Retail Drug Pricing Trends

By November 21, 2019 November 26th, 2019 Commentary

The Agency for Healthcare Research and Quality has issued a new research findings report, based on MEPS data, regarding trends in retail prices for drugs.  (Stat. Brief)   The report covers the years 2011 to 2016 and examines trends in percentage of prescriptions that are generics, specialty drugs, and non-specialty single source medications and examines prices for the drugs and cost-sharing by consumers.  Because of wide variability in actual prices paid, they use both average and median prices for the analysis.  The percentage of prescription fills with non-specialty single source (i.e., brand name) drugs fell from 22% to 11% over the period, while generic non-specialty share rose from 71.5% to 83.4%.  Specialty drugs rose from 1.2% to 2%, but they are now about 40% to 50% of total drug spending because the prices are so high for these compounds.  Medicare had the highest percentage of generics and the lowest of specialty drugs, while Medicaid had the lowest percent of generics and Medicaid and private insurers had the highest percent of specialty drug use, although all three major insurance types had relatively similar percentages of use.  Specialty use by payer type can be driven by prevalence of disease at certain ages, for example HIV and hepatitis C patients tend to be younger and often covered by Medicaid, and many HIV and hepatitis C medications are very expensive specialty drugs.

The average retail unit price for non-specialty generic drugs was around $1.00 while it was $324.65 for specialty drugs.  Median retail unit prices were $.30 for non-specialty generics and $38.75 for specialty drugs.  So you can see that there are a few very high-priced specialty drugs pulling the average price up, while the median is substantially  lower.   The median retail unit price increased almost 50% from 2011 to 2016, while the average price was relatively constant.  Brand name drug prices had a median price rise of 84% and the average price more than doubled.  People with private insurance were paying average retail unit prices that were more than twice as high as those for Medicare beneficiaries or Medicaid recipients and over three times those for the uninsured population.  For non-specialty drugs, the share of total price paid by the consumer declined, although the actual dollar amount increased as prices rose.  Average unit out-of-pocket costs were $.23 for generic drugs and $12.15 for specialty drugs, but the percentage of total cost averaged 41.8% for generics and 10.8% for specialty drugs.  To the consumer, however, what matters is those actual dollars out of pocket, not the percent of the total cost.  The average discount available to Medicare, Medicaid and the privately insured resulted in prices that were about 2% above the wholesale acquisition unit cost and 15% below average wholesale unit price benchmarks.

Kevin Roche

Author Kevin Roche

The Healthy Skeptic is a website about the health care system, and is written by Kevin Roche, who has many years of experience working in the health industry through Roche Consulting, LLC. Mr. Roche is available to assist health care companies through consulting arrangements and may be reached at khroche@healthy-skeptic.com.

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