Prescription Medicines Costs in Context 2020 Prescription Medicines

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Prescription Medicines: Costs in Context 2020

Prescription Medicines: Costs in Context 2020

Prescription Medicines: Costs in Context www. phrma. org/cost We are in a New Era

Prescription Medicines: Costs in Context www. phrma. org/cost We are in a New Era of Medicine Where Breakthrough Science is Transforming Patient Care 56 New Medicines Were Approved by the FDA in 2019 Cancer Death Rate Cancer death rate posts biggest one-year drop ever Game Changer Newly approved drug being called ‘game changer’ for people who suffer from hemophilia Coronavirus Vaccine Reasons for hope: the drugs, tests and tactics that may conquer coronavirus 2

Prescription Medicines: Costs in Context www. phrma. org/cost Out-of-pocket Costs for the Sickest Continue

Prescription Medicines: Costs in Context www. phrma. org/cost Out-of-pocket Costs for the Sickest Continue to Soar Despite a Dramatic Slowdown in Medicine Prices and Spending Brand Medicine Prices Retail Medicine Spending 0. 3% 2. 5% 2018 3

Prescription Medicines: Costs in Context www. phrma. org/cost Insurers and PBMs Have a Lot

Prescription Medicines: Costs in Context www. phrma. org/cost Insurers and PBMs Have a Lot of Leverage to Hold Down Medicine Costs Negotiating power is increasingly concentrated among fewer pharmacy benefit managers (PBMs). Insurers determine: FORMULARY if a medicine is covered TIER PLACEMENT 21% patient cost sharing 36% Top 3 Market Share: 74% Optum. Rx (United. Health. Group) CVS Health (Caremark) Express Scripts All Other ACCESSIBILITY utilization management through prior authorization or fail first PROVIDER INCENTIVES 33% 20% preferred treatment guidelines and pathways Source: Drug Channels Institute, March 2020. 4

Prescription Medicines: Costs in Context www. phrma. org/cost Spending on Retail and Physician-administered Medicines

Prescription Medicines: Costs in Context www. phrma. org/cost Spending on Retail and Physician-administered Medicines Represents Just 14% of Health Care Spending 8% 12% 31% U. S. Health Care Spending, 2018 7% Brand Manufacturers 3% Generic Manufacturers 4% Supply Chain Entities Admin Costs 14% Home Health & Nursing Home Care Prescription Medicines 4% Physician & Clinical Services 13% 18% Other** Dental Services Hospital Care Source: Ph. RMA analysis of CMS National Health Expenditures data, Altarum Institute study, 2015. May not sum to 100% due to rounding. 5

Prescription Medicines: Costs in Context www. phrma. org/cost 91% of All Medicines Dispensed in

Prescription Medicines: Costs in Context www. phrma. org/cost 91% of All Medicines Dispensed in the United States are Generics 88% 90% 91% 72% 52% 43% $1. 99 trillion 33% 19% 10 -year savings (2009 - 2018) 1984 1990 1996 2002 2008 2014 2018 2019 Source: IMS Health. Drug Channels Institute, March 2020. Source: Association for Accessible Medicines. “Generic Drug & Biosimilars Access & Savings Report, ” 2019. 6

Prescription Medicines: Costs in Context www. phrma. org/cost Medicine Spending is Projected to Grow

Prescription Medicines: Costs in Context www. phrma. org/cost Medicine Spending is Projected to Grow in Line with Health Care Spending Through Next Decade In 7 of the last 10 years, Retail Drug Spending Growth was below Total Health Spending Growth 14% Projections show retail drug spending growth in line with overall health spending 12% Annual Growth Rate 10% 8% 6% 4% 2% 0% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Total Health Spending Growth Rate 2019 2020 2021 2022 2024 2025 2026 2027 2028 Prescription Drug Spending Growth Rate Source: CMS National Health Expenditures Report 2020 Note: Total retail sales include brand medicines and generics. 7

Prescription Medicines: Costs in Context www. phrma. org/cost Nearly Half of Spending on Brand

Prescription Medicines: Costs in Context www. phrma. org/cost Nearly Half of Spending on Brand Medicines Goes to Entities Other Than the Manufacturers Who Developed Them Percent of Total Spending on Brand Medicines Received by Manufacturers and Other Entities, 2018 Rebates, discounts, fees and other price concessions have more than doubled since 2012 $175 B 46% $74 B 54% 2012 Brand Manufacturer Source: Berkeley Research Group, 2020. 2019 Other Entity Received Source: Drug Channels Institute, March 2020. 8

Prescription Medicines: Costs in Context www. phrma. org/cost Patients Face Rising Out-of-pocket Costs for

Prescription Medicines: Costs in Context www. phrma. org/cost Patients Face Rising Out-of-pocket Costs for Medicines and Other Barriers to Care The use of four or more cost-sharing tiers is becoming more common on employer plans Percent of plans with deductibles on prescription drugs 44% 45% 2017 2019 52% 11% 23% 2012 4% 2017 2005 23% 2013 2015 14% 7% 2007 2009 2011 Source: PWC, KFF 9

Prescription Medicines: Costs in Context www. phrma. org/cost Too Often, Negotiated Savings Do Not

Prescription Medicines: Costs in Context www. phrma. org/cost Too Often, Negotiated Savings Do Not Make Their Way to Patients More than half of commercially insured patients’ out-of-pocket spending for brand medicines is based on the full list price Cost sharing for nearly 1 in 5 brand prescriptions is based on list price 29% Copay 55% 44% 26% Deductible Coinsurance Source: IQVIA. May 2018. 10

Prescription Medicines: Costs in Context www. phrma. org/cost Patients Face High Out-of-pocket Costs at

Prescription Medicines: Costs in Context www. phrma. org/cost Patients Face High Out-of-pocket Costs at the Pharmacy Counter Even Though Total Spending on Other Parts of the Health Care System is Far Higher Hospital spending is much higher than prescription drug spending. Yet patients pay more out-of-pocket for medicines than for hospital care. $1, 191. 8 B $850 B $47. 1 B $34. 8 B $335 B Total U. S. Spending Hospital Care Total Patient Out-of-Pocket Spending Retail Prescription Drugs Hospital Care Retail Prescription Drugs Source: Drug Channels Institute analysis of National Health Expenditure Accounts, Office of the Actuary in the Centers for Medicare & Medicaid Services, December 2019. Outpatient prescription drug figures exclude inpatient prescription drug spending within hospitals and nearly all provider-administered outpatient drugs. Figures in billions. 11

Prescription Medicines: Costs in Context www. phrma. org/cost Hospitals Account for 1/3 of All

Prescription Medicines: Costs in Context www. phrma. org/cost Hospitals Account for 1/3 of All U. S. Health Care Spending and Contribute to Patient Out-of-pocket Costs by Marking Up Medicines Nearly one in five hospitals marks up medicine prices to 700% or more of their acquisition cost If a hospital purchased a medicine for $150, a 700% markup could result in patients being billed $1, 050 for that medicine $1, 050 An analysis found that 320 hospitals mark up some medicine prices at least 1, 000% Amount billed by hospital 1, 000% Amount paid by hospital $150 Source: The Moran Company. Hospital Charges and Reimbursement for Medicines: Analysis of Cost-to Charge Ratios. September 2018. 12

Hospitals and Other Health Care Providers Use the 340 B Drug Discount Program to

Hospitals and Other Health Care Providers Use the 340 B Drug Discount Program to Retain an Increasing Share of Medicine Spending The amount of brand medicine spending retained by hospitals, pharmacies and providers grew 2 x between 2013 and 2018. $60 B $50 B $40 B $30 B $20 B $10 B $3. 5 B 9 X $30. 6 B $21. 2 B $18. 0 B 2013 2018 $0 B Other Provider Margin 340 B Margin Source: Berkeley Research Group. 13

Prescription Medicines: Costs in Context www. phrma. org/cost Medicine Spending in the United States

Prescription Medicines: Costs in Context www. phrma. org/cost Medicine Spending in the United States is In Line with Spending Around the World 14% Canada 13% France 16% Japan 11% UK 13% Germany 14% USA 15% Italy 10% Australia 12% Spain 16% Korea Prescription Medicines as a Percentage of Total Health Care Spending Note: Total health care spending includes hospital care, physician and clinical services, home health and nursing home care, government administration and net cost of private health insurance, dental, home health and other professional services as well as durable medical equipment. Source: OECD Health Statistics Database (accessed February 2016); Altarum Institute, 2015, A ten year projection of the prescription drug share of national health expenditures including non-retail. 14

Prescription Medicines: Costs in Context www. phrma. org/cost More Medicines are Available to U.

Prescription Medicines: Costs in Context www. phrma. org/cost More Medicines are Available to U. S. Patients as Compared with Other Countries that Set Prices Artificially Low The 5 -year survival rate for all cancers is 42% higher for men and 15% higher for women in the U. S. than in Europe. Number of New Medicines Available by Country, January 2011 - June 2019 88% 64% 61% 53% 52% 49% 15% United States Germany United Kingdom Japan France Canada Greece Source: Ph. RMA analysis of IQVIA Analytics Link and FDA, EMA and PMDA data. January 2020. Note: New Active Substances (NASs) approved by the FDA, EMA and/or PMDA and first launched in any country between January 2011 and June 2019. Average delay represents the time in months since global first launch among NASs that have launched in a given country. IQVIA reports only the retail channel for Greece. 15

Prescription Medicines: Costs in Context www. phrma. org/cost Ph. RMA Created the Medicine Assistance

Prescription Medicines: Costs in Context www. phrma. org/cost Ph. RMA Created the Medicine Assistance Tool, or MAT, To Help Patients Navigate Medicine Affordability MAT makes it easier for those struggling to afford their medicines to find and learn more about various programs that can make prescription medicines more affordable. The Medicine Assistance Tool Includes: A search engine to connect patients with 900+ assistance programs offered by biopharmaceutical companies, including some free or nearly free options Resources to help patients navigate their insurance coverage Links to biopharmaceutical company websites where information about the cost of a prescription medicine is available 16

Prescription Medicines: Costs in Context www. phrma. org/cost Ph. RMA Is Working to Fix

Prescription Medicines: Costs in Context www. phrma. org/cost Ph. RMA Is Working to Fix the Health Care System So It Works Better for Patients Improving Patient Affordability • • Require insurers & PBMs to pass through negotiated rebates and discounts Establish an annual cap on patient out-of-pocket costs in Part D Allow patients to spread costs throughout the year Lower patients’ cost sharing from 25% to 20% in Part D Fixing Market Incentives • • Delink supply chain payments from list prices Reduce 340 B distortions Shifting Toward Value • • Remove barriers to innovative payment arrangements Identify better tools for value assessment Increasing Competition • • • Citizen petitions Patent settlements Patent transparency 17