April 06, 2020
Growth in specialty pharmaceutical development continues to trend upward, with an increasing focus on very high-priced cell-based therapies; 2) utilization of specialty products continues to expand for a growing subset of conditions; 3) high prices and price inflation across the entire market are persistent; and 4) the rebate-driven contracting model for prescription drugs creates misaligned incentives for plan sponsors and plan members. Overall, prescription drug affordability challenges continue to make this issue one of intense interest among policy makers, patients, payers and other pharmaceutical supply chain stakeholders.
Position on Drug Pricing
Employer efforts to control drug trend via traditional utilization management techniques, plan designs and educational efforts, while necessary, are not enough for sustained affordability of prescription drugs. Underscored by the recent Large Employers’ Health Care Strategy and Plan Design Survey, high-cost therapies are large employers’ number one concern in managing pharmacy benefit plans and nearly half of respondents would welcome government involvement connected to the pricing of high-cost therapies.
Short-sighted proposals, such as capping out-of-pocket prescription drug expenses are likely to result in premium increases for plan participants and higher overall expenses for plans, including employer plans, and do not address underlying challenges.
Instead, an improved policy environment would focus on modifications to current policies that undermine or inhibit competition, thereby inflating drug expenditures. Reforms are needed across various federal programs and agencies including Medicare, Medicaid, the Food and Drug Administration (FDA), and the US Patent and Trade Office (USPTO) and include, but are not limited to:
- Removing uncertainties for value-oriented contracting and implementing indication specific pricing and reference pricing in public programs
- Limiting the reach of Medicare Part D “protected classes”
- Eliminating perverse payment incentives under Medicare Part B
- Encouraging the uptake of biosimilars and evaluating the utility of an “interchangeability” status
- Reforming permissive patent (USPTO) and exclusivity (FDA) protocols
- Banning pay-for-delay deals that inhibit the entry of generic and biosimilar competition
Why It Matters
- In 2017, prescription drugs accounted for 10% of U.S. health spending but 21% of employer insurance benefits. That is not much less than the 23% employers spent on inpatient hospital care.[i]
- Costly new specialty drugs are a major driver of both spikes in health spending and overall spending.[ii]
- The growth of employer-sponsored high-deductible plans over the past decade has put a spotlight on pricing concerns, bringing much-needed scrutiny to the pharmaceutical supply chain, or the “rebate-driven” contracting model.
- Per capita drug spending on specialty drugs increased by 55% from 2013-2016.[iii]
- While generic drug prices have decreased over time, there were notable increases between 2008-2016, and the trend is not promising.
More Topics
Articles & Guides
Benefits Communication
- 1 | “What Are the Recent and Forecasted Trends in Prescription Drug Spending?”
- 2 | “What Are the Recent and Forecasted Trends in Prescription Drug Spending?,” Peterson-Kaiser Health System Tracker (blog), accessed March 18, 2019, https://www.healthsystemtracker.org/chart-collection/recent-forecasted-trends-prescription-drug-spending/.
- 3 | “What Are the Recent and Forecasted Trends in Prescription Drug Spending?”