For most of the past 10 years, Medicare’s drug costs have risen modestly (1.5 percent) each year. That all changed in 2014, when several extremely expensive drugs hit the market, including a Hepatitis C drug (Sovaldi) that cost more than $94,000 per year for a single patient and a skin cancer drug (Targretin) that cost a whopping $88,000 per year, per user, according to the 2014 Medicare Drug Spending Dashboard.
Drug expenditures are now expected to increase by 6.5 percent every year for the next decade, fueled partly by expensive specialty drugs and rare drugs that have little or no competition, notes the Associated Press. But even generic drugs aren’t immune, said John Bennett, MD, president and CEO of CDPHP, a New York health benefits provider, in this week’s American Journal of Managed Care online interview. “We’re suddenly seeing this huge increase not only in specialty and brand-name drugs, but in generic drugs. People are suddenly acquiring these orphan drugs which were very cheap or even some regular non-orphan drugs—drugs that are used by a wide segment of the population which previously were very cheap—they are acquiring those companies cheaply and just jacking up the price.”
Insurers and beneficiaries alike are crying foul, concerned about the precedent the recent trends may set. Presidential candidates and advocacy groups across the political spectrum are making drug pricing part of their platforms. But Congressional bills that attempt to control drug prices or allow Medicare to negotiate with them are being met with gridlock.
The senior care industry has a right to be worried: Older adults are being hit the hardest, since they are prescribed more medications that any other age group yet are least able to afford the cost.
Polypharmacy of five or more prescription medications per day has risen disproportionately with age since 1999. All 55+ age groups are higher now than at the end of the last decade, but rates of polypharmacy have skyrocketed for those over age 74 from 24 percent in 1999 to almost 50 percent by 2010, according to data from the Sightlines Project, a research collaborative of the Stanford Center of Longevity. Yet, those over age 74 also constitute the highest category of Americans living at or near the poverty level, the Sightlines report adds.
Medicare and Medicaid are not allowed to haggle pricing with drug manufacturers, but they do receive discounts by law—about a 30 percent price reduction for Medicare and about 50 percent for Medicaid. The higher the drug price, the higher the cost for the agencies and their seniors.
At least 83 percent of Americans are in favor of allowing Medicare, the country’s largest health insurer, to negotiate drug prices directly with drug manufacturers, instead of doing the price-setting through pharmacy benefit managers (PBMs) and private insurers, notes the Kaiser Foundation. Medicare spends about $78 billion on prescription drugs per year, so the control decision is a weighty one.
Another proposed strategy is to extend the number of seniors who would qualify for Medicaid’s drug plans, since Medicaid’s discounted rates are better than Medicare’s. Although the bill has been proposed to Congress in the past, it has never made it to any voting floor.
“This is an idea that has been kicked around for a long time. People in Washington and elsewhere have been talking about the government doing more to negotiate lower drug costs, specifically leveraging lower drug costs for people on Medicare. Honestly, people have been talking about it for at least a decade,” said Tricia Neuman, ScD, senior vice president of the Kaiser Family Foundation and director of its Program on Medicare Policy, in a recent American Journal of Managed Care online interview.
Congress has the ability to change the rules about drug price negotiations, but will they? "It's not a question of whether there are options on the table," Neuman told the Associated Press. "It's a question of whether policy makers choose to adopt them."