Growth in prescription spending had slowed, but increased rapidly in 2014 and 2015
New specialty drugs are having an upward effect on spending, according to CMS, echoing other analyses by PwC, Express Scripts and IMS Health. In 2015, pharmaceutical spending is grew 8% on a per capita basis, but analysis of CMS projections suggests growth in per capita drug spending will decelerate to 5.3% in 2016 and 5.9% in 2025.
Estimates suggest that Rx drugs will continue to represent a larger portion of overall health spending
Prescription drugs had represented a shrinking share of total health spending in recent years, but drug spending has since increased and is expected to continue to grow over the next several years
Out-of-pocket spending for Rx drugs remains flat in 2015, physician services spending grew
In 2015, per capita out-of-pocket spending on prescription drugs was similar to the previous year, however physician services are estimated to have increased slightly.
About one in four people taking prescription drugs report difficulty affording their medication, and a recent Kaiser Family Foundation opinion poll found that 51% of voters consider a candidate's plan to address prescription drug prices important to their vote in the 2016 presidential election.
Out-of-pocket costs for Rx drugs are expected to increase, but will likely represent a smaller portion of overall Rx spending
While per capita out-of-pocket spending on prescription drugs is expected to grow in coming years, it has fallen as a share of total drug spending and this trend is projected to continue into future years. Medicare is expected to represent a growing share of drug spending over the next decade.
An IMS Institute report finds that net spending on drugs grew 8.5% from 2014 to 2015. The main drivers of pharmaceutical spending in 2015 were growth in brand-name drug prices, the emergence of new brand medications, and to a lesser extent, price growth for generic drugs. In the years before 2014, patent expiries played a significant role in slowing drug spending growth. The effect of these patent expires peaked in 2012, reducing spending by $32.6 billion, according to IMS estimates. Since then, however, the impact of patent expiries has tapered, resulting in only a $12.1 billion reduction in drug spending in 2014, and a $14.2 billion reduction in 2015.
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. The Express Scripts 2015 Drug Trend Report indicates that the traditional drug trend (utilization and cost) decreased from 6.4% in 2014 to -0.1% in 2015 after having increased about 167% from 2013 to 2014. The trend for specialty drugs jumped 119% from 2013 to 2014 and then experienced a 42% decrease from 2014 to 2015.
Before 2010, many more traditional drugs were approved than specialty drugs. Since then, there has been at least one more approval of specialty drugs than traditional drugs, with the greatest difference being in 2013, when 19 specialty drugs were approved, compared to 9 traditional drugs.
Medications for inflammatory conditions (rheumatoid arthritis, psoriasis) accounted for about 31 percent of spending among the top 10 specialty therapy class drugs in 2015. Medications for Hepatitis C were new to the top 10 list in 2014 when spending for just three Hepatitis C medications accounted for 96.4 percent of total spending for this class of treatment. In 2015, spending growth on Hepatitis C medications slowed to 7 percent.
The Express Scripts 2015 Drug Trend Report found that in 2015, diabetes medications were the most expensive of the top ten traditional therapy classes, ranked based on per-member-per-year (PMPY) spending. PMPY spending on diabetes medications was $77.50 in 2015, followed by $40.65 for pain/inflammation drugs, and $32.66 for high blood cholesterol medication.
For much of the past two decades – with the exception of the period surrounding the economic downturn – growth in utilization outpaced growth in pharmaceutical prices. The price index for drugs has held relatively stable since the mid-1990s (ranging in growth from about 1% to 5% annually), while the utilization index has changed more over time. Due to the way drugs are selected for inclusion in the price index, it can take some time for new drugs to be incorporated into the index.
Generic drug prices have declined while branded drug prices have nearly doubled in price
While generic drug prices have decreased over time, there have been some increases during the 2008-2015 time period. According to a report by Express Scripts, instances of generic drug price inflation has been due to manufacturer consolidation (fewer manufacturers producing the generic) and/or temporary shortages of active ingredients needed to produce the generic drug.
A report by the International Federation of Health Plans (IFHP) found that drug prices in the U.S. are higher on average than prices in similarly wealthy and sizable countries. The following slides provide some examples of specific drugs included in the IFHP report. In 2013, the United States had the highest average price for Celebrex (prescribed for pain). Data from IFHP indicate that the average price of Celebrex in the U.S. was about 63% higher than in Switzerland (the country with the 2nd highest average price) and about 341% higher than in Canada (the country with the lowest average price).
Nexium is prescribed to treat acid reflux. According to the International Federation of Health Plans, the average price of Nexium in the U.S. in 2013 was almost three times more than the average price in Switzerland, which had the second highest price after the U.S.
Humira, prescribed to treat rheumatoid arthritis, is ranked number 1 in per-member-per-year (PMPY) spending of the top 10 specialty therapy drugs in the Express Scripts 2014 Drug Trend Report. The report indicates that Humira accounted for 11.9% of total specialty drug spending in the U.S in 2014 and had a 10.7% increase in utlization. According to 2013 data from the International Federation of Health Plans, the average price of Humira in the U.S. is about 15% higher than the average price in Canada (the country with the 2nd highest average price) and about 155% higher than the average price in Switzerland (the country with the lowest average price).
Enbrel, prescribed to treat certain autoimmune diseases, is ranked number 2 in per-member-per-year (PMPY) spending of the top 10 specialty therapy drugs in the Express Scripts 2014 Drug Trend Report. The report also indicates that it accounted for 8.2% of total specialty drug spending in the U.S. in 2014 and had a 2.2% decrease in utilization. According to data from the International Federation of Health Plans, the average price of Enbrel in the United States is about 35% higher than the average price in Canada (the country with the highest average price after the U.S.) and about 119% higher than the average price in Switzerland (the country with the lowest average price).
Copaxone, prescribed to treat multiple sclerosis, is ranked number 4 in per-member-per-year (PMPY) spending of the top 10 specialty therapy drugs in the Express Scripts 2014 Drug Trend Report. According to the report, Copaxone accounted for 5.0% of total specialty drug spending in the U.S. and dropped 7.3% in utilization in 2014. Data from the International Federation of Health Plans show that in 2013, the average price of Copaxone in the United States was about 188% higher than the average price in Switzerland and 353% higher than the average price in England.
Gleevec (prescribed to treat some cancers) is ranked number 8 in per-member-per-year (PMPY) spending of the top 10 specialty therapy drugs in the Express Scripts 2014 Drug Trend Report. The report indicates that it accounted for 2.2% of total specialty drug spending in the U.S. in 2014, and its utilization dropped 5.3%. Data from the International Federation of Health Plans show that in 2013, the average price of Gleevec in the U.S. was more than 445% higher than the average price in Canada (the country with the lowest average price) and 71% higher than the average price in Switzerland (the country with the highest average price after the U.S.).
In 2013, the U.S. had the highest average price for Cymbalta (prescribed to treat depression, anxiety, and fibromyalgia). The average price of Cymbalta in the U.S. was almost double the average price in Canada and 4 times the average price in England.
Gilenya is prescribed to treat multiple sclerosis. Data from the International Federation of Health Plans show that in 2013, the average price of Gilenya in the United States was more than double the average price in Canada.
In 2013, prescription drugs accounted for 10% of U.S. health spending but 19% of employer insurance benefits. That is not much less than the 23% employers spent on inpatient hospital care.
Medicare has become a major payer for prescription drugs
With the launch of Medicare Part D and the ACA’s closing of the “Donut Hole” (a prescription drug coverage gap resulting in Medicare enrollees paying out-of-pocket in addition to their deductible and copayments or coinsurance), Medicare has become a major payer for prescription drugs. From 2005 to 2015, Medicare’s contribution to total national health spending on prescription drugs jumped from just 2% to 29%, making it the second largest contributor to drug spending after private insurance.
When asked about policy options for keeping prescription drugs cost down, 86% of Americans favored requiring drug companies to report on how drug prices are set. Eight-two percent favored allowing Medicare to negotiate with drug companies for lower drug prices, 78% favored limiting prices for high-cost drugs (e.g., for cancers and Hepatitis C), and 71% favored allowing the purchase of drugs imported from Canada.