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Insurers Distort the Facts on Drug Costs … Again

November 10, 2017
An effort by the Blue Cross Blue Shield Association (BCBSA) to spur a discussion on prescription drug costs is not getting off to a good start because it’s premised on some misleading information. In an interview with Bloomberg BNA, Justine Handelman, a senior executive at BCBSA, was noted as saying drug costs “make up about 22 percent of health insurance premiums on average, about the same share that’s spent on physician and clinical services, and drug costs are continuing to rise.” Here are a few key facts Handelman neglected to mention.

The national trend on prescription drug costs is decreasing. The Centers for Medicare and Medicaid Services (CMS) reports that national growth in prescription drug spending is slowing, from 9% in 2015 to less than 6% in 2016. On drug prices, CMS data reveals an estimated 1.6% growth this year. And a new report released today by Altarum shows a dramatic drop in the growth of list drug prices, from 7% year-over-year ending in September 2016 to just 1.4% ending in September of this year. And don’t forget, these numbers don’t take into account significant rebates and discounts provided by drug manufacturers.

The insurer’s pessimistic views do not reflect what its own pharmacy benefit manager (PBM) is reporting. Prime Therapeutics—the PBM owned by Blue Cross Blue Shield plans—recently issued a report that showed its commercial payers experienced just a 0.8% increase in drug spending this year. This isn’t the first time an insurer has been telling a different story than its own pharmacy benefit manager. Prime also reports that the overall unit cost of drugs has actually decreased by 3.6%. What’s there to be pessimistic about?

The “22 percent” number has been debunked before. America’s Health Insurance Plans (AHIP) issued a report earlier this year that suggested 22.1% of premium dollars went toward prescription drugs in 2014. Sounds familiar. As BIO President and CEO Jim Greenwood noted at the time, AHIP fails to recognize that 2014 was an outlier due to new cures for patients with Hepatitis C. Meanwhile, information from other trusted sources — including the Centers for Medicare and Medicaid Services and Avalere — also cast serious doubts on the insurance industry’s inflated number.

The insurer’s pivot to drug costs is a useful distraction from its own business practices. Just this week, Axios reported that “Blue Cross Blue Shield health insurance companies have more than quintupled their net profits in the first half of this year” compared with the same six months in 2016. Additionally, Consumers Union continues to express concerns over the insurer’s excess surplus, which may mean it’s overcharging its beneficiaries. Meanwhile, reports continue to surface of insurers restricting access to medicines, pursuing double-digit premium increases, and discriminating against patients.

At BIO, we support a robust discussion around prescription drug costs, biomedical innovation and how to make health care accessible and affordable for all patients. That's why BIO launched, to make sure the discussion is an informed one and also to ensure public policies always reflect what’s best for patients and what’s going on in the real world.

Note: An earlier version of this post incorrectly stated that the Blue Cross Blue Shield Association owns Prime Therapeutics. The post has been updated to reflect that Prime Therapeutics is owned by Blue Cross Blue Shield plans.