Drug pricing is both universally understood to be a problem and almost universally misunderstood. The anecdotes are real and compelling. Patients who deny themselves life-saving medicines. Bankruptcies triggered by overwhelming levels of patient cost responsibility. The fingers are pointed every which way; it’s the greedy middle-men (and women). It’s the drug companies. It’s the insurers. What is agreed upon is that patient out-of-pocket costs for drugs are out of control and something needs to be done about it.

The data suggest that 99% of prescriptions cost patients very little, as 9 in 10 use generics, many have relatively generous benefit designs and others use coupons. Even in oncology, where costs are understood to be very high, two-thirds of oral oncology drugs are free for patients. But there’s a 1% problem, where prescriptions cost patients more than $125, and where they abandon prescriptions 44% of the time, rising more as costs rise even further. For those who feel the cost pinch, the current insurance benefit designs might well deem that as intentional. Given that patients having ‘skin in the game’ is the basis for Medicare Part D and High Deductible Health Plans (HDHPs), and that these benefit designs have led to shifting costs to patients, it is perhaps no surprise that the vast majority of patients facing these outlier costs have these types of plans.

The 1% with high prescription costs are also part of the 10% who have annual out-of-pocket costs for all of their drugs above $500. Those patients who do face costs above these thresholds may not be able to afford them. Those with high costs are also more often those with more serious or even multiple conditions and the sick face the cost burden more than the healthy – essentially the opposite of the concept of insurance. When costs rise, patients of all insurance types and incomes abandon necessary prescriptions. Patients abandoned 634 million prescriptions in 2019, that’s 9% of the total prescriptions in the country last year. When they are exposed to costs, especially high costs, they choose not to fill prescriptions, usually against their doctor’s recommendations. Costs over $500, the low end of the range for the list price for a branded prescription still under patent protection, are abandoned more than 60% of the time. And these issues could well be understated if we consider patients who forego a doctor visit due to cost and are not written a prescription at all.

As noted, some patient cost exposure is offset by the use of coupons, but for Medicare patients the use of coupons is banned, meaning they are disadvantaged in the environment where list prices driving cost-sharing have escalated an average 7.1% over the past five years, 35% in total. In Medicare the closure of the so-called ‘donut hole’, reducing patient costs from 100% to 25% in the coverage gap, has been a contributing factor to reducing patient costs. The average per prescription cost has declined 5% over that period, at the same time patients have likely filled more prescriptions they would otherwise have abandoned. Balancing these two issues, there are still some Medicare patients whose costs are higher than they can afford. Their rates of abandonment exceed commercially insured patients, and 20% of them have annual out-of-pocket costs that exceed $500 a year, compared to 9% for commercial insurance. These issues are amplified by the baby boom and the 8.3 million more seniors shifting from commercial to Part D insurance in the past five years, who experience these issues when they age into coverage. For those who reach the catastrophic level of spending in the Part D model, their 5% share of costs without an annual maximum cap can still be a very large amount. In Medicare Part B, a 20% share of costs without a cap can be considerable, especially when some cancer medicines cost thousands per cycle and over $100,000 per year at list prices. Policies proposed to cap these catastrophic costs would impact relatively few Medicare patients, but would lend significant benefits for them.

Diabetes treatments are another area where the disease burden can make the cost-sharing model substantially challenging. For insulins, where average out-of-pocket costs are declining, nearly a quarter of insulin prescriptions last year had final out-of-pocket costs above the $35 level – the maximum being proposed in various state laws and in the CMS Senior Savings model for Part D plans in 2021. If all patients with costs above the threshold were capped, patients could save $837 million, provided the costs didn’t somehow move to other parts of their cost-sharing model, drifting into the deductible for other drugs or driving up their premiums. Most diabetics are not facing the high and rising costs of insulins - but for those who are, they are undoubtedly worsening their disease by abandoning their prescriptions or worsening their financial situation by continuing to pay when they can’t afford it.

Progress has been made to make many patients’ drug costs more affordable, but it is not being borne equitably by stakeholders. As more patients have lower costs, others are paying more, including insurers like the government, who are bearing a larger portion of overall costs. Manufacturers are also making less incrementally - manufacturer brand price increases averaged less than the CPI in each of the last three years - through discounts, rebates and coupons. Cost exposure clearly influences patient behaviors, but there is anecdotal evidence that this has gone too far, which raises the question of what in fact is a reasonable cost? And is there a single cost, or should it depend on income, ability to pay, or be waived or modified for specific conditions?

Insulin-dependent diabetics are worthy of cost protection, facing a death sentence without it – but they aren’t the only ones who feel their costs are too high. It could be that diabetes is such an outlier on the intersection of stakeholder actions (price setting, negotiations, benefit designs, etc.) that currently proposed policies will be sufficient and public concerns will be quieted. The existing mosaic of insurance designs in public and private settings and patient cost exposures masks the reality that most patients have low and declining costs, and that the 1% are collateral damage. Solving the issues of the 1% almost certainly takes something away from the 99% and that is an insoluble problem for policy makers rarely if ever discussed.

For more information on this topic, download the Medicine Spending and Affordability in the U.S. from the IQVIA Institute for Human Data Science. Also available is an on demand webinar with blog and report author, Michael Kleinrock.