Brand name prescription drug insurance premiums prices have frequently increased by a larger percentage than general inflation for many years. Increases in prescription drug prices directly affect the prescription users, employers, taxpayer-funded programs, and private insurers in several ways.
This constant growth of prescription drug price will lead to covered individuals paying a higher cost-share for their prescriptions and an increased monthly premium for their coverage. Individuals that do not have private health insurance will absorb tax hikes and endure the possibility of closing public programs due to the increased government spending on brand name prescription drugs from Medicare and Medicaid.
Why Does This Matter?
If brand name prescription drug prices were to rise at the same level as general inflation since 2006, the average adult American would be paying nearly 40 percent lower than the prescription drug cost that they are paying today.
This is significant because this exponential increase leads to insured individual’s copays and premiums to grow due to the rise in insurance company’s claim costs. Government funded programs, such as Medicare and Medicaid, will also be spending more on their prescription drug claims, which will result in growing tax rates and closing of taxpayer-funded programs.
According to the AARP Public Policy Institute, the average cost of a brand name prescription drug in 2020 was approximately $6,600 per year and the average older American is prescribed approximately 4.7 prescription drugs per month.
This equates to $31,020 per year for brand name prescription drugs, the average annual income for an individual enrolled in Medicare is only $29,650; annual brand name prescription drug claims have surpassed the annual income for the average older individual in the United States. This yearly surge in brand name prescription drug prices reveal one of the main issues in our healthcare system today.
How Are Brand Name Prescriptions Increasing Insurance Premiums?
The inflation of filed insurance claim values are directly correlated to the increasing insurance premiums across our healthcare system. Prescriptions account for approximately 20 percent of total filed claims throughout a given year. As the cost for prescription drugs increase, claim costs will continuously rise resulting in increased insurance premiums.
In addition to the brand name prescription drug price increases, some prescriptions give prescribing doctors paid incentives for prescribing the drug which encourages doctors to prescribe certain treatments leading to additional spending.
An example of a treatment that gives doctors a paid incentive for prescribing the drug is Aduhelm, a new FDA approved infusion therapy treatment that was created by Biogen to treat Alzheimer’s. The cost of this treatment is set at $56,000 per year, which can reach $100,000 when accounting for related treatments, with copays costing up to $11,500.
The prescribing physician will earn $3,360 for each Aduhelm treatment that they prescribe, which encourages physicians to prescribe this treatment to one of the 6,000,000 individuals with Alzheimer’s in the United States.
Unfortunately, there were 11 scientists that reviewed the research behind Aduhelm for the FDA and 10 of the 11 voted against the approval, the other scientist in the panel was undecided. This is significant because scientists have voted against the approval of Aduhelm due to the insufficient evidence of effective treatment and physicians across the country are still able to prescribe this infusion therapy to individuals and charge them a large portion of their annual income for a treatment that lacks evidence of successfully treating Alzheimer’s.
How Can Companies Reduce Prescription Drug Claim Values?
Pharmaceutical manufacturers use many strategies to increase the prices of their prescription drugs, which results in escalated claim values. One way that pharmaceutical manufacturers increase the prices of prescription drugs is to charge different amounts for the type of tablet that is prescribed.
For example, RxBenefits saw an individual that was a part of a 3300 participant plan being prescribed a 280 mg tablet of Imbruvica per day that had a gross cost of $13,771 every 28 days. After digging deeper into the prescription claims, they found an equivalent alternative of being prescribed two 140 mg tablets of Imbruvica per day with a gross cost of only $9,129 every 28 days.
This switch optimized the claim and saved the individual $4,642 in gross cost per month, equivalent to a savings of over $55,000 per year, without affecting the health of the individual. Companies can reduce prescription drug claim costs by optimizing member prescriptions by noticing the hidden strategies that pharmaceutical manufacturers are using.
Once these overpriced claims are identified, the Rx Manager would reach out to the prescribing doctor to change the prescription to the cheaper alternative. Optimizing prescription claims improves the plan’s rebate yield, which increases rebate value and prevents unnecessary premium increases from unneeded prescription claim costs.
How New City Can Help?
New City has the ability to find the right insurance for you. It can be hard for companies to find the right option between all the group health insurance and self funded healthcare solutions out there. Every company is different, and working with an experienced employee benefits consultant could be the right choice for your business. Talk with New City Insurance and see how making the switch could save you time and money in the long run.