Study: Insurer spending on drugs up sharply since 2010

Karen Bouffard
The Detroit News

A study by one of the nation’s largest insurers has found that its affiliates are spending 73 percent more on prescription drugs than in 2010, and the majority of those expenses are on brand drugs, despite a growing acceptance of generic drugs across the country.

The study, released Wednesday, by the national Blue Cross Blue Shield Association, provided a seven-year analysis of prescription drug utilization, price changes and costs, and showed that drug prices have increased about 10 percent annually for the insurance group, which serves 106 million people nationally with about 4.5 million in Michigan.

Escalating drug prices have complicated the national debate over health care reform, and prompted calls to speed federal approval of generic alternatives to patented medications and make other reforms. Bipartisan legislation introduced March 30 in Lansing would add Michigan to a growing list of states that have passed laws requiring greater transparency about drug pricing.

The drug industry group, Pharmaceutical Research and Manufacturers of America (PhRMA), disputed the study’s findings, arguing, “Government actuary and pharmacy benefit manager data confirm a significant decline in medicine spending growth.”

The study found that much of the increase can be blamed on the high cost of proprietary “specialty” drugs for hard-to-treat conditions like Hepatitis C, cancer and some autoimmune disorders. But prices also have spiraled for brand name drugs used to treat chronic diseases like diabetes and asthma, the study found.

“We want members to have access to drugs and we need them to have access at affordable prices. We need to come back to affordability,” said Helen Stojic, director of corporate affairs for Blue Cross Blue Shield of Michigan.

Costs have increased for consumers, especially for brand name drugs. Consumers’ out-of-pocket costs for all prescriptions rose 3 percent annually over the time frame, and 18 percent annually for patented drugs, according to the study.

The share of less-expensive generic drugs prescribed to Blues members increased from 66 percent to 82 percent over the past seven years. But the savings weren’t large enough to offset the costs of new specialty drugs, which can cost from $4,000 to as much as $15,000 to $20,000 a month.

Brand name drugs accounted for 78 percent of total drug spending over the seven years, even though the share of prescriptions for brand name drugs decreased from 34 percent to 18 percent during that time.

The cost of brand name drugs that have no generic alternative, also known as “single source” drugs, is responsible for the lion’s share of the increase in prescription spending, the study found. The cost of single-source drugs rose by 285 percent since 2010, or an average annual rate of about 25 percent. Though they comprise less than 10 percent of all prescriptions filled, patent-protected single-source drugs now make up 63 percent of total drug spending, the study determined.

Holly Campbell, senior director of government affairs with PhRMA, said she had not yet seen the study, “but this appears to be another misleading report from Blue Cross Blue Shield Association on medicine spending in an attempt to justify discriminating against patients with chronic conditions such as cancer, rheumatoid arthritis and multiple sclerosis.

“After accounting for discounts and rebates, medicine spending growth in 2016 dipped into the low single digits, with growth rates between 2 and 5 percent,” Campbell added. “National Health Expenditure (NHE) projections released by the Centers for Medicare & Medicaid Services found medicine spending grew only 5 percent in 2016 and medicine spending and total health care spending are projected to grow by approximately 6 percent annually over the next decade.

“In addition, several pharmacy benefit managers have stated prescription medicine costs grew just 3-4 percent in 2016 – in line with overall health care cost growth.”

The advent of specialty medications has proved challenging for pharmacists as well as consumers and health insurers, said Eric Roath, a pharmacist and director of professional practice at the Michigan Pharmacists Association.

The cost of those drugs is so high that it’s hard for pharmacies to afford to keep them in stock. Obtaining prior authorization from insurance companies also can be arduous and time consuming. And more time is required to counsel patients on things like potential side effects, or how to take their medication.

“It’s a lot more than just making sure the patient has access,” Roath added. “It’s hard for the patients who don’t understand (the process). They’re coming in with their prescription, and then to say ‘Your insurance doesn’t cover this’ or ‘It’s going to be 48 or more hours before you can get this,’ can be difficult. It’s really hard from a patient care standpoint.”

For Senderra Specialty Pharmacy, a Texas-based company that recently established a Patient Services Center in Flint, helping patients and doctors navigate prior authorization is part of their business model. The process can be so complex that doctors and patients don’t always know who’s in charge of authorizing their prescriptions.

The Flint center employs about 300 people, from patient care coordinators, to nurses, oncology specialists and pharmacists. In addition to fielding calls from patients, the center provides prior authorization assistance to 15,000 physicians nationwide.

Insurance companies often hire pharmacy benefit managers, or PBMs, to oversee the prescription portion of their health insurance policies. Recently, there has been an increased focus on PBMs across the country as their operations and effectiveness in reducing costs have come into question.

Critics contend that PBMs contribute to escalating drug costs by not passing along savings they negotiate with drug manufacturers. Anthem, a large health insurer, recently ended its contract with PBM Express Scripts, alleging the company withheld billions in savings that should have been returned to the insurer.

State Sen. Tonya Schuitmaker has introduced legislation in the Michigan Senate that would increase PBMs’ transparency about drug prices.

“We need more transparency from the PBMs,” said Schuitmaker, R-Lawton. “A number of different factors impact rising drug costs and this is an attempt to look at just one of those factors, though a broader discussion is necessary if we hope to see significant reductions in the costs of prescription drugs.”