Juliette Cubanski Follow @jcubanski on Twitter, Matthew Rae Follow @matthew_t_rae on Twitter,
Katherine Young, and Anthony Damico
Published: May 20, 2019
Published: May 20, 2019
Prescription drug costs are a pressing concern
for both consumers and policymakers. Rising drug prices affect patients’
out-of-pocket costs as well as the budgets of private and public payers, though
the challenges vary by payer. This analysis compares prescription drug spending
and use in large private employer plans, Medicare Part D, and Medicaid, based
primarily on claims data by payer, which does not account for rebates. Rebates
differ by payer, and are estimated to be larger for Medicaid than
Medicare Part D or private employers.
Spending by private health insurers, Medicare,
and Medicaid accounts for a majority of prescription drug spending in the U.S.,
but the types of individuals who receive prescription drug coverage from these
three payers varies:
·
Medicare covers adults
ages 65 and older and younger people with long-term disabilities. Medicare’s
prescription drug benefit is provided through the Part D program to
Medicare beneficiaries who enroll in private stand-alone drug plans or Medicare Advantage drug
plans.
·
Medicaid is the
nation’s health insurance program for people with low income and provides a
wide array of medical and long-term care benefits to a diverse population of
low-income children and adults, individuals with disabilities, and people ages
65 and older. People 65 and older and those with disabilities who also have
Medicare coverage receive coverage of retail prescription drugs through
Medicare Part D.
·
Employers cover a
population that is healthier than either Medicare or Medicaid, and almost all covered
workers have coverage for prescription drugs.
This variation in the types of individuals
covered by each payer is reflected in some of the patterns of prescription drug
spending and use presented below.
Highlights from this analysis include:
·
Private health
insurance, Medicare, and Medicaid accounted for 82% of total retail prescription
drug spending in the U.S. in 2017, while patients paid 14% of the total as
out-of-pocket payments.
·
For spending on
specific drug products, the top five drug products with the highest total
spending alone account for at least 10% of total prescription drug spending in
large employer plans, Medicare Part D, and Medicaid.
·
While some of the same
drug products appear among the top 10 drug products with the highest total
spending in large employer plans, Medicare Part D, and Medicaid, there is also
variation that reflects differing covered populations.
·
Out-of-pocket drug
spending per user among people in large employer plans and Medicare Part D is
highest for drugs to treat cancer, multiple sclerosis and rheumatoid arthritis.
·
Antidiabetic agents,
antivirals and psychotherapeutics are among the top therapeutic classes by
total spending in large employer plans, Medicare Part D, and Medicaid.
Spending by private
health insurance, Medicare, and Medicaid accounts for more than 80% of total
retail prescription drug spending in the U.S.
Figure 1: Total U.S.
Retail Prescription Drug Spending, 2017
In 2017, total U.S. retail prescription drug
spending was $333 billion, after accounting for rebates, with the majority
(82%) of spending incurred by the three major sources of payment in the U.S.
health system: private health insurance, Medicare, and Medicaid. Among all
payers, private health insurance accounted for the largest share of drug
spending, at 42%, followed by Medicare at 30%, and Medicaid at 10%. Patient
out-of-pocket costs represented 14% of total retail drug spending.
Spending on retail
prescription drugs accounts for a larger share of total personal health care
spending for private health insurance and Medicare than Medicaid
Figure 2: Percent of
Total Personal Health Care (PHC) Spending Accounted for by Retail Prescription
Drug Spending, 2017
In 2017, retail prescription drug spending
accounted for 13% of total personal health care spending in private health
insurance plans and 15% of personal health care spending in Medicare. Drug
spending as a share of personal health care spending in Medicaid was lower (6%)
because Medicaid also pays for more expensive services, including long-term
services and supports that are not paid for by private insurance or Medicare.
Across payers, a small
number of drug products account for a disproportionate amount of total drug
spending
Figure 3: Top Drug
Products as a Percent of Total Drug Spending, 2016
For large employer plans, Medicare Part D, and
Medicaid, the top five drug products with the highest total spending alone
account for at least 10% of total prescription drug spending by each payer
(13%, 10%, and 10%, respectively), while the top 50 drug products account for
roughly 40% of total prescription drug spending (39%, 43%, and 41%,
respectively). These estimates do not account for rebates.
The top 50 drug
products by spending account for a large share of total drug spending but a
relatively small share of total prescriptions in large employer plans, Medicare
Part D, and Medicaid
Figure 4: Top 50 Drug
Products as a Percent of Total Drug Spending and Total Prescriptions, 2016
While the top 50 drug products account for
roughly 40% of total prescription drug spending for large employers, Medicare
Part D, and Medicaid, the share of total prescriptions accounted for by the top
50 drug products is much smaller: only 8% for both large employer plans and
Medicaid, and 15% for Medicare Part D.
In 2016, total drug
spending in Medicare Part D and Medicaid was highest for Harvoni (for hepatitis
C); in large employer plans, total drug spending was highest for Humira (for
rheumatoid arthritis)
Figure 5: Top 3 Drug
Products by Total Spending, 2016
In 2016, the drug product with the highest
total spending in Medicare Part D and Medicaid was Harvoni, a curative
treatment for hepatitis C that was approved by the FDA in October 2014; total
spending on Harvoni was $4.4 billion in Medicare Part D and $2.2 billion in
Medicaid (not accounting for rebates payers may have received). The number one
drug product for large employers in 2016 was Humira, a treatment for rheumatoid
arthritis, with $4.9 billion in total spending (also not accounting for
rebates).
While some of the same
drug products appear among the top 10 drug products with the highest total
spending in large employer plans, Medicare Part D, and Medicaid, there is also
variation that reflects differing covered populations
Figure 6: Top 10 Drug
Products by Total Spending, 2016
Among the top 10 drug products with the
highest total spending in large employer plans, Medicare Part D, and Medicaid,
there are two products in common: Harvoni, a treatment for hepatitis C, and
Lantus Solostar, an insulin therapy for diabetes. There is additional overlap
in the top 10 lists for large employer plans and Medicaid, including treatments
for attention-deficit/hyperactivity disorder (ADHD) and HIV. Despite the
overlap, the ranking of these drug products generally differs across payers,
and there is also variation in which products have the largest total spending
for each payer, which reflects the different types of populations covered. In
particular, for Medicare Part D, the top 10 list includes treatments for
cancer, chronic obstructive pulmonary disease, and high cholesterol which are
more commonly used by older adults. For Medicaid, the top 10 list includes
several psychotherapeutic medications, reflecting the important role that Medicaid plays in
meeting the needs of people with mental illness.
Antibiotics and
asthma/allergy drugs are among the most commonly used drugs in large employer
plans, while drugs for high blood pressure and high cholesterol are more
commonly used in Medicare Part D
Figure 7: Top 10 Drug
Products by Number of Users, 2016
Atorvastatin calcium (generic for Lipitor), a
treatment for high cholesterol, was used by 9.3 million people in Medicare Part
D plans, more users than any other drug product used by Part D enrollees in
2016. The antibiotic amoxicillin was used by 8.5 million people in large
employer plans in 2016, more than any other drug product used by people in
large employer plans in 2016. Because the most commonly used drug products are
generics, average total and out-of-pocket spending per user is relatively low
for these drugs.
Hepatitis C and cancer
treatments have the highest average total spending per user in large employer
plans and Medicare Part D
Figure 8: Top 10 Drug
Products by Average Total Spending Per User, 2016
Two hepatitis C treatments, Sovaldi and
Harvoni, are among the top 10 drug products by total spending per user in large
employer plans and Medicare Part D, with total spending per user on both
products of more than $70,000 in 2016. Cancer drugs are also among the drug
products with the highest total spending per user for large employer plans and
Medicare Part D, including Revlimid, Ibrance, and Gleevec, with annual costs of
at least $60,000 per user.
Out-of-pocket drug
spending per user among people in large employer plans and Medicare Part D is
highest for medications to treat cancer, multiple sclerosis, and rheumatoid
arthritis
Figure 9: Top 10 Drug
Products by Average Out-of-Pocket Spending Per User, 2016
Although there is little overlap in the
specific list of top 10 drug products used by people in large employer plans
and Medicare Part D in terms of annual average out-of-pocket spending per user,
the types of drugs with the highest out-of-pocket costs are similar, and
include drug products to treat cancer, multiple sclerosis, and rheumatoid
arthritis. In 2016, people in large employer plans paid more out of pocket for
Xyrem, a treatment for narcolepsy, than for other drug products—$1,568 on
average. In 2016, the hepatitis C treatment Harvoni was the most expensive drug
product for Part D enrollees, with $5,235 in average annual out-of-pocket costs
per user among those who did not receive low-income subsidies.
Antidiabetic agents,
antivirals, and psychotherapeutics are among the top therapeutic classes by
total spending in large employer plans, Medicare Part D, and Medicaid
Figure 10: Top 10
Therapeutic Classes by Total Spending, 2016
In terms of total spending on prescription
drugs by therapeutic class, antidiabetic agents and antivirals are among the
top 3 classes for large employer plans, Medicare Part D, and Medicaid. Total
spending on antidiabetic agents, the number one class for Medicare Part D, was
$20.0 billion for Part D, $9.0 billion for large employers, and $5.7 billion
for Medicaid (not accounting for rebates on drug products in these classes).
Total spending on antivirals, the number one class for Medicaid, was $9.2
billion for Medicaid, $11.8 billion for Medicare Part D, and $6.3 billion for
large employer plans. But as with total spending by drug product, the rankings
of top drug classes by spending show variation across payers that reflects
variation in covered populations; for example, psychotherapeutics rank higher
for Medicaid and Medicare Part D than large employers, while molecular targeted
therapy (cancer treatments) rank higher for Medicare Part D than large
employers.
Cardiac drugs,
psychotherapeutics, and pain medications are among the top therapeutic classes
by volume in large employer plans, Medicare Part D, and Medicaid
Figure 11: Top 10
Therapeutic Classes by Number of Prescriptions, 2016
In terms of number of prescriptions filled,
the most commonly used types of drugs in large employer plans, Medicare Part D,
and Medicaid include cardiac drugs and psychotherapeutic agents. The number of
prescriptions for cardiac drugs—the top drug class by volume in large employer
plans and Medicare Part D—was 69.9 million in large employer plans, 246.6
million in Medicare Part D, and 52.8 million in Medicaid. The number of
prescriptions for psychotherapeutic agents—the number two drug class by volume
in Medicaid and Medicare Part D and number three in large employer plans—was
56.2 million in large employer plans, 118.4 million in Medicare Part D, and 68.3
million in Medicaid.
Annual average
out-of-pocket spending is higher among people in Medicare Part D plans than
those in large employer plans, but spending by both groups was lower in 2016
than in 2007
Figure 12: Annual
Average Out-of-Pocket Drug Spending, 2007-2016
People in Medicare Part D plans spend more out
of pocket on prescription drugs than people in large employer plans, on
average. In 2016, people in Medicare Part D spent $365 out of pocket on drugs,
more than 2.5 times the average out-of-pocket drug spending by people in large
employer plans that year ($132). Between 2007 and 2016, average out-of-pocket
drug spending by people in large employer plans decreased somewhat. Part D
enrollees also spent less out of pocket in 2016 than in 2007, on average, but
their out-of-pocket costs have been relatively flat since 2012, after
decreasing between 2010 and 2012 due to a provision in the Affordable Care Act
to phase out the coverage gap in the Part D benefit.
A larger share of
people with Medicare Part D have high annual out-of-pocket drug costs compared
to people with employer coverage
Figure 13:
Distribution of Annual Out-of-Pocket Retail Drug Spending, 2016
In 2016, nearly 1 in 10 people in Medicare
Part D plans (9%) had out-of-pocket drug spending above $1,000, compared to 3%
of people in large employer plans. Conversely, more than 8 in 10 people in
large employer plans (84%) had out-of-pocket drug costs below $200, compared to
60% of people in Medicare Part D plans.
Juliette Cubanski and Matthew Rae are with KFF; Katherine Young
was with KFF when the analysis was conducted. Anthony Damico is an independent
consultant.
|
This analysis is
available both at kff.org and the Peterson-Kaiser Health System Tracker, a
partnership between the Peterson Center on Healthcare and KFF.
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