Specialty Drugs & the Rising Cost of Healthcare

The cost of insurance is on the rise at an alarming rate.  In 2017, the average person in the United States spent $10,739 per individual in the household annually, versus just $146 in the year 1960.  In fact, health care costs have risen at a faster pace than the average annual income in the U.S.  Why is this? 

Some believe that you can blame specialty drug costs. Spending for prescription medication has risen each year and the high prices of new novelty drugs, such as new therapy drugs that require special handling or monitoring, are a major contributing factor to rising premiums.  According to current Medicare figures, these specialty pharmaceuticals will often cost a patient upwards of $600 per month.

These specialty drugs are generally aimed at areas of medicine that haven’t yet found reliable cures--chronic or complex conditions such as cancer, Hepatitis C, Multiple Sclerosis, Parkinson’s Disease, HIV or Rheumatoid Arthritis. In California in 2017, over half of the prescription drug spend was on specialty drugs.

Demand and prices for these drugs are skyrocketing. Drug companies say they have no choice but to charge more to recoup their high research and development costs. If they can’t do that, they have warned: these drugs won’t make it to market.

As a result of this, insurers have been hard pressed to provide access to these drugs without significantly raising their plan rates to cover the high costs. For instance, a generic drug may require just a $10 copay, while some specialty drugs require a patient to pony-up as much as 33% of the cost, often resulting in thousands of dollars in patient expenses each month.

Medicare and Medicaid are forbidden by law to negotiate prices, so they must leave it up to the insurance companies to decide which drugs they can offer under their plans. But these new costs are now being passed on to the patient/consumer in the form of higher premiums. New medical break-throughs can save lives, and we must support such innovation and access. But can we afford it?

According to Harvard Medical School, some pharmaceutical companies do charge more for these drugs claiming market exclusivity, and the U.S. Senate Special Committee on Aging has been researching this problem. How much is a drug really worth? The average annual retail cost of some of these drugs exceeds the median U.S. household annual income, and is more than three times the average Social Security benefit.  And it’s not about to stop now.  Spending on specialty drugs, according to some, is expected to more than quadruple by the year 2020.  While there are always new medications being produced, those on a fixed income may not be able to afford them, and this is a growing burden on the health care system.

Insurers such as Cigna, Aetna, Anthem and Kaiser Permanente report that in 2017, they spent up to $600 million for specialty drugs as opposed to $270 million on brand-names and just $170 million on generics.

Reducing these costs is important and The National Coalition on Health Care (NCHC, made up of more than 80 medical societies), warns of “…a tsunami of expensive medicines that could literally bankrupt the health care system.”  To combat this, the NCHC have launched a campaign for sustainable Rx pricing. Also, research by Pew Charitable Trust has begun identifying and evaluating options of controlling overall pharmaceutical spending while still ensuring patient access to important medications.

Can these efforts work? We must patiently wait and see. But opinions are positive, with so many firms, individuals and the federal government now seeking answers.

Questions?  We are here.