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10 things you should know about medicine spending and costs

Holly Campbell   |     January 2, 2019   |   SHARE THIS

Discussions about costs are important. Too often patients struggle to afford the medicines they need. Our industry is committed to working with policymakers on solutions that enhance the competitive marketplace, lower costs for patients and promote continued medical innovation.

  1. Today, there are more than 140 personalized medicines and 42 percent of new medicines in development have the potential to be personalized therapies that can be targeted to specific patients and their individual health needs.
  2. Medicines are this country’s best chance at tackling the country’s biggest cost driver: chronic disease. Health conditions, such as cancer, diabetes and heart disease, are the leading causes of death and disability in the United States and account for about 90 percent of health care spending.
  3. 90 percent of all medicines dispensed in the United States are generic copies that cost a fraction of the price of the initial brand medicine. In addition, competition from generics and biosimilars are expected to reduce U.S. brand sales by $105 billion from 2018 to 2022.
  4. Due to negotiations in the market, retail medicine costs grew just 0.4 percent in 2017, the slowest rate since 2012, and net prices for brand medicines grew just 1.9 percent.
  5. On average, 40 percent of the list price of medicines is given as rebates or discounts to insurance companies, the government, pharmacy benefit managers and other entities in the supply chain who often require large rebates in order for a medicine to be covered. These rebates and discounts exceeded $150 billion in 2017 alone and are growing every year.
  6. Hospitals mark up medicine prices, on average, nearly 500 percent. An analysis of 20 medicines also found the amount hospitals receive after negotiations with commercial payers is, on average, more than 250 percent what they paid to acquire the medicine.
  7. Spending on Medicare Part B medicines has remained a small, stable share of total Part B spending, just 8 percent in 2016. Part B medicines accounted for just 3 percent of total Medicare spending in 2016.
  8. Health insurers are shifting more costs onto patients through deductibles, increased use of coinsurance and the use of four or more tiers for prescription drugs. The share of employer-sponsored plans requiring deductibles for the pharmacy benefit has increased from 23 percent in 2012 to 52 percent in 2017.
  9. Unlike care received at an in-network hospital or physician’s office, patients with high deductibles or coinsurance pay cost sharing based on the list price of a medicine, even if their insurer receives a steep discount. More than half of commercially insured patients’ out-of-pocket spending for brand medicines is based on the full list price. Patients with a deductible have seen their out-of-pocket costs for brand medicines increase 50 percent since 2014.
  10. Sharing negotiated discounts could save certain commercially insured patients with high deductibles and coinsurance $145 to $800 annually and would increase premiums about 1 percent or less.

Learn more at LetsTalkAboutCost.org

Holly Campbell

Holly Campbell Holly Campbell is a deputy vice president of public affairs at PhRMA focusing on the cost and value of medicines. Prior to joining PhRMA, Holly worked for large and small public relations firms where she provided strategic communications counsel, media relations and partnership expertise to health care and pharmaceutical clients. In her free time, she enjoys taking barre classes, trying new restaurants and spending time with Boss and Poppy, her rescue pups.

Topics: out of pocket costs, Part B

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