For years, lawmakers and consumers alike have expressed frustration and concern about the rate at which prescription drug prices in the U.S. have risen, but there is seemingly no end in sight for these increases. New data once again reflects that this issue is persistent, and tightening the financial screws for millions of Americans at a time when financial difficulties are still prevalent for higher-than-usual number of workers.
Over the course of 2020, average prices for 260 of the nation's most common prescription medications rose 2.9% — more than double the rate of inflation, which increased 1.3% over the same time period, according to the AARP's latest Rx Price Watch data. The average annual cost for any American who carries four or five prescriptions (true of many elderly people, in particular) is $31,000 — and that's greater than the total average annual income of people on Medicare, which is just $29,650.
In many cases, these extremely high prices are covered in whole or in part by insurers, but often, companies pass at least some of those cost increases onto consumers — and it should be noted that these hikes aren't just coming for newly developed drugs. For instance, the anti-diabetes drug Victoza has been around for more than a decade at this point, but between 2015 and 2020, a prescription for it increased in price by 42%, rising from just over $7,900 to $11,300.
The good news for those worried about these increases is that AARP data showed that hikes are at least slowing: 2020 saw prices rise more slowly than in any year since 2006. On the other hand, given that the growth was still more than twice the rate of inflation, experts say it's still outsized growth.
A growing issue
Meanwhile, the rate at which Medicaid patients utilize prescription drugs is also on the rise, meaning that people on the government-run program are being prescribed more medications these days than in the past. Research from the Kaiser Family Foundation showed that from 2015 to 2019 (the latest full year for which complete data was available), Medicaid enrollees saw their prescription drug utilization increase 5%. This was typified by a spike in the first three years of this period, and slight declines in 2018 and 2019.
At the same time, though, Americans' expenditures on prescriptions rose sharply. Over this five-year period, spending before drug rebates increased a surprising 23%. Here, too, was a pattern of growth from 2015 through 2017, and then a slight drop in 2018. However, even as utilization decreased between 2018 and 2019, spending jumped 9%. Overall, Medicaid spent some $68.5 billion on prescription drugs in 2019; just five years earlier, that number was $55.8 billion, an uptick for the government-run program of nearly 23%.
Interestingly, these increases came despite the fact that Medicaid patients were far more likely to be prescribed lower-cost generic drugs, rather than their brand-name alternatives.
Understanding the problem
Like most issues that end up hitting Americans in the wallet, people are acutely aware of how these price hikes affect them. Many want to see something done to start reversing this trend at the regulatory level. In fact, 66% of Americans now believe it should be a "top priority" of lawmakers to pass a bill that would allow the federal government and private insurers to negotiate lower drug prices with pharmaceutical manufacturers, based on separate data from the Kaiser Family Foundation. Another 27% said it was important, but should not be a top priority. All told, the idea of taking legislative or regulatory action to cut drug costs is broadly popular across numerous demographics, regardless of where respondents fell on the political spectrum.
Another 59% of those polled believe it should be a top priority for states to be able to negotiate with drug companies so they can more effectively lower costs for residents. Here, too, an additional 34% said it's important but perhaps should not be a top priority. Similar shares of those polled feel the same way about placing a limit on the out-of-pocket costs seniors pay for their prescription drugs. Among all respondents, there were broad perceptions that the biggest factors in higher drug costs were for those companies to increase profits (78%), fund research and development (68%) or to cover the cost of marketing and advertising (52%).
In fact, these three ideas — all related to controlling prescription drug costs for average Americans — were among the four most popular among respondents. Rounding out that group was the idea of expanding Medicare to cover hearing aids, dental care and vision coverage. Another popular idea was taking action to ensure Americans could continue to receive the COVID-19 vaccine.
In the meantime
Of course, even without action at the federal level, the need to lower drug costs is also on the table for two of the world's biggest retailers, Ars Technica said. In recent weeks, both Walmart and Amazon announced plans to allow their customers to receive significant savings on popular prescription drugs. For the former, it is expanding its Walmart+ RX program, which offers enrollees drug discounts averaging 65% but rising as high as 85%. Likewise, Amazon is now offering a six-month supply of certain prescription drugs for as little as $6.
However, it should be noted that both these programs exist to circumvent insurers, providing discounts directly to consumers through the heft of these companies' buying power as they attempt to become go-to destinations for purchasing prescription drugs. With cost transparency, consumers are able to compare drug prices with these programs, allowing them to determine whether the direct purchase will be more affordable or if they should continue going through the insurer, on a case-by-case basis.
Certainly, the more insurers can do to help people understand their drug costs and find more affordable options to get the prescriptions they need wherever possible, the better the outcomes for all involved. That effort starts with more outreach and education.