AARP analysis find sharp lifetime price hikes for the most expensive drugs

The list prices of the 25 medications that Medicare spends the most money on have more than tripled on average since they went on the market, according to a new analysis by a national advocacy group for older Americans.

AARP, which conducted the analysis, says the findings reinforce the importance of federal legislation enacted one year ago to put the brakes on price inflation for prescription drugs.

“At AARP, we hear from members routinely who say they’ve had to choose between their prescription drugs and other important needs,” said Leigh Purvis, who tracks prescription drug policy for the AARP Public Policy Institute, the organization’s research and policy development arm. “We do not think that anyone in 21st century America should be making that kind of decision.”

Purvis, who took part in a national virtual press conference to announce the analysis findings, said the data shows why provisions in the 2022 Inflation Reduction Act are justified to rein in some prescription drug prices through the federal Medicare program.

“At AARP, we know that people on Medicare prescription drug plans take an average of between four and five prescription drugs per month,” Purvis said. “And their drugs are increasingly covered using coinsurance, where you pay a percentage of the drug’s price instead of a flat copay.”

The shift to that sort of cost-sharing means patients experience price hikes more directly, she said. That also can happen if a patient’s deductible requires them to bear more of the cost of a drug until the deductible is exhausted.

“Millions of other people don’t have health coverage and are having to absorb the costs associated with high and growing drug prices on their own,” Purvis added.

The Inflation Reduction Act, signed into law a year ago Wednesday, includes a measure that for the first time allows the Medicare prescription drug program to negotiate with a limited number of drug companies on the prices of prescription drugs.

The law also requires drug companies to pay a rebate to Medicare if their prices increase faster than the general inflation rate, and it caps what Medicare patients can be charged for insulin at $35 a month.

The negotiation provision in the law will be phased in, with the federal government negotiating prices for 10 medications in the first phase. The list of those 10 is due to be made public in September.

AARP analysis looks at 25 medications

The AARP analysis focused on the 25 brand-name drugs with the highest total spending in 2021 under Medicare Part D, the prescription drug part of the program that covers health care for people 65 and older.

According to the report, Medicare Part D spent $80.9 billion on the 25 drugs, which were taken by more than 10 million Part D patients.

The analysis looked at the trend in list prices for each of the drugs from when they first went on the market. On average, their prices went up 226% over their lifetime; the lifetime price increases ranged from 20% to 739%.

For all but one drug, the price increase “greatly exceeded the corresponding annual rate of general inflation” as measured by the Consumer Price Index for all items for all urban consumers, according to the AARP analysis.

“There is no justification for drug companies to engage in these types of price increases every year that they’re on the market, particularly increases that are so much higher than the price increases for other goods and services,” Purvis said.

For drugs that have been on the market for at least 20 years, the average lifetime price increase was 592%. “In real terms, this could be the difference of thousands of dollars for one person,” Purvis said, forcing patients to make “trade-offs that we often hear about, like being able to put food on the table or being able to pay for gas.”

The drug price inflation doesn’t just affect the Medicare program or the patients who are prescribed those medications. “Higher government spending driven by drug price increases will affect all Americans in the form of higher taxes, cuts to public programs, or both,” the AARP analysis report states.

Where individual patients are concerned, “We know that increased drug prices, if left unchecked, will prompt more older Americans to stop taking those … medications,” Purvis said. “And we know that will lead to poorer health outcomes and higher health care costs in the future.”

David Kreling, a University of Wisconsin School of Pharmacy professor emeritus who has studied the economics of prescription drug inflation, said that the AARP analysis uses valid methods and accurate data. But the true picture of prescription drug costs is complicated by the factors that have been generally beyond the reach of researchers, he told the Wisconsin Examiner.

The analysis relies on list prices for drugs, which are publicly available. But medicines are prescribed and paid for against a backdrop of complex deals that health insurance companies negotiate with drug manufacturers.

Insurers will demand rebates on expensive drugs or refuse to cover those prescriptions. That essentially lowers the price of the drug, although by how much isn’t publicly reported.

“The fact that there’s this whole rebate [practice] in the first place is what makes it so difficult to have any true information,” Kreling said. The list price “doesn’t include any of the aftermarket phenomena.”

The need to pay a rebate might also lead a drug company to drive up its list price. From the drug company’s perspective, if the demanded rebate is “half of our list price, that means we’re going to have to have our [list] price be twice as high as it would be normally,” he added.

In addition, Kreling said, while the most expensive drugs account for a major share of what Medicare spends on drugs, those high-priced remedies are a relatively small sliver — perhaps 10% — of the total volume of drugs dispensed to Medicare patients. Much less expensive generic prescription drugs account for most of the medications prescribed.

Still another complication, he added, is that many of the expensive brand-name medications get the attention of patients and providers because they’re newer and supported by extensive marketing programs.

When they are compared to older, much cheaper alternatives, however, Kreling said, “whether they’re actually better is sometimes potentially an arguable point.”

by Erik Gunn, Wisconsin Examiner
August 18, 2023