Let the Facts Get in the Way of the Health Care Spending Story

For decades, data provided by the Department of Health and Human Services has quantified health care spending associated with retail medicines at approximately 10 percent of overall health care costs. Pharmacy benefit managers and insurers have ignored this data and, for those same decades, have argued that spending for medicines is greater than 20 percent of health care expenditures. 

The discrepancy between peer-reviewed published data by HHS and anecdotal talking points by insurers/PBMs has been part of the contentious debate among policymakers and the public around biopharmaceutical spending in the United States. The differences continue despite additional data in the last few years that confirmed that expenditures for all types of medicines — retail and non-retail — is closer to 14 percent

We may finally have some clarity through real-world evidence provided by state regulatory agencies. In 2018, the California Department of Managed Healthcare released a report for plan year 2017 that calibrates the impact of prescription drug spending on health plan premiums. 

The report is based on rate information provided annually by health plans and health insurers. According to the DMHC, for the plan year 2017, prescription drugs accounted for 13.1 percent of total health plan premiums. 

This year, Oregon released its inaugural prescription drug price transparency report for its Prescription Drug Price Transparency Program, which was created in 2018 when the Oregon Legislature passed the Prescription Drug Price Transparency Act. The program is part of the Division of Financial Regulation, which is part of the state’s largest consumer protection agency, the Oregon Department of Consumer and Business Services.  

The report assesses the impact of prescription drug costs on premiums and provides un-aggregated, individual insurer self-reported data. For the three health plans that cover more than 1 million people (or approximately 25 percent of residents in Oregon), prescription drug spending accounted for between 10 and 18 percent of total health plan premiums. 

Kaiser Foundation Health Plan of the Northwest, which has the second-largest number of enrollees in Oregon, reported that prescription drug spending consumed only 11 percent of premiums. It is important to note that Kaiser does not use a PBM to negotiate and implement prescription drug coverage, nor does it engage in rebate contracting. Instead, it uses net price contracting, which was proposed as an alternative contracting methodology in the now withdrawn HHS rebate rule.

These state reports confirm what most biopharmaceutical companies have been claiming for years — that prescription medicines are a small percentage of the overall health care costs in the United States and support the argument that a singular focus by policymakers on biopharmaceutical spending as a means to reduce health care expenditures in the United States is at best naïve and at worst dismissive of the facts about health care spending. Moving forward, this published data should allow us to have a fact-based debate on patient-centered policies that will result in real savings for patients and the health care system overall.


Robert Popovian is the vice president of Pfizer U.S. Government Relations.

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