What are recent trends and characteristics of workers with high drug spending?

An updated version of this analysis is available here.

Prescription drug spending grew rapidly between 2014 and 2015, but increases have been more modest recently. Several studies by the federal government, pharmacy benefit managers, and insurers point to high prices for new “specialty” drugs as driving the spike, in addition to price increases for some existing brand name drugs. Prescription drugs are one of the leading contributors to health spending growth, and insurers frequently cite these higher drug costs as a reason for raising premiums so changes in their cost drivers can have significant effects on consumers.

This chart collection has been updated, but originally accompanied a related brief that explored recent trends in spending on prescription drugs among people with employer coverage, with a particular focus on people with high drug spending and high out-of-pocket drug spending. 

 

Related Content:

Health Spending

Health Cost and Affordability Policy Issues and Trends to Watch in 2024

Health Spending

Charges for emails with doctors and other healthcare providers

Growth in prescription drug spending increased in 2014, but has slowed considerably in recent years


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 14% in 2014. Since then, prices have moderated with almost no growth in 2016.

Even after rebates, drugs account for a bigger share of employer-sponsored health spending than many think


Retail prescription drug spending accounted for 21% of total spending in employer-sponsored health plans in 2016, not accounting for drug manufacturer rebates. Adjusting that for an estimate of rebates lowers the share of spending in employer plans for drugs to 19%. Looking at overall national health spending, drugs accounted for just 10% of spending. (The rebate amount was calculated by applying the same proportion of reported manufacturer rebates are of prescription drug point-of-purchase spending by private insurance, using estimates from Altarum.)  

Spending on new curative hepatitis C drugs increased rapidly following their introduction in 2013


A new curative drug to treat hepatitis C, Sovaldi, launched in late 2013, and some other new, curative drugs followed shortly thereafter. Among people with large employer coverage, annual per person spending (including people with $0 spending) on curative drug treatment for hepatitis C was 19 cents in 2013, and increased rapidly to $27 dollars in 2014 with the adoption of these new drugs.

The growth of overall drug spending was influenced by the arrival of blockbuster hepatitis C drugs


The introduction of curative drug treatments for hepatitis C such as combinations of Sofosbuvir, Ledipasvir, and Velpatasvir has a notable impact on the amount of drug spending in recent years. In 2014, the year following their arrival, drug spending growth in employer plans was more than 3 percentage points above growth when excluding these treatments.

Without new hepatitis C treatment, drug spending in the last 4 years would be noticeably lower


Cumulatively, starting in 2013, the annual drug spending growth has been noticeably lower without hepatitis C treatments compared to overall drug spending.

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 retail drug spending $5,000 and above (in 2016 dollars) increased from 1.4% in 2004 to 4.6% in 2016. The share with retail drug spending exceeding $20,000 (adjusted for inflation) also increased during the same time from 0.1% to 1.2%.

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 47 years old, while employees or their family members with drug costs below $100 are around 29 years old on average.

Women and men are similarly likely to have high drug spending, but men are more likely to have little to no drug spending


Men are more likely to have very low drug spending (from $0 to $100), in large part due to women taking oral contraceptive. However, men and women are similarly likely to have high drug spending. 

Related Content:

Health Spending

Health Cost and Affordability Policy Issues and Trends to Watch in 2024

Access & Affordability

How does cost affect access to healthcare?

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). After increase at somewhat similar rates  from 2007 to 2009 average spending for outpatient non-retail drugs as increased faster than retail drugs –with the exception of 2014. In 2016, the most recent year of data, spending growth for retail drugs was just 0.4%, while non-retail drug spending was 20.9%. Overall, non-retail drug spending been grew at an average of about 10.9% per year from 2004 – 2016, compared to 3.6% average growth for retail drugs over the same period.

Workers and their family members with certain diagnoses have much higher average drug spending


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.

Workers and their family members with certain diagnoses are more likely to have very high retail and total 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.

On average, insurance covers a larger share of retail prescription drug spending than a decade ago


Large employer plans are covering a larger share of enrollees’ total retail prescription drug spending than in previous years.  In 2016, insurance covered about 88% of retail prescription drug spending on average, up from 80% in 2004. In 2004, people with large employer coverage had drug spending averaging $753 of which insurance covered $605 and enrollees paid the remaining $148 out-of-pocket.  By 2016, average total drug spending had increased to $1,151, while out-of-pocket spending decreased modestly to $136, leaving insurers paying substantially more for drugs. These amounts do not, however, account for rebates paid to insurers by manufacturers, which may have changed over time.

Average out-of-pocket drug spending in large employer plans has 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 $170 in 2009 to $136 in 2016. When adjusted for inflation, average out-of-pocket retail drug spending for people with large employer coverage declined 28% from $189 in 2004 (in 2016 dollars) to $136 in 2016.

Deductibles and coinsurance represent a larger share of out-of-pocket drug spending than 12 years ago


Over the past 12 years, 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.

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. 2.7% 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.

People with out-of-pocket drug spending over $1,000 represent a small share of enrollees, but a larger share of drug spending


Those who have out-of-pocket drug spending in excess of $1,000 represent just 3% of all enrollees, but 35% of total drug spending and 35% of all out-of-pocket drug spending among people with large employer coverage.

People with high drug spending tend to have high total health spending and high out-of-pocket spending


As of 2016, total health spending (including on hospitalizations, physician care, and prescriptions) averages $5,529 per person among people with large employer coverage. However, for the 4.6% of people with drug spending exceeding $5,000, their average total health spending is much higher at $39,038. Average total health spending is even higher ($82,293) for people with drug spending above $25,000. Overall, out-of-pocket costs are also substantially higher for people who had high drug costs.

People with high out-of-pocket drug spending are more likely to be diagnosed with certain conditions


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%).

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 have claims for 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 22.7% of women in 2012 to 2.7% in 2016. The chart above shows the drop in women of reproductive age with out-of-pocket spending on oral contraceptive pills. 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.

 

Methods

We analyzed a sample of claims obtained from the Truven Health Analytics MarketScan Commercial Claims and Encounters Database (Marketscan). The database has claims provided by large employers (those with more than 1,000 employees) and health plans. In 2016, Marketscan captured medical claims for almost 20 million people representing about 23% of the 85 million people in the large group market. Claims were limited to people with more than six months of fee-for-service (FFS) claims; this excludes people who spent a majority of the year not enrolled in their current employer’s plan and/or enrolled in plan paid on an encounter basis.  In 2016, there were claims from 15 million people (representing 65 million enrollees) who had more than six months of FFS Coverage and 11 million claims (representing 46 million people) who had both filed an outpatient drug claim and had more than six months of FFS. Survey weights were applied to match counts in the Current Population Survey for large group enrollees by sex, age, state and whether the enrollee was a policyholder or dependent. People 65 years old and over were excluded.

Drug spending paid for by someone other than an enrollee’s insurer, drugs administered at an inpatient setting or not classified under the controlled substance act were excluded from the definition of retail drugs.  Each script was counted as a single prescription regardless of the quantity or dosage. Marketscan’s redbook classifies drugs by the therapeutic/ pharmacologic category of the drug product. Non-retail drugs are included on the outpatient and inpatient files in Marketscan.  These drugs were identified using the HCPCS level 2 code, where the code commenced with the letter ”J”.  Some exhibits are adjusted for inflation using the Bureau Labor Statistics CPI- All urban consumer index (series CUSR0000SA0)

The prescriptions measured as curative treatments for hepatitis C include the following: Daklinza, Zeptatier, Viekira XR, Mavyret, Technivie, Viekira PAK, Olysio, Sovaldi, Harvoni, Epclusa, Vosevi. 

Related Content:

Access & Affordability

How does cost affect access to healthcare?

Health Spending

Charges for emails with doctors and other healthcare providers

Out of pocket and insurance prices as well as disease-specific spending do not include any rebates that may reduce the cost of prescription drugs.

The Peterson Center on Healthcare and KFF are partnering to monitor how well the U.S. healthcare system is performing in terms of quality and cost.

More from Health System Tracker
A Partnership Of
Share Health System Tracker