There has been a lot of conversation on the rising cost of prescription drugs. Companies are slowly raising their prices, sometimes by many fold, in one year. Turing bought Daraprim, and raised the price overnight from $13.50 to $750 a pill. Valeant raised the prices of Cuprimine and Syprine from about $500 to about $24,000 for a 30-day supply. Personally, I’ve been impacted by the rising cost of EpiPen, having to keep a couple in hand to help protect my daughter who has food allergies. I decided to dig in and CMS Drug Spending data is a great place to start to understand the rising costs of prescription drugs in the U.S. CMS releases the data annually and late last year the 2015 data was released.
Data Set: 2010 – 2015 Medicare Drug Spending Part B and Part D
For the Tableau workbook with all the data and dashboards CLICK HERE
Section 1: Understanding the basics: Total Spending, By Manufacturer and Brand
The total spending by Medicare Part B and Part D together has tripled since 2010. In 2015, the total spend was $63.2 billion with $17 billion through Part B (Blue Bar) and the rest through Part D (Orange Bar).
Genentech, Inc got almost $30 billion over six years, 12% of all money paid out. Astrazeneca, Gilead Sciences, Amgen and Sanofi-Aventis round out the Top 5, and with number six Glaxosmithkline account for almost half of all spending.
6 companies taking 50% of all money spent.
Over the years, you can see drugs like Abilify (mood disorders), Crestor (cholesterol), Nexium (stomach problems) and Spiriva (COPD) have stayed high and constant, while Harvoni, a drug to treat Hepatitis-C, has shot up to number 1 in 2015 with $7 billion in spending.
Section 2: Understanding the increase in spend
The increase in Medicare spending is a function of the change in Beneficiary count, the Average Unit Per User and the Average Cost Per Unit. The beneficiary count doubled from 2010 to 2011 but since then has grown by 50%. The Average Unit Per User has decreased while the Average Cost Per unit has doubled since 2011.
2a. Beneficiary Count Deep Dive
Prevnar 13! A little over 700,000 beneficiaries in 2014, and over 5.6 million in 2015! Medicare Part B (medical), Part C (Medicare Advantage Plan with drug coverage) and Part D (prescription drug plans) cover four types of commonly recommended vaccines and PCV13 (Prevnar 13) and PPSV23 (Pneumovax 23) are one type. The Centers for Disease Control and Prevention recommend that those 65 and older receive both, preferably PCV13 first. Medicare Part B pays for both shots with no copay as long as the second shot is administered at least 12 months after the first. Medicare Advantage plans do the same as long as an in-network provider is used.
Depo-Medrol is number 2 with over 4.3 million beneficiaries and used to treat the pain that comes with arthritis. Advair Diskus, Crestor, Lantus, Spiriva all have more than a million users.
Let’s look at brands that have had big increases over the last 5 years. Look at Imbruvica, a kinase inhibitor, used to treat certain kinds of cancer, which after a big jump in its first year continues, to rise. Drugs like H.P. Acthar, a Gel used for the treatment of exacerbations of multiple sclerosis in adults and Xarelto, a drug used to treat blood clots due to irregular hearbeats, are on the rise.
List of drugs with greater than 50% increase in any year
2b. Units Per User Deep Dive
A lesser effect on overall price increase, but still some drugs stood out. Xarelto and Xtandi, a drug used to treat prostrate cancer, both have doubled the number of units in the last few years.
2c. Average Cost Per Unit Deep Dive
What drugs cost the most per unit? Users treated with Provenge, a drug used to treat prostrate cancer, can expect to spend $35,000 per unit, and with 3 units per user, costs can top $100K. H.P. Acthar costs $7,000 per unit and Neulasta, a drug given to boost white blood cell production, can cost $3,500 per unit.
There are over 10 drugs that all more than doubled their cost per unit in 2015. While we hear of the ones that cost hundreds and thousands of dollars, drugs like Pennsaid increased their cost from $2 to over $11.
Section 3: Understanding the Cost Per User
Let’s look at the total cost per user. There are multiple drugs that will cost over $50K per user. Insurance might cover a large chunk, but at these costs, users are still left holding quite a large bill. Remodulin, a drug used to treat pulmonary arterial hypertension, can cost an user close to $150k. Tyvaso, anotther drug used for the same can also cost an user over $100k. Cancer treatment drugs like Afinitor, Gleevac and Yervoy can all run up the costs.
3a. Deep dive of the increase in cost per user
A Medicare user is spending, on average, nearly $2,500 on prescription drugs. This has stabilized from 2014, but there are drugs that continue to rise in cost for users.
The root cause for increase in cost is driven by the increase in the cost of the drug. In some cases, the increase in cost is due to the increase in number of units. Take a look at the four drugs below.
Hydroxycloroquine is a drug used to treat malaria, and the cost per user went from under $200 to nearly $900 in 2015. The cost of a unit of the drug went from under 50 cents to over $2. The money making opportunity of the Zica virus. Again, I felt this personally, as we travel to India yearly, and Mefloquine, the drug that our pediatricians require our daughters to take, suddenly shot up in price.
Carbamazepine, a drug used to treat and prevent seizures, went from $229 per user to $520. The reason, the cost per unit more than doubled in 2015. Combined with the high number of units, over 1000 per user, the pinch hits the pocket book pretty fast.
H.P. Acthar, a drug that shows up in many of our Top Ten lists, has steadily been increasing in cost for the user since 2011. It used to cost less than $60k but now costs more than $160k. While the cost of the drug has increased by about $1000, the number of units per user has gone from 10 to 24.
Glumetza, a drug used to treat high blood sugar, went from less than $3,000 per user to almost $14,000. The cost of the drug skyrocketed in 2015. Glumetza, is owned by Valeant. Read more from the NYTimes.
There is a lot of insight to be gleaned from the CMS data. The cost of drugs are constantly on the rise, and the sooner we can come together to figure out how to restrict the rise the better. For the Tableau workbook with all the data and dashboards CLICK HERE I am making the workbook public so go ahead and find your own insights.
Karthik Raja 