Prescription Medicines:

Costs in Context
2020
 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 Game Changer Coronavirus Vaccine

Cancer death rate posts biggest Newly approved drug being Reasons for hope: the drugs,
one-year drop ever called ‘game changer’ for tests and tactics that may
people who suffer from conquer coronavirus
hemophilia

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 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 2018

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 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

21% TIER PLACEMENT

patient cost sharing
36% OptumRx (UnitedHealthGroup)
Top 3  ACCESSIBILITY
CVS Health (Caremark)
Market Share: utilization management through
Express Scripts

74% All Other prior authorization or fail first

33% PROVIDER INCENTIVES

preferred treatment guidelines
20%
and pathways

Source: Drug Channels Institute, March 2020.

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 Prescription Medicines: Costs in Context  www.phrma.org/cost   

Spending on Retail and Physician-administered Medicines

Represents Just 14% of Health Care Spending

8% 7% Brand Manufacturers
3% Generic Manufacturers
12% 4% Supply Chain Entities
31%
U.S.
Health Care
Spending,
14% Admin Costs Home Health & Nursing Home Care
2018
4% Prescription Medicines Physician & Clinical Services

13% Other** Dental Services

18%
Hospital Care

Source: PhRMA analysis of CMS National Health Expenditures data, Altarum Institute study, 2015. May not sum to 100% due to rounding.
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 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%
33% $1.99
19% trillion
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.

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 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%

12% Projections show retail

drug spending growth
in line with overall
10%
health spending
Annual Growth Rate

8%

6%

4%

2%

0%

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2024 2025 2026 2027 2028

Total Health Spending Growth Rate Prescription Drug Spending Growth Rate
Source: CMS National Health Expenditures Report 2020
Note: Total retail sales include brand medicines and generics.
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 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 Rebates, discounts, fees and other price
Received by Manufacturers and Other Entities, 2018 concessions have more than doubled since 2012

$175B

46% $74B
54%

2012 2019

Brand Manufacturer Other Entity Received

Source: Berkeley Research Group, 2020. Source: Drug Channels Institute, March 2020.

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 Prescription Medicines: Costs in Context  www.phrma.org/cost   

Patients Face Rising Out-of-pocket Costs for

Medicines and Other Barriers to Care

Percent of plans with deductibles  The use of four or more cost-sharing tiers is
on prescription drugs becoming more common on employer plans

44% 45%

52%

23% 23%

14%
11%
23% 7%
4%

2012 2017 2005 2007 2009 2011 2013 2015 2017 2019

Source: PWC, KFF

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 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 Cost sharing for nearly 1 in 5 brand prescriptions is based
spending for brand medicines is based on the full list price on list price

29%

44%

55%

Copay
26%
Deductible
Coinsurance

Source:  IQVIA. May 2018.

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 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 Yet patients pay more out-of-pocket
than prescription drug spending. for medicines than for hospital care.

$1,191.8B

$850B $47.1B
$34.8B
$335B

Total U.S. Spending Total Patient Out-of-Pocket Spending

Hospital Care 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. 

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 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 If a hospital purchased a medicine An analysis found that 320 hospitals
up medicine prices to 700% or for $150, a 700% markup could mark up some medicine prices at
more of their acquisition cost result in patients being billed least 1,000%
$1,050 for that medicine

$1,050 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.
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 Hospitals and Other Health Care Providers Use the 340B Drug Discount
Program to Retain an Increasing Share of Medicine Spending
The amount of brand medicine spending retained by
hospitals, pharmacies and providers grew 2x between 2013 and 2018.

$60B

$50B

$40B

9X
$30.6B
$30B
$3.5B
$20B

$21.2B $18.0B
$10B

$0B
2013 2018
340B Margin Other Provider Margin
Source: Berkeley Research Group.
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 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
13%    Germany
11%    UK

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.
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 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: PhRMA 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.

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 Prescription Medicines: Costs in Context  www.phrma.org/cost   

PhRMA 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 Resources to help patients

900+
assistance programs offered by
biopharmaceutical companies, including
some free or nearly free options
navigate their insurance coverage
Links to biopharmaceutical
company websites where
information about the cost of a
prescription medicine is available

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 Prescription Medicines: Costs in Context  www.phrma.org/cost   

PhRMA Is Working to Fix the Health Care System

So It Works Better for Patients
• Require insurers & PBMs to pass through negotiated rebates and discounts
Improving Patient • Establish an annual cap on patient out-of-pocket costs in Part D
• Allow patients to spread costs throughout the year
Affordability
• Lower patients’ cost sharing from 25% to 20% in Part D

Fixing Market • Delink supply chain payments from list prices

• Reduce 340B distortions
Incentives

Shifting • Remove barriers to innovative payment arrangements

Toward • Identify better tools for value assessment
Value

• Citizen petitions
Increasing • Patent settlements
Competition • Patent transparency
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