Private insurance accounted for 42% of drug spend in 2017: KFF

Drugs and money
Private insurance accounts for the biggest prescription drug spends. (Getty/LIgorko)

While total expenses for prescription drugs are significantly larger for private insurance companies than for Medicaid or Medicare Part D, people with private insurance are still paying less out-of-pocket expenses over the course of the year, according to a recent analysis of Medicare Part D, Medicaid and private plans.

The study, released Monday by the Kaiser Family Foundation (KFF), reveals these three forms of insurance coverage account for a majority of prescription drug spending in the U.S., 82% in 2017. But the members enrolled in these plans—and how much they pay for drugs—varies greatly. In 2017, another 14% of payment for prescription drugs came out of patients’ pockets.

Overall, the U.S. spent $333 billion on retail drugs in 2017. Specifically, spending for drugs through private health insurance accounted for $140 billion, 42%, in 2017; spending on Medicare Part D prescriptions accounted for $101 billion, 30%; and spending on drugs through Medicaid accounted for $33 billion, 10%. As a result, patients were still responsible for paying $47 billion of all prescription drug costs in 2017.

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What do these data tell us about paying for prescription drugs as a whole in the U.S.?

"It’s a simple question with no simple answer," Matthew Rae, KFF senior policy analyst for the healthcare marketplace project, told FierceHealthcare. "A couple of thoughts: Most employer plans are required to have an out-of-pocket maximum, which limits how much drug spending an enrollee can collect in a year. Secondly, employers have told us they are interested in reducing drug cost-sharing for individuals with chronic conditions." Plus, Rae points out that beyond plan design, enrollees in employer plans are generally healthier than those enrolled in Medicare Part D.

"I think one of the key takeaways is that we don’t have just one major payer for drugs, but rather three—employers, Medicare and Medicaid—which makes it somewhat more complicated to talk about paying for drugs 'as a whole' in this country. It can also make it more complicated to consider policy solutions that would address rising drug costs, which is high on the current policy agenda," Juliette Cubanski, associate director for the program on Medicare policy at KFF and co-author, told FierceHealthcare.

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The top five drugs products with the highest total spending accounted for at least 10% of the total prescription drug spending in large employer plans, Medicare Part D and Medicaid plans in 2017.

The highest out-of-pocket expense for those with employer plans and Medicare Part D included drugs to treat cancer, multiple sclerosis and rheumatoid arthritis. When it comes to therapeutic classes, the highest spend for all three plans included anti-diabetic agents, antivirals and psychotherapeutics.

Retail prescription drug spending accounted for 13% of the total personal healthcare spending or private health insurance plans and 15% of personal healthcare spending in Medicare in 2016. Drug spending was only 6% of Medicaid expense in the same year due in large part to the fact that Medicaid also covers more expensive services, including long-term services and supports that are not paid for by private insurance or Medicare.

Among the top 10 drug products with the highest total spending in large employer plans, Medicare Part D and Medicaid, there were two products in common: Harvoni, a treatment for hepatitis C, and Lantus Solostar, an insulin therapy for diabetes. Other overlaps on the top 10 lists for large employer plans and Medicaid include treatments for attention-deficit hyperactivity disorder and HIV.

RELATED: HHS’ rebate rule would boost federal spending by $177B, lead to higher Part D premiums, CBO finds

Other medications that made the Medicare Part D top 10 list included treatments for cancer, chronic obstructive pulmonary disease and high cholesterol. For Medicaid, the top 10 list included several psychotherapeutic medications. And for large employers, two hepatitis C treatments, Sovaldi and Harvoni, were among the top 10 drug products by total spending per user, with total spending per user on both products of more than $70,000 in 2016.

"The analysis shows that when there is a costly new treatment where demand is high across different segments of the population, as in the case of the hepatitis C treatment Harvoni, it can have a dramatic effect on spending across all payers," Cubanski added.

Overall, out-of-pocket spending was highest for people enrolled in Medicare Part D plans. In 2016, one out of every 10 people in a Medicare Part D program had out-of-pocket drug expenses above $1,000, compared to 3% of people on a private insurance plan. And 84% of privately enrolled members had average out-of-pocket drug expenses cost below $200, compared to 60% of Medicare Part D enrollees.

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