September 5, 2014—Prescription drug spending growth is expected to accelerate from 3.3 percent in 2013 to 6.8 percent this year, primarily due to greater drug utilization by the newly insured and those who have switched to more generous insurance plans under the Affordable Care Act’s coverage expansions, according to federal health expenditure projections published this week by the journal Health Affairs.
“Early analysis indicates that compared to other forms of private health insurance, [insurance marketplace] plans are experiencing greater use of drugs in several therapy classes, including higher use of specialty drugs,” actuaries at the Centers for Medicare & Medicaid Services wrote. “In addition, expensive new hepatitis C treatments are expected to contribute to an acceleration of drug spending growth in 2014.”
CMS said it anticipates that “for 2015, continued gains in insurance coverage through Medicaid and [insurance marketplace] plans are anticipated to lead to continued strong increases in the use of prescription drugs. As a result, the growth rate for drug expenditures is expected to be 6.4 percent.”
For the periods 2016–19 and 2020–23, CMS expects prescription drug spending growth to average 5.4 percent and 6.0 percent, respectively. It expects drug utilization to increase slightly in 2020–23 “as a result of higher disposable personal income and changing guidelines that encourage physicians to introduce drug therapies at earlier stages of treatment.”
“Also, the share of spending on expensive specialty drugs purchased through retail channels is expected to continue to increase steadily,” CMS adds.
CMS projects that 23 million people will remain uninsured in 2023. Last year, the nonpartisan Congressional Budget Office projected there would be about 31 million uninsured individuals in 2023.
CMS projects total health spending growth to rise from 3.6 percent in 2013 to 5.6 percent this year, to 4.9 percent in 2015, and then back up to an average of 6.1 percent per year for the period 2016-23.
With Patent Cliff Behind and More Sovaldis Ahead, Where Are Part D Premiums Heading?
Meanwhile, although Medicare Part D drug benefit premiums have remained essentially flat since 2010, that potentially could change “as the rate of patent expirations slows and as new drugs, including new treatments for hepatitis C, enter the market at prices far beyond those for older brand-name drugs,” a report by the Kaiser Family Foundation suggests.
The Aug. 18 report, a retrospective on Part D during its ninth year, noted that Part D premiums have been held in check partially due to the increased availability and prescribing of generic drugs. It also noted, however, that specialty drugs are one of the faster-growing segments of the Part D drug benefit. Citing data from the pharmacy benefit manager Express Scripts, it observed that the rate of growth for specialty drugs in Medicare was almost 15 percent in 2013 alone, compared to no growth in the non-specialty drug sector. The report notes that cost-sharing obligations for older Americans have risen dramatically in the specialty market, as nearly half of all Part D are charging 33 percent coinsurance for specialty drugs in the initial coverage period.
In late July, the Pharmaceutical Care Management Association warned in a separate report that Sovaldi and other expensive new hepatitis C drugs will increase federal Medicare Part D spending by $2.9 billion to $5.8 billion in 2015 and raise Part D premiums by as much as 8.6 percent. Days later, however, CMS predicted that Part D premiums would increase by only $1 in 2015, to an estimated $32 per month.