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Helping Americans Get The Truth About Prescription Drug Savings
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A new report by Express Scripts has found that medication spending by commercial health plans grew by 13.1% last year, primarily due to the release of high cost Hepatitis C meds. Spending also increased significantly for compounded drugs. In the prior decade, total spending ranged between three and six percent.

Keep in mind that the headline statistic of 13.1% applies to how much was spent on drugs; it actually doesn’t tell us anything about the prices of the drugs. If drug utilization, which refers to the amount of drugs taken, increases while prices stay the same, then there’s more spending. As it turns out, utilization decreased by a marginal 0.1 % and d prices increased by 13.2%, demonstrating that drug costs were the primary cause of increased drug spending. In fact, a vice president at Express Scripts referred to the drug price increases as “unprecedented and unsustainable.”

Specialty drugs, which often require careful handling, administration, or monitoring, saw a dramatic 30.9% increase in spending. As mentioned earlier, spending on hepatitis C treatments was the primary driver in overall spending, skyrocketing by 742.6%. Other notable (though nowhere near even 100%) increases include 20% for oncology drugs, 24% for treatments for inflammatory conditions, and 17% for hemophilia drugs. It’s not uncommon for these medications to cost many thousands, even tens of thousands of dollars per month. Sovaldi, a hep C drug, costs $1,000 per pill. We covered the Sovaldi saga in depth.

The story for traditional medications, such as those commonly used to treat asthma, depression, diabetes, GERD, high cholesterol, and pain is much more mixed. Despite drug prices rising by 6.4% overall, prices dropped for five out of ten therapy classes. Depression medication prices, for example, plummeted by 18%. Interestingly, the report noted compound drugsas a therapy class, even though they treat a variety of conditions. These drugs had an unusually large price increase of 128%! Excluding compound drugs, drug prices for traditional meds were up only 2.3%.

Drug costs for traditional medications were contained due to continuing patent expirations of once blockbuster brand name drugs, resulting in more generics coming to market. Notable among these was the launch of a generic version of depression and diabetes pain medication Cymbalta.

By combining brand and generic drugs in determining overall expenditure and price increases masks high increases in brand name drug prices. The Express Script report does identify the top 10 traditional drug therapies, showing mostly double digit increases. Nexium, which treats GERD and heartburn, remained number one in terms of overall expenditures; its price increased by 10.8%. The price of Lantus, an insulin product to treat diabetes, was up 34%. These increases reflect a continuing trend from 2013, during which brand name drug prices increased by 13%, according to AARP’s Drug Price Report.

While generic drugs continued to help contain drug costs, that containment weakened in 2014. Many generic drug prices actually rose this past year – you can read our coverage here, where we discuss the absurdity of 1,000% price increases and show that brand versions of some of these meds are actually less expensive in other countries. The most popular generics decreased by only 20% from 2013 to 2014, compared to 30% the prior year.

To me, the backstory of this latest Express Scripts report is that there are flourishes of anti-pharma editorial. In discussing its response to incredibly high drug costs for new Hepatitis C medications, the report states:

After a year-long campaign advocating for fairer drug pricing, Express Scripts announced in December a new agreement with AbbVie, makers of the new hepatitis C medication, Viekira Pak™ (ombitasvir/ paritaprevir/ritonavir co-packaged with dasabuvir). The unprecedented arrangement expands both payer affordability and patient access. The cost to cure is now low enough that plan sponsors can afford to treat all hepatitis C patients with genotype 1, not just the sickest.

In that agreement, Express Scripts will only pay for Viekira Pak for patients with Hep C. They won’t cover Harvoni or Sovaldi, which are both manufactured by Gilead Sciences, except in special cases. In exchange for a reduction in price, AbbVie gains more sales. The PBM is essentially saying that some drugs are not priced “fairly” and so it has to play hardball. As we’ve written about before, for example, health insurance companies have made it clear that they cannot cover the most expensive medications for all their members. The fact is that healthcare businesses, such as pharmacy benefit managers and large health insurance companies, have more in common with average American consumers these days in their frustration with high drug prices.

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