• by: Robert Goldberg |
  • 05/09/2017
The policy shop of BCBS has released a report about drug costs that is deliberately deceptive and misleading.   It focuses only on the contribution of innovative drugs to total drug spending, ignoring other facts that underscore the important role new medicines play in reducing the rate of health care spending and hiding the rebates they, along with PBMs pocket. 

The report claims that “since 2010 prescription drug spending has increased 10 percent annually for Blue Cross and Blue Shield (BCBS)members since 2010, an overall rise of 73 percent.This upward trend is due to a small fraction of emerging, patented drugs with rapid uptake and large year-over-year price increases that are more than offsetting the continued growth in utilization of lower-cost generic drugs. These higher costs are being incurred by consumers and payers alike; while consumer out-of-pocket costs have risen just three percent annually for prescription drugs in total, they have risen 18 percent annually for patented drugs.”

You might wonder how it is possible for consumer out of pocket costs to rise 3 percent annually if the increase in patented drug spending has increased 18 percent? Is it because health plans are sucking up the difference in cost for our sake? A closer look at the findings suggests answers. 

1    BCBS compared apples – the average increase in out of pocket costs – which includes the increase in the use of generic drugs – to oranges, namely the pre-rebate increase in spending on drugs for Hepatitis C, autoimmune diseases and cancer for less than 1 percent of chronically ill patients.  Indeed, the BCBS ‘study’ acknowledges that the drug spending data they use is pre-rebate.  But let’s stick with sticker prices for now and ask: how does the increase in the use of a small number of new medicines affect drug spending and total health expenditures.

2    It turns out that employer-sponsored health plans are spending LESS on brand or innovator drugs as a percent of total health care spending.  And total drug spending is about the same as it was in 2007:

Sources: Health Care Cost and Utilization Reports for 2010-2015

3.       Since 2007, brand drugs as a percent of total drug spending has DECLINED

    Sources: Health Care Cost and Utilization Reports for 2010-2015

4. If brand spending is down and total drug spending as a percent of all health expenditures are flat, why is cost sharing for drugs going up by 3 percent a year? 

BCBS notes: “Utilization is down for all brand drugs, but the unit price has increased by an average of 17 percent each year, leading to a total increase in spending of 10 percent.”
In other words, health plans are charging the retail, not the rebated price, in determining copays and coinsurance even as brand drug spending as a percent of total Rx dollars has declined.  Indeed, the spread between the rebated and retail price has been increasing.  

Source: IMS Data

What's more, these rebates are not used to reduce the out of pocket costs of patients And plans use the retail price to fatten their margins with rebates AND the out of pocket spending of consumers.  Reports about rebate revenues are hard to come by.  However, an NAIC report suggests that rebates industry-wide are at least $30 billion which is more than the total underwriting gain of all health insurers.   

The BCBS policy report hides the fact that drug spending as a percent of total health care spending is flat.  It hides the fact that it is using rebates and retail prices to pad the bottom line.  And it is using innovator drug prices as scapegoats.  

A final thought: The Healthcare Cost Institute reports show that the utilization of all inpatient and outpatient services has declined since 2007 even as the use of both new and generic medicines has increased.   And yet health plans have rarely considered or acknowledged that the use of prescription drugs reduces the reliance on more expensive forms of care. 

Center for Medicine in the Public Interest is a nonprofit, non-partisan organization promoting innovative solutions that advance medical progress, reduce health disparities, extend life and make health care more affordable, preventive and patient-centered. CMPI also provides the public, policymakers and the media a reliable source of independent scientific analysis on issues ranging from personalized medicine, food and drug safety, health care reform and comparative effectiveness.

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