The costs of prescription drugs have grown more quickly than any other part of the healthcare industry, and a new report estimates a small portion of breakthrough specialty drugs will further strain the budgets of federal and state healthcare programs.
Consulting firm Avalere Health identified 10 drugs that are being developed and are considered by the Food and Drug Administration to be major advancements in the treatment of life-threatening diseases. The study, funded by America's Health Insurance Plans, the lobbying group for health insurers, found those drugs would cost $49.3 billion over the next decade.
Spending in Medicare would increase the most—$31.3 billion, according to the report. The specialty medications would also add $15.8 billion in Medicaid costs and $2.1 billion in exchange subsidy costs.
However, those estimates are gross costs, not net. Avalere listed several other noteworthy limitations with its study. The analysis did not factor in potential savings the drugs could achieve by reducing other healthcare services, it excluded the effects of the government's 340B drug discount program, and it assumed all drugs would reach the market and hit their targeted costs.
The breakthrough drugs in the analysis included Viekira Pak, the latest hepatitis C drug manufactured by AbbVie, and Ibrance a Pfizer drug treating breast cancer. Drugs that wouldn't hit the market for several years were also studied.
AHIP was quick to draw attention to the study. The group has criticized the rising prices of specialty drugs, arguing the “exorbitant” prices could restrict access for patients who need the drugs. Pharmaceutical companies dismissed the report as limiting.
Indeed, prescription drug costs rose by 13% in 2014. Increased spending on new breakthrough medications, such as hepatitis C treatments Sovaldi and Harvoni, accounted for much of that trend. In some instances, private insurers have negotiated with drugmakers to receive discounts and, in exchange, put the therapies on their preferred drug list.
But many health insurers have tried to mitigate those financial impacts through sometimes questionable “tiering” of drugs. For example, many insurance companies have placed HIV drugs on the most expensive specialty tier for their exchange plans, which may discourage sick members from choosing those plans. Aetna has since changed its policy for HIV drugs on its exchange policies.