Ten new drugs will cost government $50 billion, report says

Ten new medications are expected to cost the government almost $50 billion in drug spending, according to a new report. 

The report from the consulting firm Avalere Health, commissioned by an insurance company trade group, falls into a long-running campaign by insurers against what they call exorbitant prices that they and the government must pay for drugs. 

ADVERTISEMENT
The report looks at 10 “breakthrough” new drugs in the pipeline, which are expected to provide significantly improved treatments for serious conditions like Hepatitis C and breast cancer. 

The new drugs are projected to cost the federal government $49.3 billion over the next 10 years, the analysis finds. That includes $31.3 billion in Medicare spending, $15.8 billion in state and federal Medicaid spending, and $2.1 billion in ObamaCare subsidies. 

Overall drug spending in the U.S. ramped up last year with a 13.1 percent increase, largely driven by new drugs, according to a recent report from the IMS Institute for Healthcare Informatics. U.S drug spending reached $374 billion last year, though the report noted growth is expected to moderate in the coming years.

“Despite claims by pharmaceutical manufacturers that new therapies offset other health care costs, the exorbitant price tags lead to significant increases in health care spending,” America’s Health Insurance Plans, the insurer trade group, said in a statement Monday. “In fact, these latest estimates add to the growing financial strain facing patients and the health system as a result of prescription drug costs.”

PhRMA, for its part, pushed back on the report Monday, noting it only looked at 10 drugs.

“This is another report that just selects a few select medicines to look at to advance a narrative that doesn't match reality,” said Holly Campbell, a PhRMA spokeswoman. “The report itself acknowledges that spending on medicines has remained consistent in recent years.”

The report notes that drug spending is projected to remain constant around 13 percent of healthcare spending over the next 10 years. However, specialty drugs treating complex conditions are expected to increase 15 to 20 percent next year, the report says. 

One new specialty drug that has received much attention is Sovaldi, a cure for Hepatitis C that was a major advancement when introduced last year. It costs $1,000 per pill, or $84,000 for the 12-week treatment. 

Campbell argued that in the “majority” of cases, that is not the price actually paid, because insurers can negotiate lower prices, which she estimated at discounts of up to 40 percent. She also noted the value to patients of breakthrough new treatments. 

Drug prices have been drawing concern in Congress as well. Sen. Bernie SandersBernie SandersNBC's Lester Holt emerges from debate bruised and partisan Debate 2016: Trump didn't win, but neither did Hillary Debate of century lives up to its billing MORE (I-Vt.), a presidential candidate, and Rep. Elijah Cummings last month introduced legislation aimed at lowering the cost of generic drugs. 

AHIP and others point to generic drugs as a cheaper alternative to name-brand medicines, but even the price of generics has been rising in recent years.