Practical Analytic Approaches to Healthcare Challenges
The Centers for Medicare and Medicaid Services (CMS) identifies prescription drugs as one of the major components of U.S. national health expenditures, after hospital care and physician services.1 The US Assistant Secretary for Planning and Evaluation (ASPE ; principal advisor to the Secretary of the U.S. Department of Health and Human Services on policy development) estimates that retail prescription drug spending in the United States was about $328 billion in 2015, or 12 percent of overall personal health care services compared to 11 percent in 2013. This excludes non-retail prescription drug spending (spending by medical providers for drugs they provide directly to patients). The ASPE further observed that expenditures on prescription drugs are rising and would continue to rise in the coming years. 2
To identify the trend and pattern of drug spending, we conducted an analysis in one of MedInsight’s client databases with commercial population and included all the retail prescriptions. We analyzed the number of prescriptions (“scripts”) and the total cost for prescription drugs for three consecutive years (2015 to 2017) with respect to total healthcare spending and member enrollment data for the year. We identified an upward trend in the percentage of prescription spending over the years 2015 through 2017, as seen in Table 1. Despite a decrease in the average number of lives covered, prescription drug spending increased from approximately $1,123 million in 2015 to $1,229 million in 2017, a 9% increase. Total healthcare spending increased 2% over the same time period. Prescription drug spending as a percentage of total healthcare spending also increased from 20% in 2015 to 21% in 2017. The per member per month (PMPM) prescription drug spending increased by 15% from $76 in 2015 to $87 in 2017.
Table 1: Retail Prescription drug spending, 2015-2017
|Healthcare spending||$5,596 million||$5,388 million||$5,732 million|
|Retail prescription drug spending||$1,123 million||$1,082 million||$1,229 million|
|Prescription drugs as % of healthcare spending||20.10%||20.10%||21.40%|
|Total member months||14,751,514||14,009,271||14,070,879|
|PMPM prescription spending||$76.14||$77.24||$87.32|
The top 20 drugs by spending accounted for 31% of prescription drug costs in 2017, as shown in Figure 1. Table 2 lists the top twenty drugs in order of prescription cost and shows their frequency and unit cost.
Figure 1: Contribution of Top 20 Drugs to Total Pharmacy claims
Table 2: Top 20 high cost drugs- 2017
|Drug||Prescription Drug Spending (in millions)||Relative to Total Drug Spending||Number of scripts||Relative to Total Script Count||Average Cost per Script|
These top 20 drugs include some high cost drugs in the following therapeutic areas: antidiabetics, analgesics - anti-Inflammatory, miscellaneous psychotherapeutic and neurological agents and drugs for ADHD, Narcolepsy/Obesity, as shown in Figure 2. The other categories in the list are miscellaneous respiratory agents, antiasthmatic and bronchodilator agents, anticonvulsants, assorted class of drugs and miscellaneous endocrine and metabolic agents.
Figure 2: Contributors to high drug cost
We further reviewed the data for drugs ranking high on total cost, average prescription cost (average cost per script) and utilization (number of scripts) for all three years, 2015 to 2017. We found that:
- Humira Pen, an analgesic anti-inflammatory immunosuppressive drug used to treat rheumatoid arthritis, psoriatic arthritis, ankylosing arthritis, Crohn’s disease and plaque psoriasis had the highest total cost for all the three years. Our analysis shows an increase in both - the number of scripts as well as the average cost per script in a period of 2 years. The trend of prescription drug spend for Humira Pen is shown in Table 3.
Table 3: Pattern of cost and prescription for Humira Pen, 2015 to 2017
|2015||2017||% increase (2015-2017)|
|Total Cost||$43 million||$88 million||105%|
|Number of prescription||11,600||17,400||50%|
|Average prescription Cost||$3,714||$5,083||37%|
- The drug Orkambi, a respiratory agent used to treat Cystic fibrosis, had the highest average cost per script among top 20 high cost drugs in Table 2. The drug was approved by the US FDA for use in late 2015. A significant increase in its prescription and cost was observed in 2017 as shown in Table 4.
Table 4: Pattern of cost and prescription for Orkambi, 2015 to 2017
|2015||2017||% increase (2015-2017)|
|Total Cost||$2 million||$13 million||550%|
|Number of prescription||117*||641||448%|
|Average prescription Cost||$19,849||$20,439||3%|
*The drug was approved in August 2015, hence the utilization pattern represents only partial year and cannot be comparable for year on year analysis.
- Methylphenidate Hydrochloride, a drug used for ADHD, narcolepsy and obesity, had the highest number of prescription count over the years (highest in 2016 and 2017, second highest in 2015), as seen in Table 2. The pattern highlights an increase in the average prescription cost over a two-year period despite the decrease in the number of prescription count, as shown in Table 5.
Table 5: Pattern of cost and prescription for Methylphenidate Hydrochloride, 2015 to 2017
|2015||2017||% increase (2015-2017)|
|Total Cost||$16 million||$17 million||6%|
|Number of prescriptions||99,656||92,475||-7%|
|Average prescription Cost||$160||$182||14%|
Our analysis confirms findings from multiple published studies that drug spending continues to rise year after year. This continuous increase in total spending for prescription drugs results from an increase in the number of scripts, an increase in the unit cost per script, and the emergence of new drugs in the market. It is important to note that this analysis is based only on claims data from one large MedInsight client with commercially-insured lives, which may not be representative of all populations and may not identify all drug utilization and cost. Also, the days’ supply or the quantity of drug dispensed is not taken into consideration in this analysis.
The findings suggest that payers and policy makers need to continually monitor prescription drugs costs and utilization. Various publications 3 suggest some realistic short-term strategies to address high prices which include enforcing more stringent requirements for awarding and extending exclusivity rights; enhancing competition by ensuring timely generic drug availability; providing greater opportunities for meaningful price negotiation by governmental payers and employers; generating more evidence about comparative cost-effectiveness of therapeutic alternatives; and more effectively educating patients, prescribers, payers, and policy makers about these choices. Milliman does not endorse any specific policy proposal.
1 Centers for Medicare and Medicaid Services. National Health Expenditures Projections 2016-2025.
2 Observations on Trends in Prescription Drug Spending. Department of Health and Human Services Office of the Assistant Secretary for Planning and Evaluation. March 8, 2016.
3 Kesselheim AS, Avorn J, Sarpatwari A. The high cost of prescription drugs in the United States. The Journal of American Medical Association. 2016;316(8):858-871