U.S. pays nearly twice as much for drugs compared to other countries

A recent HHS analysis revealed that prices charged by drug manufacturers to wholesalers and distributors in the United States are 1.8 times higher than in other countries for the top drugs by total expenditures separately paid under Medicare Part B. U.S. prices were higher for most of the drugs included in the analysis, and U.S. prices were more likely to be the highest prices paid among the countries in the study (ASPE Report, October 25, 2018).

Medicare Part B

Drugs typically administered to patients by healthcare practitioners are covered and paid under Medicare Part B, which is part of the fee for service traditional Medicare benefit. Under Part B, providers buy and bill for these drugs. Medicare pays suppliers and providers based upon the Average Sales Price (ASP) for each product, as reported by manufacturers to CMS. Physician offices that buy and bill Part B drugs are paid 106 percent of the drug’s ASP, and hospitals are reimbursed either at 106 percent or 77.5 percent of ASP, depending on the hospital outpatient department’s participation in a safety net drug pricing program. Spending on Part B drugs has doubled since 2006.

The analysis and results

Data was compiled on the top drugs based on total Medicare reimbursement to either physician offices, hospital outpatient departments, or overall under Medicare Part B in 2016. Countries included in the analysis included: the United States, Austria, Belgium, Canada, Czech Republic, Finland, France, Germany, Greece, Ireland, Italy, Japan, Portugal, Slovakia, Spain, Sweden, and the United Kingdom. The analysis identified thirty two Medicare Part B drugs among the top twenty drugs in spending for each setting. These thirty two drugs accounted for $18 billion in spending, out of a total $27 billion on Part B drugs across these settings. The main analysis reports on twenty seven Part B Drugs.

Across the twenty seven drugs in the study, the U.S. ex-manufacturer prices were 1.8 times than average international ex-manufacturer price. There was not any one country that consistently had the highest or lowest prices compared to the U.S. for twenty of the drug products; U.S. prices exceeded the average international price by more than twenty percent. In addition, for nineteen of the twenty seven products the U.S. prices were higher than any other country. Excluding the U.S., Germany and Canada had the highest prices for six drugs and Japan for five drugs. France and the United Kingdom had the lowest prices for four drug products. Japan, Sweden and Slovakia had the lowest prices for three drug products each. Finally, the analysis calculated that the Medicare program and its beneficiaries spent an additional $8.1 billion (47 percent more) on these twenty seven products that it would have, if payments based upon ASP were scaled by the international price ratios.

Overall, prices and reimbursement rates for Part B drugs are significantly higher for the U.S. providers than purchasers outside the U.S., except for a few outlier cases. The amount by which U.S. prices exceeded those of international comparators varied significantly by product, and there was no clear pattern as to which countries were consistently paying lower prices. The analysis suggests that Medicare Part B could achieve significant savings if prices in the U.S. were similar to those of other large market based economies.

Draft guidance seeks to make drug labels clear, concise, more consistent

In an effort to assist applicants in writing the Indications and Usage section of labeling for human prescription drug and biological products, the FDA issued a new draft guidance. The FDA’s intent is to make information in prescription drug labeling easier for health care practitioners to access, read, and use. The goal of the guidance is to help ensure that the labeling is clear, concise, useful, and informative and, to the extent possible, consistent in content and format within and across drug and therapeutic classes (Notice, 83 FR 31759, July 9, 2018).

Indications

The Indications and Usage section should clearly communicate the scope of the approved indication, including the population to which the determination of safety and effectiveness is applicable. The guidance includes information on how and when evidence may support approval of an indication that is broader or narrower in scope than the precise population studied.

The indication should begin “Drug X is indicated” and be followed by the disease, condition, or manifestation of the cease or condition being treated, prevented, mitigated, cured, or diagnosed, and when applicable other information necessary to describe the approved indication. The other information may include selected patient subgroups or disease sub populations for whom the drug is approved, adjunctive or concomitant therapy or therapeutic modalities to use before initiation drug therapy, or specific tests needed to select patients in whom to use the drug.

Limitations of use

Limitations of use should be presented separately from the indication and should only be included when the awareness of such information is important for practitioners to ensure the safe and effective use of the drug. Limitations of Use are appropriate for drugs for which there is reasonable concern or uncertainty about effectiveness or safety in a certain clinical situation, drugs approved without evidence of benefits known to occur with other drugs in the same class, or drugs with dose, duration, or long-term use considerations.

Language

Certain products have statutory or regulatory required or recommended language for the Indications and Usage section. The guidance includes preferred wording and wording to generally avoid. For example, the guidance explains why it is better to use the phrase “reduce the risk” or “reduce incidence of” rather than using “prevent” in the indication. It also discusses when the terms “only” and “also indicated” should be avoided. Finally, product should be identified by the proprietary name or trade name if it has one, and other information such as the dosage form, and route of administration should not be included in the indication.

 

Prescription drug spending in U.S. among highest worldwide

Prescription drug spending in the United States exceeds spending in nine other high income countries, with generic drugs comprising 84 percent of the total pharmaceutical market. Besides the U.S., a Commonwealth Fund issue brief looked at prescription drug spending in Australia, Canada, France, Germany, the Netherlands, Norway, Sweden, Switzerland and the United Kingdom.

Prescription drug spending in U.S. increases in 1990s

According to the Commonwealth Fund review, spending on prescriptions drugs increased substantially in the mid-1990s due largely to the growth of the pharmaceutical industry. For instance, FDA approved drugs were at an all-time high and sales of cancer drugs increased. Additionally, drug spending increased due to the expansion of federal programs such as the Children’s Health Insurance Program, Medicaid, and Medicare.

Prescription drug spending increased by 20 percent over a period of two years during the mid-2000s. The growth was primarily due to introducing many expensive specialty drugs to treat hepatitis C, cystic fibrosis and other conditions. Passage of the Affordable Care Act likely led to such increases as well. U.S. spending on pharmaceuticals surpassed $1,000 per person in 2015 and was 30 percent to 190 percent higher than in the nine other countries. The next countries, behind the U.S., in spending in 2015 were Switzerland with $783, Germany with $686, and Canada with $669.

Reasons U.S. spending on prescription drugs is so high

The Commonwealth Fund offered possible reasons to explain why the U.S. spends so much on prescription drugs, including country population and volume of drugs consumed, drug utilization per person, type and mix of drugs consumed (e.g., generics versus brand-name drugs), and prices at which drugs are sold.

Although the U.S. population is ranked among the largest and has the highest prescription drug spending as a country, spending per capita remains much higher in the U.S. than that of other countries. Higher per person spending is not due to the large population of the U.S., however.

The impact of generic prescription drugs

Generic drugs make up 84 percent of the total U.S. pharmaceutical market, which is a larger share than in all other countries, excluding the U.K., which is tied with the U.S. with 84 percent. Followed by the U.S. are Germany with 81 percent, Netherlands with 71 percent and Canada with 70 percent of the share of generic prescription drugs. Lower prescription drug prices in the other countries reflect more centralized processes for obtaining pharmaceuticals and setting coverage.

Conclusion. Price continues to play a primary factor in the high prices associated with prescription drugs in the U.S. The reasons can be attributed to the fragmented nature of health care delivery and payment, as well as separate negotiation arrangements between drug manufacturers and payers and complicated arrangements for federal and state health programs. Also, the U.S., unlike other countries, allows for greater latitude for monopoly pricing of brand name drugs.

CMS updates its Medicare and Medicaid drug spending dashboards

As part of its effort to provide additional information on, and increase transparency in the cost of prescription drugs, CMS has updated both its Medicare and Medicaid drug spending dashboards to include information from 2015. According to a CMS press release, the medications presented as part of the 2015 Medicare Drug Spending Dashboard represents a very large proportion of Medicare spending, including 34 percent of all Part D spending and 69 percent of Part B drug spending, which was similar to the 2014 drug dashboard. A second, contemporaneous CMS press release notes that the medications presented as part of the 2015 Medicaid Drug Spending Dashboard represent approximately 41 percent of Medicaid covered outpatient drug spending in 2017.

Total program spending

For total program spending, the Medicare dashboard shows five drugs with the highest Part D and Part B drug spending, respectively, in 2015 compared to their spending in 2014. For example, the dashboard shows that Lantus (insulin) was a top-five drug in terms of costs in Medicare Part D between 2014 and 2015, as was Havroni, a new drug to treat Hepatitis C.

The Medicaid dashboard also shows the trend in total drug spending for the five drugs with the highest aggregate drug spending in 2015. Of the top five, Harvoni and Abilify (aripiprazole, a brand name anti-psychotic drug) had total drug spending greater than $2 billion in 2015, with annual total program spending for Abilify greater than $1.7 billion for each of the past five years. Also, spending for Lantus/Lantus Solostar (insulin glargine, a brand name diabetes drug) was $1.4 billion and spending for Vyvanse (lisdexamfetamine dimesylate, a brand name attention deficit hyperactivity disorder drug) and Humira/Humira pen (adalimumab, a brand name drug used for rheumatoid arthritis) was approximately $800 million each.

Highest total spending (Part D)

The Medicare dashboard shows that the five Part D drugs with highest total spending in 2015 were:

  • Spiriva (tiotropium bromide, a brand name chronic obstructive pulmonary disease treatment);
  • Advair Diskus (fluticasone/salmeterol, a brand name asthma and chronic obstructive pulmonary disease treatment);
  • Crestor (rosuvastatin calcium, a brand name cholesterol drug)
  • Lantus/Lantus Solostar (insulin glargine, a brand name diabetes drug); and
  • Harvoni (ledipasvir/sofosbuvir; a brand name Hepatitis C virus treatment).

Advair Diskus and Crestor were also among the top five drugs with the highest Part D spending in 2014, but Spiriva, Lantus, and Harvoni were not. Harvoni was introduced in October 2014 and in 2015 had just over $7 billion in spending. Sovaldi (sofosbuvir), another drug for treating Hepatitis C, had the highest spending in 2014, but was not among the top five drugs in 2015, with $1.3 billion in spending.

Highest total spending (Part B)

The Medicare dashboard shows the top five Part B drugs with highest total spending were:

  • Lucentis (ranibizumab, a brand name drug for wet age-related macular degeneration);
  • Remicade (infliximab, a brand name rheumatoid arthritis drug);
  • Neulasta (pegfilgrastim, a brand name white blood cell stimulator for use with cancer treatments);
  • Rituxan (rituximab, a brand name cancer treatment); and
  • Eylea (aflibercept, a brand name drug for wet age-related macular degeneration).

These were the same five drugs with the highest Part B spending in 2014. Each of these drugs contributed more than $1 billion in spending for the Medicare Part B program.

Unit cost

The Medicare dashboard lists the top five drugs with the largest increases in average cost per unit from 2014 to 2015 in the Part B and D programs. Glumetza (metformin HCl, a diabetes treatment) had the largest increase in cost per unit at over 380 percent and had total spending increases from $34.3 million to $153 million. All five of these Part D drugs had increases in cost per unit of more than 100 percent. Among Part B drugs, mitomycin (a generic chemotherapy agent), had the largest increase in average Part B cost per unit at 163 percent and had total spending increases from $5.9 million to $15.8 million. The other four Part B drugs had smaller, but still significant increases, approximately 25 to 40 percent.

The Medicaid dashboard shows the top five drugs with the largest increases in average cost per unit from 2014 to 2015. Ativan (lorazepam, a brand name drug used for anxiety) had the largest increase in cost per unit at 1,264 percent and a spending increase from $1.7 million to $5.3 million. All five of the drugs had increases in cost per unit of more than 400 percent.

High cost per prescription fill

The Medicaid dashboard shows the top five drugs selected for high costs per prescription fill (i.e., greater than or equal to $1,000) in 2015. Advate (antihemophilic factor [recombinant], a brand name hemophilia treatment) had an average cost per fill of $20,828 and was associated with total program spending of $354 million. In comparison, Prezista (darunavir ethanolate, a brand name HIV antiviral) had an average cost per fill of $1,259 and total program spending of $335 million. NovoSeven RT (coagulation factor VIIa [recombinant], a brand name hemophilia treatment) had the highest average cost per fill at $67,098 and $298 million in program spending.