High Drug Prices Frustrate Government-Sponsored Health Programs

Feb 28, 2017
Health plans partnering with Express Scripts are delivering high-quality, affordable pharmacy care to millions of individuals enrolled in government-sponsored programs, but this record is at risk without decisive action to advance additional pro-patient and pro-payer policy changes.
  • Medicaid
  • Medicare
  • Public Exchanges


View the full report.

Our country is engaged in an important dialogue about how best to provide millions of Americans with much needed pharmacy care, and how to deliver that care in the most affordable and sustainable way. While the health plans entrusted with implementing these programs are, overall, managing pharmacy costs effectively, Express Scripts has identified additional areas where policymakers should act now to curb high drug prices and reduce wasteful spending.

Topline Findings

  • Medicare Part D plans managed by Express Scripts – which achieved higher CMS Star Ratings in 2016 compared to industry averages – held the increase in trend to 4.1%. A third of those Part D plans reduced spending on prescription medications in 2016.
  • Medicare Part D plans absorbed a slightly higher portion of a prescription’s cost, thus reducing patients’ share of pharmacy costs by 3.4% in 2016. The average patient out-of-pocket cost (including copays, deductibles and coinsurance) for a 30-day prescription was $8.35 in 2016, down slightly from 2015.
  • Pharmacy spending for Medicaid health plans increased 5.5% in 2016, driven largely by a 4.3% increase in unit costs for medications that have resulted from brand price inflation and formulary management limitations.
  • Year-over-year pharmacy spending for Health Insurance Exchange plans increased 14% in 2016, driven by increases in both unit costs and utilization. Specialty medication use remains high for the Exchange population, accounting for nearly 50% of all pharmacy spending.
  • Exchange plans held the line on patients’ out-of-pocket costs. The average patient out-of-pocket cost for a 30-day prescription was $12.05 in 2016, a slight increase from 2015.

Unit cost increases challenged Medicare, Medicaid and Exchange plans in 2016

Medicare plans managed by Express Scripts kept unit cost increases to 2.7% in 2016. However, Medicare rules -- including six “protected” drug classes and formulary requirements – prevented Medicare plans from more effectively managing unit cost increases in certain therapy classes.

The effect of these limitations was greatest among oncology medications, one of Medicare’s costliest therapy classes, which saw a 22.3% increase in trend. Use of oncology medications increased 14% in 2016 while unit costs increased 8.3%. Medicare plans spend $341.81 per member per year on oncology medications, more than five times the amount commercial plans spend on these medications.

A 2015 Express Scripts study found that oncology medications prescribed to Medicare beneficiaries cost an average $875 more per prescription compared to commercially insured members despite both groups exhibiting similar medication adherence rates. Oncology medications are one of the six Medicare protected drug classes.

As seen with the commercially insured, spending on medications for inflammatory conditions drove spending increases in the Medicare, Medicaid and Exchange populations. Humira® (adalimumab) and Enbrel® (etanercept), which dominate market share in government programs’ inflammatory classes, accounted for unit cost increases of 12 to 31% and drove government-sponsored plans to spend between $3,600 and $4,200 per prescription on inflammatory medications.

Unit costs for Exchange plans – which tend to have more open formularies to remain more competitive – increased 7.8% in 2016. Increases in unit costs were greatest among categories that have had the highest utilization trends in this population, including HIV, inflammatory conditions, diabetes and oncology. Unit costs for HIV, the costliest therapy class for the Exchange population, increased 16.4%, while utilization in that class increased 3.9%.

The impact of the much-discussed exorbitant price increase for EpiPen® (epinephrine autoinjector) in 2016 is visible when looking at the drug spending trends by age group among the Exchange population. Spend for drugs in the anaphylaxis therapy class among members aged 0-19, which has a higher prevalence of allergies, increased 18.8%, all driven by a 24.2% increase in unit costs and partially off-set by a 5.4% decrease in use.

While rising drug prices challenged all payers throughout 2016, not all had the flexibility to take needed action. As seen in the trends among commercial plans, formulary and utilization management programs go a long way in mitigating price increases. Proven pharmacy benefit management tools need to be part of the solution.

Policy recommendations to address high drug prices

Reviewing trends in drug pricing, including economic, competitive, and regulatory factors, Express Scripts has identified the following key areas where policymakers can take decisive action to make medicine more accessible and more affordable:

  • Rapidly increasing prices for brand-name biologic medications that have little competition (insulins)
  • Novel new drugs that come to market with out-of-reach price tags based on what the “market will  bear” (hepatitis C, cancer)
  • Aggressive price increases for drugs without competition, including older generics
  • Abusing FDA product enhancement incentives to raise prices and defer competition (Duexis)
  • Aggressively creating expanded markets for a medication through public policy initiatives while simultaneously raising prices (naloxone, abuse-deterrent opioids)

In a companion report released today, the company highlights common-sense public policies that, when enacted, can provide immediate relief to patients and payers. For example, legislation to reduce the biologic exclusivity period by just five years alone could save the federal government between $4 and $16 billion over 10 years. Additional recommendations include: increasing support and funding for the FDA, adopting more value-based purchasing agreements, closing loopholes in the Orphan Drug Act, incentivizing generic drug development and better leveraging electronic prior authorization and ePrescribing technology.

There are significant changes that can provide great savings and greater safety in the long-term, but we can also advocate for important policy changes that will make a difference right now. The reality is there are several ways our country can effectively address the issue of egregious pricing without limiting access, stifling innovation or creating disruption.

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