Prescription Drugs: Just the Facts
By: Colorado BioScience Association Date: 04/20/2018
As the Colorado State Legislature considers House Bill 18-1260, Drug Price Transparency, a lot of claims and opinions are circulating in our state about the drivers of health care costs. Prescription drugmakers are a familiar target for those looking to place blame on rising out-of-pocket costs to patients. However, the facts demonstrate otherwise. Let’s break down some of the most common misconceptions about prescription drug prices.
Claim: The United States spends an outsized portion of our health care resources on prescription drugs.
Fact: Spending on prescription drugs is roughly 14% of all health care spending — about the same as in 1960.
Fact: As a percentage of all health care spending, U.S. spending on prescription drugs is similar to other developed countries.
Sources: Analysis of Altarum Institute data; OECD Health Statistics
Claim: Rising drug prices are forcing Americans to pay more out-of-pocket for their prescription drugs.
Fact: While drugmakers set a drug’s list price, insurance companies determine patients’ out-of-pocket costs for prescription drugs.
Fact: Insurers require patients to pay on average five times more in out-of-pocket costs for prescription drugs than for hospital care.
Fact: According to one estimate, more than 35% of a drug’s list price is rebated back to insurance companies, the government, and other players in the drug supply chain. All too often, these savings are not shared with patients.
Sources: CMS; Berkeley Research Group
Claim: Prescription drug prices are rising at an unsustainable rate.
Fact: Drug spending growth is slower than other health care services.
Fact: Nearly 90% of all drugs sold in the U.S. are low-cost generic drugs of previously novel brand name drugs, and the generic versions are sold at a fraction of the cost.
Sources: Centers for Medicare and Medicaid Services (CMS); Pink Sheet article from 02/22/2017; Association for Accessible Medicines.
Claim: Prescription drugs are the primary drivers of health care spending.
Fact: For every dollar spent on health care in the U.S., just 14 cents are spent on prescription drugs.
Sources: BIO Analysis of Altarum Institute data, December 2017; Prescription drugs include both retail and physician-administered drugs
Fact: The drivers of health care spending are payments to hospitals and doctors which are expected to grow by $1.1 trillion over the next decade – more than four times greater than the growth of prescription drug spending.
Note: Some physician-administered drugs are included in hospital and physician spending which today is 3-5% of national health spending.
Sources: CMS (National Health Expenditure Projections 2017-2026
Fact: Biopharmaceutical innovations transform how we treat and cure diseases, they also deliver significant cost savings to the health care system. For example, death rates from cancer have dropped by 22% since 1991. This saves the system $2 trillion.
Claim: Mandating greater drug price transparency will allow the public to hold drugmakers accountable.
Fact: Federal “transparency” mandates would force drugmakers to publicly disclose proprietary and confidential business information that no other industry is required to do, which will chill private- sector investment in biomedical research.
Fact: Federal “transparency” mandates would fall especially hard on small businesses — the source of 70% of all clinical trials — because they rely on private-sector funding to support their research.
Fact: Colorado House Bill 1260 would do little to empower consumers because they do not address the role insurers, pharmacy benefit managers, and others play in determining how much patients pay for medicines. Further, these mandates would not provide information on out-of- pocket drug costs consumers need when selecting their health plans.
Sources: BIO Industry Analysis, BioMed Tracker
So, while health care costs are on the rise, drug prices are not to blame. Meaningful change will only happen with true transparency that involves examining all aspects of our healthcare system.