of the list price of a brand medicine is rebated back to payers and the supply chain
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.
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.
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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.
ADDITIONAL RESOURCES +
69 percent of patients abandon medicines when cost sharing is more than $250
PhRMA submission to HHS on blueprint to lower drug prices and reduce out-of-pocket costs
New data show patients’ out-of-pocket costs are rising faster than their insurers’ costs
Why won’t the insurance industry tell the truth about medicine costs?
What’s the deal with these prescription drug middlemen?
Are insurers exaggerating medicine costs to justify premium increases? Consumers think so.
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.
ADDITIONAL RESOURCES +
69 percent of patients abandon medicines when cost sharing is more than $250
PhRMA submission to HHS on blueprint to lower drug prices and reduce out-of-pocket costs
New data show patients’ out-of-pocket costs are rising faster than their insurers’ costs
Why won’t the insurance industry tell the truth about medicine costs?
What’s the deal with these prescription drug middlemen?
Are insurers exaggerating medicine costs to justify premium increases? Consumers think so.
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.
ADDITIONAL RESOURCES +
Understanding the drivers of drug expenditure in the U.S.
Power of medicines: Saving lives and building the future
How medicines can curb health care costs
What you need to know about the federal government’s federal health spending projections
Better use of medicines can improve health outcomes and reduce the use of costly medical care
90%
of every dollar spent on health care is used to treat people with one or more chronic condition
Why are medicines less expensive in other countries?
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 Japan. Unlike foreign governments that often set prices and restrict coverage as a condition of entering the market, the United States relies on its competitive marketplace to control costs and provide patients with access to medicines far earlier.
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As a result, in the U.S. medicines are available almost immediately after approval. For example, Americans have access to new cancer medicines two years earlier, on average, than other wealthy countries. This is one reason why American patients have higher cancer survival rates than patients in several European countries.
14%
Spending on retail and physician-administered medicines represents 14% of U.S. health care spending
Why are medicines less expensive in other countries?
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 Japan. Unlike foreign governments that often set prices and restrict coverage as a condition of entering the market, the United States relies on its competitive marketplace to control costs and provide patients with access to medicines far earlier.
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As a result, in the U.S. medicines are available almost immediately after approval. For example, Americans have access to new cancer medicines two years earlier, on average, than other wealthy countries. This is one reason why American patients have higher cancer survival rates than patients in several European countries.
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.
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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.
ADDITIONAL RESOURCES +
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 almost 350 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.
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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.
350%
Approximately how much 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 almost 350 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 350 percent since 2006.
ADDITIONAL RESOURCES +
Spending on medicines grew less than one percent in 2017
4 Things to know about the QuintilesIMS drivers of medicine spending in the U.S. report
ICYMI – 3 new reports show dramatic slowdown in medicine spending growth
Study finds actual cost of 14 new medicines is billions less than predicted
Spending on medicines: The big picture
Critics proven wrong again on medicine spending
How a competitive biopharmaceutical marketplace helps control costs
5 Must-know facts about medicine costs and spending
How prescription drug prices fall significantly over time
NHE Data: Medicine spending grew just 1.3 percent in 2016
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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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.
ADDITIONAL RESOURCES +
Press Release: Nearly 1 in 5 hospitals marks up medicine prices at least 700 percent
New study finds some hospitals mark up medicine prices at least 700 percent
Fact Check Friday: The truth about the cost of 340B to patients
Patients pay the price when hospitals mark up cancer medicines
How much are hospitals marking up the price of medicines? The answer may surprise you.
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.
ADDITIONAL RESOURCES +
Press Release: Nearly 1 in 5 hospitals marks up medicine prices at least 700 percent
New study finds some hospitals mark up medicine prices at least 700 percent
Fact Check Friday: The truth about the cost of 340B to patients
Patients pay the price when hospitals mark up cancer medicines
How much are hospitals marking up the price of medicines? The answer may surprise you.
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.
ADDITIONAL RESOURCES +
ICYMI: Research shows promise of innovative payment arrangements in reducing costs, improving access
Video: Barriers to results-based contracts
Long-awaited FDA guidance addresses one key obstacle to value-based contracting
PhRMA submission to HHS on blueprint to lower drug prices and reduce out-of-pocket costs
Value-based contracts may lower patients’ out-of-pocket costs by 28 percent
PhRMA CEO in Forbes – How to negotiate better deals for prescription medicines
ICYMI: Avalere and FasterCures develop new value framework from patient perspective
ICYMI: Innovative payment models helping provide patient access to new medicines
The Value Collaborative: Advancing private market solutions to achieve better health, lower costs
Results-based contracting allows biopharmaceutical companies and insurers to share financial risk.
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