Protecting Consumers in an Environment of Rising Drug Prices

Rising drug prices is one of today’s most discussed health care topics, and with good reason: double-digit price hikes for brand name drugs are becoming more commonplace and can jeopardize access to medications and put financial strain on patients and taxpayers. In fact, brand price inflation was a key driver of total drug spending in 2016, which reached a record high of $450 billion.1

Pharmacy benefit managers (PBMs) provide a check on rising drug prices by using competition to negotiate discounts and promote the appropriate use of lower-cost, clinically equivalent medicines. In 2016, the rate of drug spending, also known as trend, dropped to an average of 3.2 percent for CVS Caremark clients, in contrast to a trend of 11 percent without PBM strategies in place.

Consumers Benefit from PBM Strategies

The majority of consumers with prescription drug coverage has relatively low out-of-pocket costs. Nearly 60 percent of those covered by CVS Health-administered plans spent less than $100 in out-of-pocket costs in 2016, a slight decline from the prior year.

PBMs have several strategies for helping patients keep their out-of-pocket and premium costs low, including:

  • Identifying when lower cost, clinically equivalent medicines can be used instead of high-cost brand name drugs. In fact, nine out of ten prescriptions dispensed in 2016 were generic drugs.2

  • Using industry expertise to negotiate discounts with manufacturers, which are passed on to plan sponsors according to contract terms and can be used to lower premiums or reduce cost-sharing for consumers.

  • Developing innovative prescription savings programs, such as Reduced Rx, which offer discounts directly to patients on certain essential medications.   

The Rise in High-Deductible Health Plans

In 2016, 29 percent of workers in employer-sponsored plans were covered by a high deductible health plan (HDHP) – that’s five times more than 10 years before.3 For many consumers, enrolling in an HDHP represents their first exposure to drug list prices during the deductible phase of coverage. Though only four percent of individuals covered by a CVS Health-administered plan spent more than $1,000 annually on prescription drugs, we find that many members with high out-of-pocket costs are also in HDHPs.

Point-of-Sale Discounts Can Reduce Patient Out-of-Pocket Costs

We understand the challenges some consumers face with rising drug costs, which is one reason we developed the capability for clients to apply negotiated discounts at the point-of-sale, thus reducing a member’s out-of-pocket cost for a prescription. Research shows that out-of-pocket costs may be a barrier to accessing needed medical care, so a solution like point-of-sale discounts can potentially help improve medication adherence. Several CVS Caremark clients have implemented this solution, and we are using it for our own employee benefit as well.

Providing Flexibility to Expand Drug Coverage for Consumers with Health Savings Accounts

Health savings accounts are available to individuals enrolled in HDHPs and may be used to pay for qualified medical expenses, including prescription medications. Under current law, certain drugs that are considered preventive can be covered at the same copay as if the deductible has been met, and in some cases at no cost to the patient. However, medications used to treat an existing disease, injury or condition may not be covered, meaning the individual has to pay the full cost until the deductible is reached.

CVS Health advocates for policy changes that would allow more flexibility for HDHPs to cover prescription drugs, beyond those that qualify for the preventive drug list, prior to reaching the deductible. These changes have the potential to make medicines more accessible, encourage patients to take their medications as prescribed and keep health care costs low.

For more information on how CVS Health is working to ensure consumers have access to affordable medicines, visit our Rising Drug Prices information center. And to stay informed about the most talked-about topics in health care, register for content alerts and our bi-weekly health care newsletter.

06.12.17

1 QuintilesIMS Institute. (2017). Medicines Use and Spending in the U.S. A Review of 2016 and Outlook to 2021. Retrieved from: http://www.imshealth.com/en/thought-leadership/quintilesims-institute/reports/medicines-use-and-spending-in-the-us-review-of-2016-outlook-to-2021
2 Association for Accessible Medicines. (2017). 2016 Annual Report. Retrieved from: http://accessiblemeds.org/wp-content/uploads/2017/02/AAM-Annual-Report-2017.pdf 
3 Kaiser Family Foundation. (2016). 2016 Employer Health Benefits Survey. Retrieved from: http://www.kff.org/report-section/ehbs-2016-summary-of-findings/