As prescription drug costs continue to rise sharply, it is crucial for employers to understand the factors driving these increases. This blog post will highlight the key drivers behind rising prescription prices. Additionally, it offers practical strategies for effectively managing these expenses.
Prescription Drug Cost Drivers
In 2022, the United States spent more than $400 billion on prescription drugs, according to the Centers for Medicare and Medicaid Services (CMS). While this figure is smaller compared to spending on hospital and physician services, the rise in costs has been significant.
Some of the primary factors contributing to this trend include:
1. Influx of Specialty Drugs
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- Market Impact: Specialty medications may constitute a smaller share of total prescriptions. Nevertheless, they accounted for over 55% of prescription drug spending in 2022.
- Production Costs: These drugs often involve complex development and handling. Consequently, their production costs are high.
- Future Price Increases: There is a projected 8% rise in specialty drug prices through 2025. This is in stark contrast to a mere 3.2% increase in nonspecialty medications.
2. Inflation and New Drug Launches
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- Shifting Treatments: New specialty medications are replacing more affordable alternatives. In fact, over 40% of new drug launches in 2022 were specialty medications.
- Limited Alternatives: Although there are more than 40 biosimilar drugs available, market dynamics often restrict patient access to affordable options.
3. Adherence Issues
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- Prescription Challenges: Approximately 31% of prescriptions remain unfilled. Interestingly, older adults and women tend to adhere better to treatment plans compared to younger individuals and men.
- Consequences of Non-Adherence: Failing to follow prescribed therapies can worsen health outcomes. This, in turn, leads to increased medical expenses over time.
Looking Ahead: Prescription Drug Trend Projections
A recent analysis forecasts that prescription drugs could represent 9% of total U.S. healthcare expenditure by 2028. This could amount to an estimated $863 billion. This projection underscores the urgent need for employers to adopt proactive cost management strategies.
Effective Solutions for Managing Prescription Costs
Employers, insurers, and consumers are increasingly adopting a variety of strategies to address rising prescription costs. Here are some effective approaches:
1. Usage Management
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- Drug Formularies: Health plans are developing formularies that exclude specific medications from coverage.
- Step Therapy: Patients may need to try lower-cost treatments before qualifying for coverage of higher-priced options.
- Out-of-Pocket Responsibilities: Implementing separate prescription deductibles or prior authorizations can help manage costs.
2. Alternative Payment Methods
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- Choose Generic Options: Selecting generic medications can greatly reduce costs while maintaining quality.
- Paying Cash: Patients might save money by paying cash for their prescriptions instead of using insurance.
3. Rebates and Discounts
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- Pharmacy Benefit Managers: Employers can negotiate discounts and rebates based on purchasing volume.
- Purchasing Pools: Collaborative buying efforts among employers can strengthen negotiating power for lower prices.
4. Employee Awareness and Engagement
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- Consumer Demand for Savings: As out-of-pocket expenses rise, employees are increasingly requesting generic drug alternatives.
- Utilizing Technology: Consumers can use apps and online resources for price comparisons. They should also consider mail-order options for cost-effective 90-day supplies.
Navigating the complexities of prescription drug expenses may seem overwhelming. However, it is an essential endeavor for employers. By understanding the factors driving costs and implementing effective strategies, employers can better manage their healthcare expenses while supporting the health and well-being of their employees. And, of course, Kapnick can help. Reach out at info@kapnick.com or 888.263.4656 for more information on how we can help you create the best prescription plan for your employees and goals.
