Top 25 Prescription Drugs Have Tripled in Price Since Hitting the Market
A recent report by the American Association of Retired Persons (AARP) found that the prices of 25 brand-name prescription drugs that Medicare Part D spends the most on have, on average, tripled since they came on the market. The 25 drugs analyzed in the report represent a significant portion of overall Medicare spending. In fact, the AARP report found that Medicare spent nearly $81 billion on these 25 prescription medications in 2021, more than 37% of total Medicare spending that year. These drugs are taken by more than 10 million Americans enrolled in a Medicare Part D prescription drug plan. Furthermore, the AARP report found that the price increases for all but one of these medications greatly surpassed the annual rate of inflation.
“This pricing behavior can be particularly challenging for Medicare Part D enrollees, who take an average of four or five prescription drugs every month and often face cost sharing that is directly affected by drug price increases.”
—The AARP report
Price increases for these medications ranged from 20% to 739% and were generally higher the longer a drug had been on the market, according to the report. In response to increasing costs, a recent study in the Journal of the American Medical Association found that 1 in 5 adults had tried to reduce the cost of medications, often by skipping prescribed doses.
Legislative Changes
On Sept. 1, 2023, the Centers for Medicare and Medicaid Services (CMS) plans to release the names of the first 10 prescription medications subject to price negotiations as part of the Inflation Reduction Act (IRA) of 2022. These drugs will be chosen based on total Medicare spending and other factors, such as how long they have been on the market and if generic alternatives exist. The first round of negotiations will begin in 2023 and 2024, with prices that will be effective starting in 2026.
Prescription drug price negotiations under the IRA are anticipated to greatly impact overall health care costs for both Medicare programs and employer-based insurance. Lowering the cost of prescription drugs could decrease the cost of group insurance and health care premiums across the country.
Employer Takeaways
Rising health care costs, including prescription drug prices, continue to be a significant challenge for most employers. CMS’s pending announcement could significantly impact the future cost of employer-based insurance and health care premiums. Employers should stay current on price negotiations. We’ll keep you informed of any significant developments.
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[The content of this News Brief is of general interest and is not intended to apply to specific circumstances. It should not be regarded as legal advice and not be relied upon as such. In relation to any particular problem which they may have, readers are advised to seek specific advice. © 2023 Zywave, Inc. All rights reserved.]