Dive Brief:
- In the six years between January 2011 and December 2016, the share of total healthcare spending by regional insurer Harvard Pilgrim Health Care devoted to prescription drugs increased to 25% from 20%, according to an analysis published in Health Affairs last week.
- The study, which included all fully-insured members across four New England states, showed that spending per member per month increased by 92% for specialty medications compared to only 4% for non-specialty medications.
- Average out-of-pocket per patient per month spending for medication decreased overall from around $20 to around $16, but for patients receiving specialty medications, it has more than doubled since 2011 to $34 per month. Since 2014, drug spending has been higher than inpatient care spending, the analysis showed.
Dive Insight:
How much the healthcare system spends on prescription drugs is a matter of frequent debate. Typically, estimates put the figure between 10% and 15% of total spending.
A report published in Health Affairs last month, for example, suggested prescription drugs costs were around $480 billion in 2016, accounting for almost 15% of all spending on healthcare in the U.S. Of this, around two-thirds went to drug manufacturers, and pharmacy benefit managers saw somewhere around $23 billion in gross profits.
But Harvard Pilgrim's analysis shows that prescription drug spending can claim a much larger piece of the pie — for one commercial insurer at least.
The report in Health Affairs indicates that as the medication per member per month remained stable, the increase in spending seen between 2011 and 2016 was driven largely by increasing prices of specialty medications.
Significantly, this period covered the introduction of the near curative, but very costly, hepatitis C treatments. The high cure rate of these drugs, such as Gilead Sciences' Sovaldi (sofosbuvir) and AbbVie's Mavyret (glecaprevir/pibrentasvir), means that this market is likely to settle over time, and the number of drugs on the market has encouraged payers to negotiate over prices.
Prices are high and still rising for cancer and other therapeutic areas, however, as complex biologics grow in use. These have had, and look to continue to have, a major affect on drug spending.
On the flip side, growth in biosimilar use could help to offset price increases as previously expensive biologics reach the ends of their patent lives.