As Rx Prices Rise, More Say Meds Are Affordable

Nov. 13, 2015 -- Medications are becoming more expensive for the sickest people, but at the same time, they’ve never been more affordable for the majority of Americans.

How is that possible?

We had an expert dig into some data for us, and he found that the number of people who say they’re having trouble affording their prescriptions is at its lowest level in about 10 years.

Joshua Gagne, PharmD, ScD, an assistant professor at Harvard, studies how drugs are used and paid for in large populations of people. We asked him if anyone was keeping track of drug affordability. It turns out that the CDC, in its National Health Interview Survey, has long asked Americans a question about how drug costs are hitting their wallets. Specifically, people are asked whether they were unable to fill a prescription in the last 12 months because of cost.

Gagne ran some numbers and found something unexpected. The percentage of Americans who say they haven’t filled a prescription in the last year because of cost is at its lowest level in a decade. In 2005, it was 9.33%. In 2014 -- the latest year available for this statistic -- it was 7.15%.

“At first glance, it was a little bit surprising to me, too,” Gagne says.

Recent headlines, after all, have been telling an entirely different story. Turing Pharmaceuticals and its CEO, Martin Shkreli, purchased the rights to an inexpensive older medication called Daraprim and hiked its price by 5000%.

And prescription drug spending is up 13% from 2013 to 2014, the largest such jump since 2001, according to IMS Health, a company that provides information and services to the health care industry. Some people who’ve long taken inexpensive pills are suddenly seeing double- and even triple-digit increases in their drug costs, often with no warning.

How is it possible, then, that more people seem able to afford their medications than ever before?

Experts say there are a few reasons.

Key Insights

For one thing, the CDC survey tells the story of averages. The number actually hides the experience of some of the sickest patients, like people who have cancer or cystic fibrosis, who need some of the most expensive drugs. For them, drug prices are crippling, yet because their meds represent a minority of all prescriptions filled, their experience really isn’t reflected in the overall number. Only about 2.3% of prescriptions have co-pays over $70, according to IMS Health.

And there are other important factors at work:

1. The Affordable Care Act expanded prescription drug coverage. Insurers are required to offer prescription-medicine coverage on their plans, which has given more people than ever critical help paying for these meds. New 2015 numbers from the CDC’s National Health Interview Survey -- the same one that asks about drug affordability -- show that only 9% of Americans lack health insurance. That’s down from 16% in 2010, and it’s the lowest the number of people in America who lack health insurance has ever been. The health care reform law also made contraceptives free and put caps on out-of-pocket drug costs for patients. About 60% of drug costs are picked up by private insurers, so the law helped the majority of people who are filling prescriptions.

2. More Americans are taking generic drugs. Most states now have laws on the books that let pharmacists fill prescriptions with less-expensive generic medications when they’re available. In 2014, nearly 90% of all prescriptions were being filled with generics, according to Statista.com. That’s up from 54% in 2003. That shift to generics has resulted in substantial savings for Americans and their insurers.

“I think this is probably one of the key drivers of drug affordability,” Gagne says.

According to IMS Health, more than three-quarters of prescriptions filled by consumers in 2013 cost people less than $10; and nearly one-quarter of all prescriptions were completely free.

3. Drug co-pay coupons make brand-name meds more affordable to the consumer.

Drug co-pay coupons pick up most of a person’s out-of-pocket costs, and they’re usually offered for expensive medications. They’re intended to steer people away from less-expensive generics by making the costs between brand-name drugs and generics comparable. The average out-of-pocket cost for insured people on the most expensive drugs covered by their insurance plan is around $73. A drug-price coupon brings that cost down to around $25, according to IMS Health.

And the use of the coupons is increasing. More than 700 brands offered them in 2014, up from 440 in 2012, according to a company called Zitter Health Insights, which tracks co-pay discount programs.

While you don’t end up paying more for pricey drugs at the pharmacy, insurers do. The coupons allow drug makers to hike their prices, but they protect consumers from feeling the pain.

“What I think the pharmaceutical companies have figured out is how to insulate the consumer from the high price but make the insurer pay it,” says Gerard Anderson, PhD, a professor at Johns Hopkins’ Bloomberg School of Public Health.

Here's the Catch

The trouble is that insurance companies do end up passing the cost to consumers, through higher premiums. In 2015, insurance companies raised the price of “benchmark” plans in state and federal health insurance Marketplaces by an average of 7.5%, for plans being sold for 2016. In some states, the price of these silver plans saw double-digit increases.

“Drug expenditures went up by 14% in 2014. We all have to pay it. We pay it in higher premiums. We pay it in higher taxes, because Medicare part D comes out of your tax revenues,” Anderson says.

And there are other signs that the forces that have made prescription drugs more affordable are fading.

1. Generic-drug companies are consolidating, which means less competition and high prices for consumers. With fewer companies willing to make the same generic drug, the ones who do can essentially charge whatever they want.

2. Expensive specialty drugs have mostly been used to treat uncommon problems, but recently expensive drugs have been approved for conditions that affect millions, rather than thousands of people, writes Peter Bach, MD, director of the Center for Health Policy and Outcomes at Memorial Sloan Kettering Cancer Center, in a recent article for the New England Journal of Medicine

One example is Harvoni, a pill that cures hepatitis C for nearly everyone who takes it. The average discount for the drug is 46% of its $94,000 list price for 12 weeks of treatment, leaving insurers and patients to pay about $51,000 per patient. 

The list-price cost to treat all 50,000 Kaiser Permanente members diagnosed with hepatitis C with new medications like Harvoni is $4.7 billion, says Kaiser spokeswoman Jaime Mulligan, citing the company's internal analysis and projections. While the medications such as Harvoni are covered, she says, the cost of the new hepatitis C drugs will exceed the company's current $4 billion outpatient prescription-drug budget. 

3. Pricey meds have become even more expensive. Before the year 2000, the average price of a year of drug treatment for cancer was about $10,000. In 2012, 12 of the 13 new drugs approved for cancer cost more than $100,000 each for a year of treatment -- a 10-fold increase.

4. The pace at which new, expensive specialty drugs are being introduced is quickening. The FDA increased its approval rate for new medications from 56% to 88% in the last 7 years, Bach writes.

All those things have made drug costs an urgent issue. Both the House and Senate have pledged to get to the bottom of runaway prices. It’s also shaping up to be an issue in the 2016 presidential election.

Bach says it's a focus that’s needed to protect patients.

“One thing we know about health care is that we can’t cram any of these genies back in the bottle. The longer we let this fester and allow prices to rise, the harder it’s going to be to unwind any of this,” he says.


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