Brand-name drug prices weigh heavily on Part D beneficiaries

MHE Publication, MHE May 2022, Volume 32, Issue 5

Beauty may be in the eye of the beholder, but drug price trends are in the way you crunch the numbers.

Beauty may be in the eye of the beholder, but drug price trends are in the way you crunch the numbers.

In a piece posted on the Health Affairs Forefront blog last month, Anna Anderson-Cook, Ph.D., and her colleagues at Arnold Ventures argued that analyses by IQVIA and others that show relatively level or even decreased net drug prices in recent years may be misleading. Arnold Ventures, formerly The Laura and John Arnold Foundation, is a philanthropic organization that supports a variety of criminal justice, education and healthcare projects. In healthcare, it has been one of the main supporters of Civica Rx, a nonprofit drug manufacturer, and the Institute for Clinical and Economic Review, a cost-effectiveness research organization in Boston.

One of the interesting points raised by Anderson-Cook and her colleagues is that overall trends “do not apply to the commercial market or to Medicare Part D, where net prices are both significantly higher and growing more rapidly” than they are for other payers. They cite Medicaid as an example of a payer that skews overall results. Medicaid plans have considerably lower net drug costs (costs after rebates and other discounts) than Part D plans because of Medicaid-specific rebates rules that result in larger rebates for Medicaid programs.

The Arnold Ventures researchers also made the case that year-over-year comparisons of net prices for drugs that are already on the market paint an incomplete picture because of the number and expense of new drugs.

Citing a Congressional Budget Office report, Anderson-Cook and her colleagues noted that in 2017 drugs launched after 2015 cost
12 times as much as drugs already on the market in 2015. What’s more, new drugs tend to do well, saleswise, once they are approved and on the market. The Arnold Ventures researchers pointed to a Part D dashboard maintained by CMS that shows that 30 brand-name drugs launched after 2015 were top sellers in Part D by 2019.

So far the cost of these new brand-name drugs has been offset by the shift from brand-name products to generics among the older drugs. The migration to generics has kept increases in net spending per beneficiary in Part D plans on a relatively even keel, meaning it hasn’t surpassed inflation.

The researchers also noted that at 90% the generic dispensing rate may have reached its upper limit. If brand-name drug costs continue to escalate while the generic market stays at 90%, there will be upward pressure on Part D spending, notwithstanding the level-to-moderate spending in the recent past. They cited a 2021 Medicare Trustees Report that projects that the cost of the Part D program will grow by 6.1% annually over the next five years. Biosimilars to the brand-name biologics may have their intended effect, tugging down prices of the biologics, but so far they haven’t had the same effect on prices that generics have had on small-molecule drugs, say the authors.

Without comprehensive reform, Anderson-Cook and her colleagues concluded, the cost of brand-name drugs will “grow aggressively,” straining the Medicare budget and the resources of the program’s beneficiaries.