Tuesday, December 26, 2023
DMHC Reports Health Plan Prescription Drug Costs Increased by $1.3 Billion in 2022, $3.4 Billion Since 2017
(Sacramento) – The California Department of Managed Health Care (DMHC) released the Prescription Drug Cost Transparency Report for Measurement Year 2022. The report looks at the impact of the cost of prescription drugs on health plan premiums and compares this data across the reporting years, 2017 through 2022. Among other findings, the report reveals that health plan spending on prescription drugs increased by $3.4 billion since 2017, including an increase of almost $1.3 billion in 2022.
“This report provides greater transparency into prescription drug costs and shows the impact the cost of prescription drugs has on health plan premiums,” said DMHC Director Mary Watanabe. “Health plans paid almost $1.3 billion more on prescription drugs in 2022 than in 2021, the highest year-over-year increase since reporting began. The cost of prescription drugs continues to impact the affordability of health care overall, with health plans paying about $12.1 billion for prescription drugs in 2022.”
KEY FINDINGS:
- Health plans paid about $12.1 billion for prescription drugs in 2022, an increase of almost $1.3 billion, or 12.3%, from 2021. Since 2017, prescription drug costs paid by health plans increased by $3.4 billion or 39%.
- Prescription drugs accounted for 14.2% of total health plan premiums in 2022, an increase from 13.3% in 2021.
- Total prescription drug costs increased by 12.3% in 2022, whereas total medical expenses increased by 7.9%. Overall, total health plan premiums increased by 4.4% from 2021 to 2022.
- Manufacturer drug rebates totaled approximately $2.068 billion, up from $1.674 billion in 2021 and $1.437 billion in 2020. This represents about 17.1% of the $12.1 billion spent on prescription drugs in 2022.
- While specialty drugs accounted for only 1.6% of all prescription drugs dispensed, they accounted for 64% of total annual spending on prescription drugs.
- Generic drugs accounted for 88.9% of all prescribed drugs but only 14.4% of the total annual spending on prescription drugs.
- Brand name drugs accounted for 9.5% of prescriptions and constituted 21.6% of the total annual spending on prescription drugs.
- For the second year, the Pfizer and Moderna COVID-19 vaccines were amongst the most frequently prescribed brand name drugs and the most costly brand name drugs. Also, this is the first year which shows COVID-19 tests amongst the brand name drugs with the highest year-over-year increase in total spending.
- The primary drugs that are driving the increase in the total prescription drug cost spending for 2022 are in the specialty and brand name drug categories. In particular, several drugs used in the management of diabetes or weight loss and biological immunological drugs have risen in the rankings or appeared on the top 25 lists for the first time and are among the most expensive and rapidly expanding drugs.
ABOUT THE REPORT: This report provides greater transparency into prescription drug costs and the impact of prescription drug costs on health plan premiums. In developing the report, the DMHC considered the total volume of prescription drugs covered by health plans and the total cost paid by health plans for those drugs. The Department also analyzed how the 25 most frequently prescribed drugs, the 25 most costly drugs, and the 25 drugs with the highest year-over-year increase in total annual spending impacted health plan premiums.
Health plans in the commercial market must annually report their prescription drug costs to the DMHC. The Department then prepares an annual report summarizing the findings and the impact of prescription drug costs on health care premiums.
BIGGER PICTURE: This report is part of a larger effort by the Newsom Administration to rein in health care costs. Another initiative designed to combat high costs is the creation of the Office of Health Care Affordability (OHCA). The Office will collect, analyze, and publicly report data on total health care expenditures, and enforce spending targets set by OHCA’s Health Care Affordability Board. Building on the DMHC’s analysis, OHCA will examine trends in prescription drug spending across coverage sources, consumer out-of-pocket payments, and regions and aims to identify underlying drivers of cost growth, including utilization, price and the introduction of new drugs to the market. In its efforts to ensure a balanced approach to slow spending growth, OHCA will promote high value system performance by measuring quality, equity, adoption of alternative payment models, investment in primary care and behavioral health, and workforce stability. Through cost and market impact reviews, OHCA will analyze transactions that are likely to significantly impact market competition, the state’s ability to meet targets, or affordability for consumers and purchasers. Based on results of the review, OHCA will then coordinate with other state agencies to address consolidation as appropriate.
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About DMHC:
The California Department of Managed Health Care (DMHC) protects the health care rights of 29.7 million Californians and ensures a stable health care delivery system. The DMHC Help Center has assisted 2.8 million Californians to resolve complaints and issues with their health plan. The DMHC Help Center provides assistance in all languages and all services are free. For more information visit www.DMHC.ca.gov or call 1-888-466-2219.