There's widespread outrage about soaring drug prices, but a new report shows that people are, on average, actually paying less for their medications than they did a few years ago.
Drug prices are on the upswing, with net prices rising 3.5 percent last year, according to the study from the QuintilesIMS Institute, a research organization that specializes in health care analysis. And total spending climbed to $323 billion, even after accounting for all the discounts and rebates that drugmakers provide. But patients' out-of-pocket costs for medicines have declined, from $32 per name-brand prescription in 2013 to $28 today.
The report, which did not receive industry funding, isn't the only one to show this counterintuitive pattern of declining out-of-pocket costs. A Peterson-Kaiser Health System Tracker report last year found a slight decline in patients' personal spending on prescriptions, even as the overall costs increased.
These are the kinds of numbers the pharmaceutical industry typically uses to defend itself against criticisms of price gouging, asking people to look away from list prices that continually rise. Indeed, the new report found that average name brand drug list prices rose from $230 to $341 over the four-year period — even as the out-of-pocket costs for patients slightly decreased.
But if patients are so well insulated from those rising prices, why do so many people feel prescription drug costs have spiraled out of control?
The answer lies in the extremes: On the low-end of the average are an increasing number of prescriptions that have zero dollar out-of-pocket costs. Some of those include preventive medicines that were required by the Affordable Care Act to be made available to patients for free, such as birth control. The proportion of prescriptions with a $0 co-pay has risen from 23.6 percent of prescriptions in 2013 to nearly 30 percent last year.
On the high-end of the average are the people who are exposed to the ever-rising list prices of drugs through deductibles or coinsurance. According to the new report, nearly 1 in 5 brand name drug prescriptions are paid for through deductibles and coinsurance, but those people shouldered a little more than half of the out-of-pocket spending. About a third of high-priced specialty drugs are paid for through coinsurance and deductibles, but patients who filled those prescriptions took on 91 percent of out-of-pocket spending.
The proportion of prescriptions that cost more than $50 to a patient shrank slightly, from 2.7 percent of prescriptions in 2013 to 2.3 percent last year.
Part of this has to do with the steps the pharmaceutical industry has taken to subsidize its own products. The study examined a subset of drugs and found that the use of coupons to reduce patients' out-of-pocket costs had climbed to nearly 1 in 5 drugs. Insurers and the companies they hire to negotiate with drug companies on prices, called pharmacy benefit managers, dislike these coupons, because they argue they allow patients to utilize more expensive drugs, even when cheaper substitutes are available.
Drug companies like to accuse insurers of saddling consumers with these kinds of plans. Insurers turn the blame around and argue that if drug companies didn't keep raising the list prices of drugs, the patients wouldn't face such high bills.
In the middle of all the finger-pointing are consumers, who also bear the negative consequences. Even though out-of-pocket payments for drugs are slightly down, rising insurance premiums spread the costs over everyone else. And the report shows that when patients face the upfront costs of medication through deductibles, they are far more likely to not fill their prescriptions at all.
When a name brand drug's cost is in the deductible, they are 2.5 times more likely to walk away from the pharmacy counter than people who don't face a deductible.