $5,000 per year.
About 1 in 10 workers and their family members with endocrine, circulatory, or blood disorders had retail drug spending over $5,000
Enrollees with certain diagnoses are more likely to have exceptionally high drug spending. Roughly 4% of all enrollees in large employer plans have drug spending that exceeds $5,000 in a given year. About 10% of people with endocrine or circulatory diseases have retail drug spending that exceeds $5,000, and about 13% of people with blood disorders have such high drug costs.
Workers and their family members with certain diagnoses are more likely to have very high drug spending
Enrollees with certain diagnoses are more likely to have exceptionally high drug spending. Roughly 4% of all enrollees in large employer plans have drug spending that exceeds $5,000 in a given year. However, people diagnosed with mental illness, cancers and tumors, digestive diseases, endocrine disorders, circulatory diseases, and diseases of the blood are more likely to have drug spending in excess of $5,000.
The share of people with employer coverage who have high drug spending has increased in recent years
When adjusted for inflation, the share of people with large employer coverage who have drug spending $5,000 and above (adjusted for inflation) increased from 1.6% in 2004 to 3.9% in 2014. The share with drug spending exceeding $20,000 (adjusted for inflation) also increased during the same time from 0.1% to 0.8%.
People with high drug spending tend to have high total health spending and high out-of-pocket spending
For the approximately 4% of people with drug spending exceeding $5,000, the average total health spending was $36,323 and $78,856 for people with drug spending above $25,000. Overall out-of-pocket costs (including spending on physician and hospital care) were also higher for people who had high drug costs.
People with high drug spending are older, on average, than those with little or no drug spending
People with employer coverage whose drug spending exceed $5,000 are on average around 46 years old, while employees or their family members with drug costs below $100 are around 29 years old on average.
Women are more likely to have high drug spending, and men are more likely to have spending below $100
Men are more likely to have annual drug spending below $100, while women are more likely to have annual drug spending above both $5,000 and above $25,000.
About 3% of people with large employer coverage have out-of-pocket drug spending that exceeds $1,000 per year
Most people with large employer coverage have little or no drug spending, and thus little or no out-of-pocket spending. 2.8% of people with large employer coverage have out-of-pocket drug spending exceeding $1,000 per year, and 0.6% have out of pocket spending that exceeds $2,000. Note that these data include out-of-pocket spending for covered services (cost-sharing), but some enrollees may purchase drugs that are not covered and pay all of the cost without submitting a claim.
Large employer plans are coverage a larger share of enrollees’ total retail prescription drug spending. In 2014, insurance covered about 86% of retail prescription drug spending on average, up from 80% in 2004. In 2004, people with large employer coverage had drug spending averaging $726 ($909 in 2014 dollars), of which insurance covered $584 ($732 in 2014 dollars) and enrollees paid the remaining $142 ($178 in 2014 dollars) out-of-pocket. In 2014, enrollees had similar average out-of-pocket spending, despite overall spending increasing substantially.
Average out-of-pocket drug spending in large employer plans have declined slightly in recent years
Average out-of-pocket spending on retail prescription drugs for people with employer coverage declined from a recent high of $167 in 2009 to $144 in 2014. When adjusted for inflation, average out-of-pocket retail drug spending for people with large employer coverage declined 19% from $178 in 2004 (in 2014 dollars) to $144 in 2014.
The share of people with employer coverage who have any out-of-pocket drug spending has decreased
While the share of people with employer coverage who take prescription drugs has mostly held steady, the share who have any out-of-pocket drug spending has decreased, particularly since 2011. This is likely due to a combination of generic substitution and the Affordable Care Act’s provision requiring certain preventive services (including contraception) to be covered without cost-sharing.
Out-of-pocket drug spending fell across age groups in recent years, but particularly for women of reproductive age
Out-of-pocket drug spending fell across age groups in recent years, but particularly for women of reproductive age. While out-of-pocket drug spending trends were similar across age groups for most of the past decade, females of reproductive age had a sharp drop in average out-of-pocket spending on prescription drugs corresponding to the timing of the ACA’s contraceptive coverage provision (which does not apply to “grandfathered” plans that were in place prior to the passage of the ACA).
The share of women of reproductive age who had out-of-pocket spending on oral contraceptive pills fell sharply after the ACA
The share of women of reproductive age who had out-of-pocket spending on oral contraceptive pills fell sharply after the ACA contraceptive coverage provision went into effect, from 20.9% of women in 2012 to 3.6% in 2014. The chart above shows the drop in women of reproductive age with out-of-pocket spending on oral contraceptive pills; however, the ACA provision also requires that the full range of FDA-approved contraception methods that are prescribed be covered without cost-sharing, such as intrauterine devices (IUDs), contraceptive implants, injectables, as well as oral contraceptives.
On average, annual out-of-pocket spending on prescriptions by people with large employer coverage dropped by about $24 from 2009 – 2014. Most of this drop ($15.96) occurred between 2009 – 2012, and is likely attributable to several popular drugs losing patent protection during that time period. From 2012 – 2014, average out-of-pocket spending on drugs continued to fall (by another $7.57 per person), with 63% of the drop during this period resulting from a sharp decrease in out-of-pocket spending on oral contraceptive pills, likely due to the ACA’s contraception provision.
The share of people with large employer coverage who have high out-of-pocket retail drug spending has increased
When adjusted for inflation, the share of people with employer coverage who have out-of-pocket spending for drugs exceeding $1,000 in a given year has increased from 1.0% in 2004 to 2.8% in 2014. The share of people with out-of-pocket drug spending in excess of $2,000 also increased during the same time period.
Over the past decade, out-of-pocket spending for prescription drugs has shifted from being paid almost entirely paid through copayments toward greater deductible and coinsurance spending (reflecting a general trend of higher deductibles in employer plans). Enrollees may be more sensitive to the actual price of health care with deductibles and coinsurance than they are with copays, which are flat dollar amounts. Additionally, copays require smaller, periodic payments that may add up over time, while a deductible may need to be met at once, potentially causing affordability challenges.
Those who have out-of-pocket drug spending in excess of $1,000 represent just 3% of all enrollees, but 33% of total drug spending and 33% of all out-of-pocket drug spending among people with large employer coverage.
Workers and their family members with certain diagnoses have higher average out-of-pocket drug spending
On average, people with large employer coverage who have certain diagnoses have higher out-of-pocket spending on drugs. While the average enrollee in large employer coverage has out-of-pocket spending on retail prescription drugs of $144, people with diagnoses of cancer ($264), digestive diseases ($270), mental illness ($284), endocrine disorders ($302), circulatory diseases ($309), and diseases of the blood ($321) have higher average out-of-pocket spending on retail drugs. When including non-retail drugs administered in outpatient settings, average out-of-pocket spending on prescriptions is even higher for people with these conditions.
People with large employer coverage who have certain diagnoses are more likely to have very high out-of-pocket drug spending
In addition to “retail” drugs, or those prescriptions filled at a pharmacy, both national and employer health spending is influenced by spending of drugs administered at a doctor’s office or hospital (such as injections or infusions, like many chemotherapies). When including these non-retail drug spending, people with large employer coverage who have certain diagnoses are even more likely to have out-of-pocket drug expenses in excess of $1,000.
People with large-employer coverage who have retail drug out-of-pocket spending in excess of $1,000 are more likely to be diagnosed with certain conditions, particularly endocrine disorders (70% of people with high out-of-pocket spending on drugs have an endocrine disorder like diabetes or obesity, compared to 27% of people with prescription out-of-pocket spending at or below $1,000); musculoskeletal disorders (57% vs. 29%); and circulatory conditions (56% vs. 21%). People with out-of-pocket drug spending in excess of $1,000 are also much more likely to be taking certain medications, particularly central nervous system agents like pain medication (75% vs. 33%); hormones and synthetic substitutes like insulin (70% vs. 26%); and cardiovascular drugs (63% vs. 18%).