ICYMI – 3 new reports show dramatic slowdown in medicine spending growth

Newly released government actuary and pharmacy benefit manager data confirm previous projections of a significant decline in medicine spending growth. After accounting for discounts and rebates, medicine spending growth in 2016 dipped into the low single digits, with growth rates between 2 and 5 percent.

• National Health Expenditure (NHE) projections released this week by the Centers for Medicare & Medicaid Services found between 2015 and 2016 medicine spending had the largest decline in spending growth of all health care categories. Medicine spending grew only 5 percent in 2016 compared to 9 percent in 2015. And medicine spending and total health care spending are projected to grow by approximately 6 percent annually over the next decade.

• Express Scripts’ annual Drug Trend Report found spending on medicines increased by just 3.8 percent in 2016, versus 5.2 percent in 2015. Express Scripts also found prices for brand-name medicines increased just 2.5 percent after accounting for discounts and rebates negotiated. 

• Prime Therapeutics’ just announced spending on medicines increased by just 2.5 percent in 2016. 

• CVS announced spending on medicines dropped to 3.2 percent in 2016.

But where do the discounts go?

These trend reports follow a recent analysis by the Berkeley Research Group which found brand biopharmaceutical companies retained just 63 percent of total gross (based on list price) spending on brand medicines. This suggests more than one-third of a brand prescription medicine’s list price is rebated back to insurance companies, PBMs and the government, or retained by other stakeholders in the supply chain.

This study begs an important question: Are we doing enough to ensure the growing amount of rebates and discounts flow to the patient? Unlike care received at an in-network hospital or physician’s office, a patient’s cost-sharing for medicines, including payments for care received prior to meeting a deductible or from a co-insurance, is typically based on the list price of a medicine, not the net prices after rebates and discounts are factored in.

Learn more about the cost and value of medicines at www.phrma.org/cost.