Seniors are getting financially drained by excessive prescription drug price increases, and a congressional report released this week shows that the situation is unlikely to change anytime soon without fundamental change.
The report, “Manufactured Crisis: How devastating drug price increases are harming America’s seniors,” exposed how the prices of many of the most popular brand-name drugs increased at nearly ten times the cost of inflation from 2012 to 2017. The report looked at overall price increases amongst the top 20 most commonly prescribed brand-name drugs for seniors, and comes as rising drug prices represent an increasingly serious cost driver for all Americans. Medicare beneficiaries’ out-of-pocket spending on prescription drugs is expected to increase from 41 percent of per capita Social Security income in 2013 to 50 percent in 2030.
This study demonstrates that the pricing decisions made by these drug companies are outrageous, said U.S. Senator Claire McCaskill, whose office released the report.
“Can you imagine if you went to an auto dealership and last year’s exact model was being sold at a 20 percent mark-up, and then you went back the next year and it had happened again? That’s exactly what’s happening in the prescription drug industry, where the cost of identical drugs skyrockets year after year,” she said.
The report’s key findings include:
- Prices increased for every brand-name drug of the top 20 most-prescribed brand-name drugs for seniors in the last five years. On average, prices for these drugs increased 12 percent every year for the last five years—approximately ten times higher than the average annual rate of inflation.
- Twelve out of the 20 most commonly prescribed brand-name drugs for seniors had their prices increased by over 50 percent in the five-year period. Six of the 20 had prices increases of over 100 percent. In one case, the weighted average wholesale acquisition cost for a single drug increased by 477 percent over a five-year period.
- Although 48 million fewer prescriptions were written for the top 20 most commonly prescribed brand-name drugs for seniors between 2012 and 2017, total sales revenue resulting from these prescriptions increased by almost $8.5 billion during the same period.
Soaring drug prices are driving up health care costs each year, directly affecting Medicare. By law, Medicare administrators are not allowed to directly negotiate drug prices. Democrats want Medicare to be able to negotiate, while Republicans have opposed such it.
In 2016, prescription drug spending totaled $328.6 billion, according to the report. The most recent National Heath Expenditure data published by the Centers for Medicare and Medicaid Services reveals that retail prescription drug spending grew at an average pace of 4.8% between 2006 and 2015, with two of the highest-growth years occurring in 2014 and 2015 at 12.4% and 9.0%, respectively. Even with Medicare coverage, many older individuals also face substantial out-of-pocket costs, particularly for specialty and brand-name drugs.
In 2013, the latest year for which CMS cost and use data is available, $1 out of every $5 that Medicare beneficiaries spent in out-of-pocket health care costs (excluding premiums) went towards prescription drugs. Medicare beneficiaries’ average out-of-pocket health care spending is projected to continue to increase.
According to one study, this spending is expected to rise from 41% of beneficiaries’ per capita Social Security income in 2013 to 50% in 2030. In 2030, Medicare beneficiaries ages 85 and over are projected to spend a full 87% of their Social Security income—$4,400 more out of pocket for health care on average—while beneficiaries ages 65 to 74 are projected to spend an additional $2,000 on out-of-pocket spending on average, the report indicates.
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