Drug Spending Growth Reaches 8.5% in 2015

Total spending on drugs in the United States reached $310 billion in 2015, up 8.5% from the previous year, according to a report by the IMS Institute for Healthcare Informatics. The surge of new drugs remained strong last year, and demand for new brands was high. Savings were relatively low from branded drugs facing generic competition. Price increases on brands had a limited effect due to higher rebates and price concessions from manufacturers. Specialty drug spending reached $121 billion on a net price basis, up more than 15% from 2014. (Net-price spending does not relate to a patient’s out-of-pocket costs or the amount health plans pay for drugs. It estimates the amount received by pharmaceutical manufacturers so it reflects rebates, off-invoice discounts, and other price concessions that manufacturers make to distributors, health plans, and intermediaries.)

Manufacturers are accepting lower price increases on existing products. At the same time, spending on new brands continued at near-historic levels. Increasingly, healthcare is being delivered by different types of healthcare professionals and from different facilities while patients face higher out-of-pocket costs and access barriers. The study predicts mid-single digit growth for drug spending through 2020, driven by innovative treatments and offset by brands facing generic or biosimilar competition.

Heightened competition among manufacturers, along with more aggressive efforts by health plans and pharmacy benefit managers to limit price growth, resulted in significantly lower price increases than in prior years. The report also reveals the following:

  • Spending on specialty drugs has nearly doubled in the past five years, contributing more than two-thirds of drug spending growth from 2010 to 2015. Treatments for hepatitis, autoimmune diseases, and oncology drove increased specialty spending. The year 2015 saw a 21.5% spending increase for specialty drugs.
  • Forty-three new active substances were launched in 2015 with a third receiving orphan drug designations from the FDA. An additional 30 brands were launched last year, bringing new combination therapies, alternative dosing, and treatment administration options to patients. The strong momentum of breakthroughs and R&D productivity is reflected in the 2015 cohort of new drugs.
  • Total prescriptions dispensed in 2015 reached 4.4 billion, up 1% year over year. Demand was higher in some therapy areas, such as antidepressants and anti-diabetes, each of which increased about 10% in 2015.
  • Over the past five years, integrated-delivery networks have expanded their affiliations with healthcare professionals to increase negotiating power with insurers, save money, and drive pay-for-performance initiatives. More than 54% of healthcare professionals are affiliated with integrated-delivery networks. In the past five years, there has been a 115% increase in urgent care centers and pharmacy in-store clinics. The number of prescriptions written by nurse practitioners and physician assistants more than doubled over the past five years.
  • While brand price increases are expected to continue in the 10% to 12% range, they will be significantly offset by rebates, discounts, and other price concessions.
  • The are very bright prospects for innovative drugs becoming available through 2020. The late-phase pipeline holds 2,320 novel products, with an average 43 to 49 to be launched annually over the next five years.

Fewer Counties Have Zero Premiums Medicare Advantage Plans in 2015

While most Medicare beneficiaries in 2015 have access to Medicare Advantage plans with $0 premiums, the availability of these plans has been in decline since 2011. HealthPocket’s examination of government data found that Medicare Advantage plans with a $0 premiums in the United States dropped from 813 in 2014 to 726 in 2015, with 113 fewer counties having access to these popular $0 premiums Medicare Advantage plans.

The counties that lost $0 premiums Medicare Advantage plans were in 15 states: California, Hawaii, Idaho, Iowa, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, Oregon, Utah, Vermont, Washington, and Wyoming. Nebraska had the most counties in 2015 that lost zero premiums Medicare Advantage plans (36), followed by Montana (25), Idaho (23), California (12), and Vermont (8). The only states that did not have any $0 Medicare Advantage plans in both 2014 and 2015 were Delaware and Alaska.

HealthPocket also found that there were 16 counties that had no zero premiums Medicare Advantage plans in 2014, but gained access to these plans in 2015. These counties were in the California, Maryland, New Hampshire, New Jersey, Oregon, and Washington. Since 16 counties gained access to zero premiums Medicare Advantage plans and 129 counties lost access to zero premiums Medicare Advantage plans, there were 113 fewer counties with access to zero premiums Medicare Advantage plans in 2015.

Star ratings were higher (3.83 stars) for Medicare Advantage plans that had $0 premiums in 2015, but not 2014. Similarly the average rating for Medicare Advantage plans that had $0 premiums in both 2015 and 2014 was 3.84 stars.

Key Health Care Trends in 2015

Next year, the healthcare system will be front and center as the Supreme Court rules on the constitutionality of health insurance exchange subsidies and changes to the Affordable Care Act (ACA) continue. It will be a pivotal year for the healthcare industry with the ongoing rise of healthcare costs, acceleration of consolidation among providers and payers, and looming 2016 elections, according to a report by the Navigant Center for Healthcare Research and Policy Analysis. Here are six key areas to watch in 2015:

1. Significant uncertainty continues over the ACA: Administrative actions and amendments have brought 38 changes to the law, and more will follow. Gaining attention will be the expansion of Medicaid and an expansion of health exchange enrollment expansion among individuals and small businesses. There may be a change in the excise taxes on devices, drugs, and health plans. The industry will also be monitoring demonstrations and pilots like accountable care organizations (ACO). The ACA’s Physician Payment Sunshine Act will bring more transparency of business relationships along with intensified efforts to reduce the costs of unnecessary care and fraud. Congress will weigh in on the law’s implementation and funding, with repeal unlikely.

2. CMS expects healthcare costs to increase 6% a year for the next decade: More employers will drop insurance coverage for employees; those keeping coverage will use higher deductible products to shift financial risk to their employees. Health insurers and employers will press for bigger discounts and shift risk to providers. Bad debt will increase for providers and margins will shrink. Demand for services resulting from the newly insured and growing Medicare enrollment will exacerbate issues of access and workforce effectiveness. Sticker shock for hospital prices and specialty drugs will continue to be big issues as employers and consumers seek more transparency.

3. Providers will consolidate into regional health systems. Many will sponsor their own health insurance plans: Alternative medicine and technological advances will drive services from beds, to clinics, to homes, and to self-monitoring capabilities. Integrating these capabilities with physicians and business partners will mean the following for hospitals: heightened risk, diversification of businesses and competencies, centralization of back office functions and supply chain relationships, increased access to capital, and a stronger focus on complying with state and federal regulations. Maintaining the status quo is not an option for most hospitals.

4. Adherence to evidence-based care will be the industry’s biggest challenge: Thirty percent of health spending goes for tests, procedures, and diagnostics that have no scientific evidence of appropriateness. The Office of the Inspector General will penalize providers that do more than what’s necessary for purposes of financial gain. Also, social media fuels the public’s appetite to know what works best, who does it well, and at what cost.

• Medicare, Medicaid, health insurers, and employers believe that shifting risks to providers is the key to reducing costs while enhancing safety and quality: Replacing fee-for-service incentives with results means using bundled payments, value-based purchasing, penalties for avoidable re-admissions and unnecessary care, and other programs. The shift is already underway. Employers, plans, and the government are driving these changes. Clearly incentives are changing. Payers find this to their advantage, but providers are threatened. Engaging physicians, allied health professionals, and post-acute providers in the transition is cumbersome, complicated, politically risky, and expensive.

• The Informed Patient: The market for healthcare is composed of household that spend $16,000 a year for healthcare. It’s second only to their housing costs, and is increasing faster than their wages. Retail clinics are experiencing exponential growth as are alternative therapies, like yoga for pain management.

ACA to Bring Profound Changes in 2015

ACAThe Affordable Care Act (ACA) will bring profound changes to health benefits in 2015, according to a statement by Ben Geyerhahn, CEO and Founder of BeneStream. Coverages mandated by the ACA go into effect on January 1. There is also the requirement that companies with 100 or more employees must offer health benefits to all full-time staff under the employer mandate.

The employer mandate will affect the working poor the most. This year the working poor are being offered a range of options by employers, which means that many will have health insurance for the first time in 2015. However, any additional cost to the monthly budget is more than many can afford. That’s why 29 states passed Medicaid expansion. Because of the expansion, Medicaid now covers up to 138% of the poverty rate, which is $32,900 in income per year for a family of four.

With the exchanges, access to health insurance means more preventative care versus emergency care. More people have health insurance upon arrival to the emergency room, which lowers costs. With the employer mandate taking effect, these factors will continue to improve.

However, full-time employees who have been getting health insurance are likely to have fewer plan options than in previous years, and those options will come with narrower networks. Many employees will see higher monthly premiums with higher deductibles along with a smaller range of in-network doctors. And some plans no longer cover out of network doctors.

Also, family coverage will evaporate for many this year. Families can go to the exchange to get the remaining members covered while some may qualify for the Children’s Health Insurance Program (CHIP). 

A Preliminary Look At 2015 Individual Rates

A picture of the 2015 insurance landscape is beginning to emerge months after the close of the 2014 exchange open enrollment period, according to a report by PWC. Publicly released premium increases across about 29 states and the District of Columbia vary widely, ranging from a low of -23% in Arizona to a high of 50% in Arkansas. The average rate increase across states reporting data is 8.2% while the average monthly premium (without subsidies) is around $385.Year two of the exchanges is expected to see an upswing in participation from several major commercial insurers. The bellwether Blue Cross Blue Shield plans have submitted increase requests across the country typically above 9%.

New healthcare CO-OPs, nonprofit insurers created under the ACA, are priced comparably to or lower than competitors in Arizona, Colorado, Connecticut, Kentucky, Maine, Maryland, Nevada, and Tennessee. Arizona’s CO-OP is the lowest-priced plan in the state, with a 23% proposed rate decrease from 2014. Competitive premiums may not always result in higher enrollment as some CO-OPs have found. For more information, visit http://www.pwc.com/us/en/health-industries/health-research-institute/aca-state-exchanges.jhtml

2015 Obamacare Rate Filings Reveal Out-of-Pocket Cost Changes

A recent HealthPocket study finds that deductibles and other out-of-pocket costs are changing inconsistently among the four categories of Obamacare plans: bronze, silver, gold, and platinum plans. Bronze plans had a decrease in deductible with an increase in specialist copayments, and a higher maximum for annual out-of-pocket costs. Silver plans had decreases in deductibles, doctor copayments, specialist copayments, and maximum annual out-of-pocket costs. Gold plans had decreases in deductible, doctor copayments, and specialist copayments, but an increase in maximum for annual out-of-pocket costs. Platinum plans had increases in deductible, doctor copayments, and specialist copayments, but a decrease in maximum annual out-of-pocket costs. Actuarial values requirements for the different categories plans have not simplified the health plan shopping process as originally intended. While the actuarial value changes evenly among the different categories of Obamacare plans, the resulting changes in deductibles and physician copayments did not change proportionally with the actuarial value changes. “Early media attention of the 2015 Obamacare plans has focused on premiums, but out-of-pocket costs are just as important…they can represent thousands of dollars in annual expenses for a consumer who uses healthcare services regularly,” said Kev Coleman, Head of Research & Data at HealthPocket For more information, visit HealthPocket.com.

Exchange Premiums to Rise Modestly in 2015

Average proposed premiums for individual market exchange plans will increase modestly in 2015, based on initial rate filings in nine states, according to a report by Avalere. Across the nine-state group, average monthly silver premiums will rise by 8% from $324 in 2014 to $350 in 2015.

In addition, premium variation within states is expected to increase in 2015. Matt Eyles, executive vice president at Avalere Health said, “As insurers experience with exchanges grows, we expect the range of plan premiums to narrow. However, given the timing of plan filings for 2015, issuers had very little data from the 2014 market to inform their pricing strategy. While average premiums are pretty steady in 2015, new market entrants are driving larger variations in some states. “Consumers need to understand what employers already understand — that health insurance premiums will generally increase to accommodate the rising cost of care. But the variability of 2015 premiums underscores that healthcare is local, and people can and should evaluate their options to find the best deal,” said Dan Mendelson, CEO at Avalere Health. For more information, contact Caroline Pearson at CPearson@Avalere.com.


Study looks at initial rate filings for 2015 plan year

A review of initial rate filings in nine states with public health insurance exchanges found that premiums for “silver” plans will likely rise from $324 to $350 on average. The expected rate changes vary by state, but are overall less than some observers warned. The Hill (6/18)

Insurers sift through enrollee data to set 2015 rates

As the Affordable Care Act’s open enrollment period closes, health insurers will be analyzing new enrollee data, such as the number of subscribers with multiple chronic conditions, the proportion of healthy subscribers and how many subscribers kept nonconforming plans. Insurers have until June 27 to determine the products they will offer through exchanges in 2015. HealthLeaders Media (4/1)

Last Updated 10/20/2021

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