Report: Increases in Prescription Drug Spend Contributed to Overall Rise in 2018 Health Care Spend

Annual per-person spending on health care increased to $5892 between 2014 and 2018, according to the 2018 Health Care Cost and Utilization Report released by the Health Care Cost Institute.

Health care spending increased by 4.4% in 2018, slightly more than the 4.2% increase in 2017, and the third consecutive year with an increase greater than 4%.

Jean Biniek, PhD, senior researcher with the Health Care Cost Institute, said she was surprised that a significant portion of the growth was attributable to average price increases.

“We used data from 2.5 billion medical and pharmacy claims from 4 of the largest national health insurers to estimate costs, prices, and utilization among people in the US with health insurance coverage through an employer,” Biniek explained in an email to Pharmacy Times. “The most striking finding was that nearly 3-quarters of the growth in inflation-adjusted spending was due to increases in the average prices for health care services.”

Three other factors played significant roles in the increase: growth in service prices, increases in the quantity of services used, and an aging population with employer-sponsored insurance.

The researchers divided the report into 4 categories: inpatient admissions, outpatient visits and procedures, professional services, and prescription drugs. In 2018, per-person spending increased $87 for facility payments for outpatient visits and procedures, $86 for professional services, $24 for facility payments for inpatient admissions, and $50 for prescription drugs.

Utilization also increased for all of these categories. In 2018, patients utilized inpatient admissions 0.2% more, outpatient visits and procedures 1.6% more, professional services 3.1% more, and prescription drugs 1.1% more than in previous years.

In total, average prices increased by 2.6% in 2018. While the authors noted that that is the lowest rate of growth between 2014 and 2018, the consistent year-over-year increases during that period resulted in 15% higher prices in 2018 than in 2014.

Eric Levin, CEO of Scripta Insights, said that understanding the drivers behind health care costs is vital to making informed decisions.

“If you take value into account because you understand cost, then you can start to make really informed decisions,” he said in an interview with Pharmacy Times.

In 2018, prescription drugs contributed to $1118—or 19%—of the average per-person health care spend. The authors noted that the calculation for prescription drug cost included negotiated discounts from wholesale or list prices, but did not include manufacturer rebates provided through separate transactions.

The lack of public data on rebates meant the researchers had to estimate their effect on prices. To isolate the potential effect of rebates, the authors separated medical and gross prescription drug spend. Medical spend accounted for between 60% and 80% of the increase in total spending, and excluding gross prescription drug spend reduced the average annual growth from 4.3% to 3.9%.

The $1118 spend on prescription drugs per-person on average in 2018 includes $871 on branded prescriptions and $236 on generics. Compared with 2014, the authors noted that spending was 29% higher due to increases in expenditures for the same drugs, as well as increases in expenditures for newly approved medications.

The largest subcategory of prescription drug spend was hormones, accounting for 20%, followed by central nervous system drugs (14%), and rheumatoid arthritis medications (13%).

The average point-of-sale price for prescription drugs increased 21% between 2014 and 2018, but slowed substantially over the research period. The authors partially attributed that to newly available generic drugs for commonly used medications. For example, they noted that the average point-of-sale price for cardiovascular prescriptions declined 39% between 2014 and 2108, corresponding with greater availability and use of generics.

Utilization of prescription drugs—measured as the number of filled days per person—remained steady from 2014 to 2016, and rose slightly between 2016 and 2018. The cumulative increase was 4% over the 5-year research period.

There is still more research to do, Biniek said.

“We need to understand better the drivers of price increases, particularly increases in prices for the exact same medical service or prescription drug,” she said.

Levin reiterated how vital information is for professionals looking to understand and predict trends in the health care industry. For example, when evaluating savings opportunities for insurance providers, Levin said he very frequently sees 46% savings opportunities. Understanding the calculations leading to this could be vital in creating savings, and distributing that information to health care providers would also be a significant step.

“Our general experience is that most doctors have no idea what a drug is going to cost their patient when they write that prescription,” Levin said. “Most pharmacists are left then filling a prescription for a patient who is getting this incredible sticker shock, and it’s a very frustrating feeling for the pharmacist.”

While there will always be more puzzles and issues to solve in the health care system, Levin said, improving information availability could go a long way. The solution must involve everyone, he said, including physicians, buyers, sellers, and consumers.

Biniek concluded that because nearly half of people in the US receive health coverage through their employer, understanding these data is critical to understanding the drivers behind systemwide growth in health care spending.

REFERENCE

Health Care Cost Institute. 2018 Health Care Cost and Utilization Report. Health Care Cost Institute website. https://healthcostinstitute.org/research/annual-reports. Published February 2020. Accessed March 10, 2020.