Rising prescription drug costs are a major concern in the United States, especially the effect these increases are having on individual patients who are on high-deductible health plans. Specialty drugs are often blamed as the culprit for soaring prices; however, recent PSG analysis reveals that inflation on non-specialty brand drugs also plays a big role in the increase.
Using 2018 pricing data published from industry-standard drug databases, we analyzed the percentage of National Drug Codes (NDCs) that realized inflation throughout the last year. We found that 5.2% of all NDCs realized price increases (up 0.2% from 2017), while 31.2% of specialty NDCs and 10.8% of all brand NDCs had price increases.
To better understand what is driving inflation in terms of utilization and spend, we looked at the top 500 NDCs based on 2018 spend for each of the drug types: brand, generic, and specialty. When averaging inflation by NDC, we saw an overall 6% inflation trend on the average wholesale price (AWP). Brand NDCs realized an average AWP price increase of 6.5%; for specialty NDCs it was 5.5%. For the NDCs that realized price increases, the AWP inflation trend was 9.9%—almost four times greater than the national Consumer Price Index (CPI) yearly inflation trend of 2.5%.
How inflation impacts members—and why rebates may not help
Brand manufacturers continue to raise drug prices for four primary reasons:
To offset price increases, brand manufacturers may offer PBMs a high rebate to keep their drug on a preferred formulary tier. These rebates may net the cost for the brand drug similar to that of the alternative—a pricing strategy that benefits a PBM and their client. However, rebates are not beneficial to the members enrolled in high-deductible health plans. These individuals typically pay the full drug cost out-of-pocket until they meet their deductible. In some cases, rebates do help members by lowering their medical premiums, however, these high deductible plan members are still paying these inflated costs at point of sale.
The good, the bad, and the outrageously expensive brand drugs
The top 25 manufacturers by spend realized an AWP inflation trend of 3.1% collectively from 2017 to 2018. However, there were several outliers within this trend that should be highlighted:
Examples of price gouging are rampant. In 2015, Valeant Pharmaceuticals purchased Salix, the maker of Glumetza—which treats diabetes. Since the drug was scheduled to become generic in 2016, Valeant immediately raised the price by 800%.
Here’s another. Actavis manufactures a 500-mg. muscle relaxant drug called Chlorzoxazone, which costs about $66 for 120 tablets. In 2018 we started seeing a shift in utilization to another NDC of Chlorzoxazone. This was a 250-mg. dose manufactured by Solubiomix LLC. If a patient received the same dosing as the 500-mg. drug, they would pay $4,480 to get 240 tablets…for the same drug!
Even manufacturers of drugs that have over-the-counter (OTC) ingredients are price gouging. After purchasing Vimovo from AstraZeneca, Horizon Pharma hiked the price of the pain medication a dozen times. What was listed at just $138 for a 60-pill bottle in 2013 is now $2,979 for that same bottle! Vimovo is especially controversial in the industry because it was created by combining naproxen (OTC brand name Aleve) and esomeprazole (OTC brand name Nexium), which patients can purchase separately and at a much lower cost.
Let’s not forget non-essential drugs
Non-essential drugs are drugs considered high in cost, yet low in clinical value, and have lower cost alternatives available. Manufacturers of the top 10 non-essential drugs by spend raised prices between 8.7% and 13.2% in 2017-2018. These drugs, as well as many other non-essential drugs, are increasing in price to compensate for the loss of utilization due to increasing management strategies transitioning these to generic and OTC alternatives (see table below). These dramatic price increases underline the wasteful system that ultimately leads to higher healthcare costs for all Americans.
|Therapeutic Category||AWP Inflation Trend|
|DICLEGIS||13.2%||(has OTC alternatives)|
|ANDROGEL||12.3%||(has generic alternatives)|
|VESICARE||11.6%||(has generic alternatives)|
|TROKENDI XR||10.7%||(has generic alternatives)|
|PAZEO||9.9%||(has OTC alternatives)|
|RESTASIS||9.6%||(has OTC alternatives)|
What you can do
Plans who have members paying high deductibles can fight against grievous price hikes. Here are a few ideas:
With help from the experts at PSG, you can fight back against rising costs and ensure more positive clinical outcomes for your members. Contact PSG for a complimentary consultation today.