Health care spending is currently on track to increase from 18% to 20% of the country’s GDP within the next ten years. Those extra two percentage points equate to more than $250 billion per year — money that otherwise could be spent on other national priorities, such as education and infrastructure. While the current trajectory of health care spending is not inevitable, it will require numerous cost drivers be addressed in order to change the steady upward growth we have seen in recent years.
One of the areas that can potentially help bend the cost curve is prescription drug spending, which reached a record high of $425 billion in 2015.1 Putting drug spending on a sustainable path will not be easy, but we know two proven solutions work: fostering competition to make prescriptions affordable; and improving medication adherence to achieve better health outcomes and reduce unnecessary costs. Working together, these dual market forces can lower drug prices, ensuring patients get the right medication at the lowest cost.
Fostering competition to make prescriptions affordable
On behalf of large employers, health plans and government payers, pharmacy benefit managers (PBMs) apply real market competition by negotiating discounts on prices set by pharmaceutical manufacturers. In 2015, list prices for branded drugs grew at 12.4%, while net prices, which reflect rebates and discounts negotiated by PBMs, grew at only 2.8%.2
Furthermore, when competition comes from generics or biosimilars, the free market has an extraordinary ability to lower prices. And there’s a critically important opportunity to accelerate the flow of generics to the market by addressing the current FDA backlog. This would further spur competition, encourage negotiation, and lower prices to more sustainable levels, allowing patients to gain access to the medications they need.
Improving medication adherence to achieve better health outcomes and reduce preventable costs
Americans taking their medications as prescribed is one of the most effective ways to fight chronic diseases such as high blood pressure, diabetes and high cholesterol. Estimates show this could save $300 billion in unnecessary medical costs each year and save tens of thousands of lives.
Pharmacists play an integral role in this, helping ensure positive health outcomes for patients and keeping health care costs low by encouraging adherence and appropriate pharmacy care. For example, a recent study found that for patients who received pharmacist-led medication reconciliation following a hospital stay, their risk of hospital readmission at 30 days fell by 50 percent. This led to total savings of $1,300 per member, representing $2 in savings for every $1 spent on the program.
Improving medication adherence and fostering competition to lower drug prices can significantly decrease health care spending and improve patient health. Visit CVS Health’s Rising Drug Prices information center to learn more.
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1 IMS Health, National Sales Perspectives, Jan 2016; U.S. Census Bureau; U.S. Bureau of Economic Analysis
2 IMS Health, Medicines Use and Spending in the U.S. – A Review of 2015 and Outlook to 2020.