Patients share the cost of prescription medicines.
They should share the savings.
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 much did spending on medicines purchased at the pharmacy counter grow in 2016?
    20%
    15%
    5%
    1.3% — In 2016, spending on medicines purchased at the pharmacy counter grew at the slowest rate in years. More ►
  • 5)
    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: 
    0/5
    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 much did spending on medicines purchased at the pharmacy counter grow in 2016?
    CORRECT ANSWER: 1.3% -   More ►
    Q5)
    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

Why am I paying more than my insurer for my medicine?

Private payers reportedly receive rebates between 30 and 70 percent for medicines that treat a number of chronic conditions including diabetes, asthma, hepatitis C and high cholesterol. Yet, these negotiated discounts are not shared with patients who pay a deductible or a coinsurance -- a percentage of costs a patient is responsible for paying out of pocket -- for their medicine at the pharmacy. No patient should pay more for their medicine than their insurer.

50%

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

Why am I paying more than my insurer for my medicine?

Private payers reportedly receive rebates between 30 and 70 percent for medicines that treat a number of chronic conditions including diabetes, asthma, hepatitis C and high cholesterol. Yet, these negotiated discounts are not shared with patients who pay a deductible or a coinsurance -- a percentage of costs a patient is responsible for paying out of pocket -- for their medicine at the pharmacy. No patient should pay more for their medicine than their insurer.

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.

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 purchased at the pharmacy counter grew just 1.3 percent in 2016, and the nation’s largest pharmacy benefit manager reported an increase of just 1.5 percent in 2017.

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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 PBMs and insurers, have been shifting more of the costs of health care to patients for years – with deductibles increasing 300 percent since 2006.

1.3%

The amount spending on medicines purchased at the pharmacy counter grew in 2016

How much are hospitals marking up the cost of medicines?

Hospitals mark up medicine prices nearly 500 percent, and even after negotiations with payers, still receive nearly 2.5 times from commercial payers than what they paid to acquire the medicine.

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Less +

Insurers pay for medicines administered in hospital outpatient settings differently than those purchased at a pharmacy. 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.

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 even after negotiations with payers, still receive nearly 2.5 times from commercial payers than what they paid to acquire the medicine.

More +
Less +

Insurers pay for medicines administered in hospital outpatient settings differently than those purchased at a pharmacy. 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.

How can we make medicines more affordable for patients?

Too often patients have to fight to access breakthrough medicines that are revolutionizing how we fight disease. We can improve patient access and affordability by moving toward a system that prioritizes results for patients. Biopharmaceutical companies are working with insurers to develop innovative and flexible ways to pay for medicines that focus on results, lower out-of-pocket costs and enable patients to access the right treatments the first time.

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

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