NCPA - National Center for Policy Analysis

Health Care Spending Plateaus as Brand-Name Drug Prices Rise

March 3, 2015

The rate of growth of health spending remains moderate, but one area where prices appear to be increasing faster than in recent years is brand-name prescription drugs. Many blockbuster drugs lost their patents by 2012 and many people looked forward to a future when we could all get a month's-long supply of generic drugs for $4. It did not quite work out that way, according to John Graham, senior fellow at the National Center for Policy Analysis (NCPA).

Over the past few years, specialized drugs for smaller patient populations have been introduced with high nominal prices. In September, EvaluatePharma confirmed the increasing cost of prescription drugs was concentrated in more specialized drugs. Of the top 100 selling drugs in the United States:

  • The median revenue per patient of the Top 100 drugs increased from $1,260 in 2010 to $9,400 in 2014, representing a seven-fold increase;
  • The median patient population size served by a Top 100 drug in 2014 was 146,000, down from 690,000 in 2010; and
  • There were seven treatments priced in excess of $100,000 per patient per year in 2014, versus four in 2010.

Thus, the health insurance industry is campaigning against the high prices of specialty drugs.For its part, the brand-name pharmaceutical industry emphasizes health insurers (especially in Obamacare exchanges) often put these specialty drugs on the most expensive tier of their formularies, requiring patients to pay high out-of-pocket costs. 

While this is an accurate description of the situation, a government policy simply forcing insurers to cover a higher share of the price of a specialty drug does not reduce the price. It just moves it from direct payment by patients to the premiums paid by all of the insured.

Source: John R. Graham, "The Crisis in Drug Research and Development," National Center for Policy Analysis, March 3, 2015. 


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