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Drug makers may offer rebates to payers, but health plans continue to see notable increases in costs for prescription medicines, according to a report by the office of Massachusetts Attorney General Maura Healey. And this has been especially true for one particularly costly group of medicines used to treat multiple sclerosis.

In 2015, the average spending per member each month for all medicines rose 6.1 percent from 2014, after rebates, among five state health plans that were examined. And average spending increased 21.4 percent from 2014, after rebates, for five different types of specialty drugs for treating cancer, hepatitis C, HIV, rheumatoid arthritis, and multiple sclerosis.

Nonetheless, the report concluded that, “in most instances, rebates did not substantially alter the rate of increase in aggregate spending.” The report, which was released last week, attempted to pierce the veil of corporate secrecy associated with drug prices by analyzing data obtained through civil investigative demands issued to health plans, pharmacy benefit managers, and pharmacies.


Given that spending on specialty drugs outpaced spending on all medicines overall and these drugs account for more than 30 percent of spending nationally, the attorney general’s office made a point of examining costs for multiple sclerosis treatments. Why? Prices for multiple sclerosis drugs have continued to rise — even for older medicines — as more treatments become available.

The analysis found that net prices paid for the drugs, which refers to the cost after rebates and discounts, have been “steadily and substantially increasing” since 2011. Moreover, this upward march occurred despite different contracting approaches taken by health plans and, as a result, the five Massachusetts plans examined all paid very similar prices for multiple sclerosis drugs for their members.


In fact, the average annual growth rate in net prices ranged from 10.2 percent to 15 percent. In 2011, each drug had a net price of about $3,000 per month, but by the end of 2015, the net price paid by health plans was between $5,000 and $6,000. In other words, rebates offered by drug makers did not make a difference in lowering spending, unlike other categories of medicines, such as insulin.

Even as drug makers boost list prices, they complain that rising rebates diminish their own sales. Drug makers pay rebates to middlemen known as pharmacy benefit managers, which keep a portion as a fee and pass the rest along to health insurers. The rebates are paid in order to gain favorable positioning on formularies, which are the preferred lists of drugs for which insurance coverage is provided.

However, health insurers are increasingly foisting more drug costs onto consumers in the form of higher deductibles and copayments, although the companies that sell multiple sclerosis drugs offer patient savings programs. In any event, this convoluted payment system is now undergoing more scrutiny thanks to growing national outrage over rising prescription drug prices.

Yet comparing multiple sclerosis treatments to other categories of drugs, such as insulin, can be an apples-to-oranges exercise. The report looked at 10 of 14 available drugs, of which three are pills and the remaining seven are injectable medicines. But due to different mechanisms of action, not all are interchangeable, which means insurers have less flexibility in limiting coverage for certain drugs.

“Our findings suggest we cannot count on competition among branded drugs to discipline prices in every instance where there are multiple available drugs in a therapeutic class,” the report concluded. “While there may be some diseases where different brand drugs effectively compete with each other on rebates, there are other diseases where there is sufficient demand for access to all (or nearly all) drugs such that payers cannot meaningfully negotiate on formulary placement or the rebates that lower net prices.”

The report also noted the arrival of one generic drug did not appear to make any difference. Sandoz introduced a knockoff of the 20-milligram-strength Copaxone MS drug sold by Teva Pharmaceuticals, but only after Teva began selling a more convenient and slightly lower-priced 40-milligram version of Copaxone. Teva managed to switch about 70 percent of patients to the newer drug.