Prescription Drug Spending Debate Turns to Payers

The past decade has been marked by major drug price hikes. But the spotlight has historically been on drug manufacturers and not so much on the role of health insurers.

A recent report from the Kaiser Family Foundation (KFF) found that prices increased faster than inflation for half of all Medicare-covered drugs in 2020, while PhRMA separately called out payers over increases.

KFF regularly provides updates on drug price increases, which take place at the beginning of each year. Its latest report analyzes the comparison between price changes for drugs Medicare covered between 2019 and 2020 to the 1% inflation rate over the same period. Trade association, PhRMA, echoes KFF's findings that point to health insurance causing higher drug spending.

The reports come at a time when concerns about rising drug prices have emerged due to inflation increasing. They also coincide with stalled enactment of the Build Back Better Act (BBBA), passed 220-213 by the House of Representatives last November. The legislation aims to lower prescription drug costs.

The issue of increasing drug prices hindering patient access is not new. In fact, more than the past decade has been marked by major drug price hikes. But the spotlight has historically been on drug manufacturers and not so much on the role of health insurers, whether public or private.

"Manufacturers raised prices for 72% of the 100 top-selling brand-name drugs in January alone, because drug companies use their monopoly power to keep prices high," Sen. Elizabeth Warren (D-MA) said on Twitter. "It's time to end Big Pharma's rampant price gouging," she added.

GoodRx, an American healthcare company that tracks prescription drug prices and offers coupons for discounts on medications, reported this year that pharmaceutical manufacturers raised the prices of 832 drugs by an average of 4.6% in January 2021. However, GoodRx also reported that prescription drug prices were no longer the fastest-growing commodity or service as of 2021.

Yet payers frequently review the medications they cover and adjust their coverage of these medications.

Prescription drug pricing is among AHIP's top five focus areas this year.

Elevated inflation has been a shared concern since the reopening of the economy last year, driven by disruptions in the supply chain and bottled-up consumer demand for goods and services resulting from the COVID-19 pandemic. The BBBA was set forth in Congress to serve as an inflation rebate proposal.

The Association for Accessible Medicines (AAM) took issue with the BBBA last November, arguing that the proposal is bad policy for generic drugs. AAM pointed to the application of inflation-based rebate penalties to generics in arguing that the legislative proposal "is misguided and would limit patients' access to low-cost medicines." Drug manufacturers have control over the pricing of brand-name drugs, whereas generics compete based on lower list prices, thus the proposal caters to the brand drug market.

There has been some progress toward increasing competition in the generic drug market in recent years. But "generics are indisputably not the cause of higher patient spending in Medicare," AAM said.

The federal government would be able to negotiate drug prices in Medicare and cap beneficiaries' out-of-pocket spending under Medicare Part D as part of the BBBA. Drug companies would be required to pay rebates to the federal government when annual drug price increases for Medicare Part D and Part B and private insurance outpace the rate of inflation, which has reportedly been the case since 2020. The price of insulin, which is under the spotlight of the pricing issue, would also be capped under the BBBA.

KFF compares for drugs administered by physicians—Part B—and retail prescription drugs—Part D—to the 1% inflation rate using the latest drug spending data from the Centers for Medicare & Medicaid Services through 2020. A recent surge brought the previous annual inflation rate up to the current 7.8%.

KFF arrived at its findings by concluding that 23 of 25 Part D drugs and 16 of 25 top-spending Part B drugs had price increases that exceeded inflation in 2020. The Part D drugs include anticoagulant medications Eliquis (apixaban) and Xarelto (rivaroxaban), as well as multiple myeloma medication Revlimid (lenalidomide). The Part B drugs include two cancer medications, PD-1-blocking antibody Keytruda and Opdivo (nivolumab), as well as the osteoporosis medication Prolia (denosumab).

PhRMA, meanwhile, conducted a survey in collaboration with market research company Ipsos that indicates that Americans would prefer that Congress focus more on reducing the overall costs of healthcare coverage such as premiums and copays (71%) rather than prescription drugs costs (29%).

"It's time to bring the patient perspective to the healthcare reform debate and focus on immediate solutions that Americans value the most,” said Debra DeShong, PhRMA executive vice president for public affairs. "That includes making sure insurers provide more dependable health coverage that helps patients get the care they need and lowers out-of-pocket costs for medicines. We are ready to do our part, and we remain committed to working with policymakers to improve our healthcare system."