Your medicine should fight for you.
You shouldn’t have to fight for your medicine.
LET’S TALK ABOUT COST.

Many Americans are struggling to afford their medicines and have important questions about their medicine costs.

Here we address these questions by exploring trends in medicine spending, how insurers cover medicines, the role of middlemen like pharmacy benefit managers and what the biopharmaceutical industry is doing to make medicines more affordable.

  • 1)
    Who decides what you pay for your medicine?
    Your pharmacy
    The biopharmaceutical company
    Your health insurer — Biopharmaceutical companies do set the initial list price for a brand medicine, but ultimately your insurer determines how much of that cost is rebated back to you. More ►
    The government
  • 2)
    Insurers negotiate discounts on medicines, but what percentage of insured patients pay out of pocket based on the list price?
    5%
    52% — More than half of all commercially insured patients' out-of-pocket spending is based on the full list price of their medicines. More ►
    15%
    0%
  • 3)
    What are the majority of health care dollars spent on?
    Prescription medications
    Hospital visits
    Dental services
    Chronic disease — 90 cents of every dollar spent on health care is used to treat people with one or more chronic condition. More ►
  • 4)
    How do pharmacy benefit managers - middlemen in the biopharmaceutical supply chain - currently get paid?
    As a percent of the list price of a medicine — This creates a system where middlemen make more money when your medicine prices increase. Patients with high-deductible health plans or coinsurance do not always realize the benefit of growing discounts and rebates because their out-of-pocket costs are often based on the medicine’s undiscounted list price. Reforms to prevent pharmacy benefit managers and others in the supply chain from being paid off the list price of a medicine can fix broken incentives and make the system work better for patients. More ►
    A fee based on the value their services provide
    As a percent of what patients pay at the pharmacy
  • 5)
    Does my coupon count toward my deductible and out-of-pocket maximum?
    Yes
    No
    It depends — Normally, cost sharing paid by copay coupons count toward a patient’s deductible and out-of-pocket maximum. However, many insurers and pharmacy benefit managers are implementing copay accumulator programs that change how copay assistance for some medicines applies to patient cost sharing. When this tactic is applied, copay coupons do not count toward a patient’s deductible or out-of-pocket maximum. More ►
  • 6)
    How much did spending on medicines grow in 2017?
    20%
    15%
    5%
    0.6% — In 2017, spending on medicines grew at the slowest rate in years. More ►
  • 7)
    How much are hospitals marking up the cost of medicines?
    500% — Even after negotiations with payers, hospitals still receive nearly 2.5 times more than what they paid to acquire medicine. More ►
    25%
    100%
    10%
  • Score: 
    0/7
    Answers
    Q1)
    Who decides what you pay for your medicine?
    CORRECT ANSWER: Your health insurer -   More ►
    Q2)
    Insurers negotiate discounts on medicines, but what percentage of insured patients pay out of pocket based on the list price?
    CORRECT ANSWER: 52% -   More ►
    Q3)
    What are the majority of health care dollars spent on?
    CORRECT ANSWER: Chronic disease -   More ►
    Q4)
    How do pharmacy benefit managers - middlemen in the biopharmaceutical supply chain - currently get paid?
    CORRECT ANSWER: As a percent of the list price of a medicine -   More ►
    Q5)
    Does my coupon count toward my deductible and out-of-pocket maximum?
    CORRECT ANSWER: It depends -   More ►
    Q6)
    How much did spending on medicines grow in 2017?
    CORRECT ANSWER: 0.6% -   More ►
    Q7)
    How much are hospitals marking up the cost of medicines?
    CORRECT ANSWER: 500% -   More ►
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Who decides what I pay for my medicine?

While biopharmaceutical companies set the list price for a brand medicine, more than one-third is rebated back to payers and the supply chain. Insurers negotiate large rebates, but do not share these discounts with patients who pay a deductible or coinsurance -- a percentage of costs a patient is responsible for paying out of pocket -- for their medicine. Ultimately your insurer determines what you pay for your medicine out of pocket.

1/3

of the list price of a brand medicine is rebated back to payers and the supply chain

50%

More than half of commercially insured patients’ out-of-pocket spending for brand medicines is based on the full list price

What is the biggest driver of health care spending?

The biggest cost driver in our health care system is chronic disease. Patients with chronic diseases, like diabetes, account for 90 percent of all health care spending, and chronic disease is the leading cause of death and disability in the United States.

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Medicines are often the most cost-effective means of preventing and treating disease. Every additional dollar spent on medicines for adherent patients with ailments like congestive heart failure, high blood pressure, diabetes and high cholesterol generated $3 to $10 in savings on emergency room visits and inpatient hospitalizations. If medicines were used properly, the U.S. health care system could save $213 billion annually.

90%

of every dollar spent on health care is used to treat people with one or more chronic condition

Why are medicines more expensive in the United States?

The share of health care spending attributable to medicines in the United States is in line with that of other countries like Canada, France, Germany and Italy. Unlike many industrialized nations that seek cost containment through price controls, which restrict access to medicines, the United States relies on its own competitive marketplace to control costs.

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For example, Americans have access to cancer medications two years earlier than many European countries on average, and when cancer medications in those countries are eventually approved, they are often not reimbursed by the government.

14%

Spending on retail and physician-administered medicines represents 14% of U.S. health care spending

Why are medicines more expensive in the United States?

The share of health care spending attributable to medicines in the United States is in line with that of other countries like Canada, France, Germany and Italy. Unlike many industrialized nations that seek cost containment through price controls, which restrict access to medicines, the United States relies on its own competitive marketplace to control costs.

More +
Less +

For example, Americans have access to cancer medications two years earlier than many European countries on average, and when cancer medications in those countries are eventually approved, they are often not reimbursed by the government.

Who are pharmacy benefit managers?

Middlemen in the prescription drug supply chain called pharmacy benefit managers (PBMs) negotiate large rebates from biopharmaceutical companies on behalf of insurers and employers. But rather than getting paid based on the value their services provide, they get paid as a percent of the list price of a medicine. This creates a system where middlemen make more money when your medicine prices increase.

More +
Less +

Over time, how we pay for medicines in the United States has evolved into a complex system of list prices and rebates that move through an opaque supply chain. A medicine’s rebate – rather than its actual price – often determines if it is covered or where it sits on a formulary. This creates an unfair system that incentivizes higher list prices and larger rebates. Reforms to prevent PBMs and others in the supply chain from being paid off the list price of a medicine can fix broken incentives and make the system work better for patients.

Middlemen Profit
Medicine Cost
Middlemen make more money when your medicine prices increase.

Why don’t middlemen always let my copay coupons count toward my deductible?

In recent years, pharmacy benefit managers and insurers have been increasingly shifting more health care costs to patients. Since 2006, deductibles have increased 300 percent and there has been an 89 percent rise in what patients pay in coinsurance, which is a percentage of costs associated with their health care service or medicine. Coupon programs - offered by biopharmaceutical companies - provide a valuable source of assistance for many commercially insured patients who are facing rising out-of-pocket costs because of their insurance coverage.

More +
Less +

Unfortunately, many insurers and pharmacy benefit managers are implementing copay accumulator programs, changing how copay assistance for some medicines applies to patient cost sharing. These programs block copay coupons from being applied to deductibles and out-of-pocket maximums for some medicines, which over the course of the year leads to patients paying significantly more at the pharmacy.

300%

The amount deductibles have increased since 2006

Why don’t middlemen always let my copay coupons count toward my deductible?

In recent years, pharmacy benefit managers and insurers have been increasingly shifting more health care costs to patients. Since 2006, deductibles have increased 300 percent and there has been an 89 percent rise in what patients pay in coinsurance, which is a percentage of costs associated with their health care service or medicine. Coupon programs - offered by biopharmaceutical companies - provide a valuable source of assistance for many commercially insured patients who are facing rising out-of-pocket costs because of their insurance coverage.

More +
Less +

Unfortunately, many insurers and pharmacy benefit managers are implementing copay accumulator programs, changing how copay assistance for some medicines applies to patient cost sharing. These programs block copay coupons from being applied to deductibles and out-of-pocket maximums for some medicines, which over the course of the year leads to patients paying significantly more at the pharmacy.

If medicine costs are growing more slowly, why doesn’t it feel that way?

New therapies are transforming care for patients fighting debilitating diseases like cancer, hepatitis C, high cholesterol and more. In the midst of all this progress, spending on medicines grew just 0.6 percent in 2017. And according to the nation’s largest pharmacy benefit manager, spending on medicines grew just 1.1 percent for their clients in the first half of 2018.

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Unfortunately, it doesn't feel this way for patients. Insurers are increasingly using high deductibles, which result in patients paying the full list price for their medicines, even if their insurers receive significant discounts. And middlemen, like pharmacy benefit managers and insurers, have been shifting more of the costs of health care to patients for years – with deductibles increasing 300 percent since 2006.

0.6%

The amount spending on medicines grew in 2017

How much are hospitals marking up the cost of medicines?

Hospitals mark up medicine prices nearly 500 percent, and one in every five hospitals marks up the price of medicine by at least 700 percent. For a medicine with a list price of $150, this markup could cost patients up to $1,050. Insurers pay for medicines administered in hospital outpatient settings differently than those purchased at a pharmacy. Even after negotiations with commercial payers, hospitals still receive nearly 2.5 times what they paid to acquire the medicine. For example, many cancer treatments are provided in a hospital facility where the hospital purchases the medicine directly and is then reimbursed by the patient's insurer—often at a steep markup.

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Less +

Importantly, this is a conservative estimate as it does not take into account the impact of the 340B program. The 340B program was designed to increase access to medicines for vulnerable or uninsured patients through safety-net facilities, but all signs point to 340B doing the opposite. Unfortunately, many hospitals have taken advantage of the program without ensuring patients benefit. Current regulations enable participating 340B hospitals to make a profit by dispensing medicines that were obtained at a discounted rate, requesting reimbursement at the non-discounted rate and then pocketing the difference between the two rates. Over the years, the 340B program has grown and grown, with hospitals bringing in more and more 340B revenue, yet charity care rates and uncompensated care rates have all declined.

2.5x

Hospitals receive 2.5 times what
they paid to acquire medicine (after price negotiations)

How much are hospitals marking up the cost of medicines?

Hospitals mark up medicine prices nearly 500 percent, and one in every five hospitals marks up the price of medicine by at least 700 percent. For a medicine with a list price of $150, this markup could cost patients up to $1,050. Insurers pay for medicines administered in hospital outpatient settings differently than those purchased at a pharmacy. Even after negotiations with commercial payers, hospitals still receive nearly 2.5 times what they paid to acquire the medicine. For example, many cancer treatments are provided in a hospital facility where the hospital purchases the medicine directly and is then reimbursed by the patient's insurer—often at a steep markup.

More +
Less +

Importantly, this is a conservative estimate as it does not take into account the impact of the 340B program. The 340B program was designed to increase access to medicines for vulnerable or uninsured patients through safety-net facilities, but all signs point to 340B doing the opposite. Unfortunately, many hospitals have taken advantage of the program without ensuring patients benefit. Current regulations enable participating 340B hospitals to make a profit by dispensing medicines that were obtained at a discounted rate, requesting reimbursement at the non-discounted rate and then pocketing the difference between the two rates. Over the years, the 340B program has grown and grown, with hospitals bringing in more and more 340B revenue, yet charity care rates and uncompensated care rates have all declined.

Biopharma
Insurers
Results-based contracting allows biopharmaceutical companies and insurers to share financial risk.

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