A snowy first week of January gave us plenty of time to read some of the last research from 2024. This month we read about prescription drug pricing and the impacts of rebates on consumers, as well as market shares of Medicare Advantage carriers.
Prescription Drug Prices, Rebates and Insurance Premiums
Andrew W. Mulcahy, Preethi Rao, Lindsey Patterson, Annetta Zhou, Jonathan S. Levin, Rachel O. Reid, Sarah Junghee Kang, Zetianyu Wang, Susan L. Lovejoy. RAND. December 2024. Available here.
Researchers for RAND and the Office of the Assistant Secretary for Planning and Evaluation (ASPE) looked at data collected under the RxDC (Prescription Drug Data Collection) and publicly available sources including the Medical Expenditure Panel Survey (MEPS,) National Health Expenditure Accounts (NHEA) and KFF to analyze prescription drug spending, pricing trends, and the impact of rebates on insurance premiums and consumer costs.
What it Finds
- Employer-sponsored and marketplace health plans are shifting toward tiered formularies and higher deductibles, increasing the financial exposure for patients needing high-cost or specialty medications.
- Patients are increasingly responsible for paying coinsurance, leading to higher out-of-pocket expenses despite insurers benefiting from rebates.
- For group plan enrollees, average annual out-of-pocket spending on retail-dispensed drugs remained relatively stable (e.g., $125 in 2014 vs. $109 in 2019), but this conceals significant variation across therapeutic classes
- Spending increases were especially significant for certain drug classes like oncology medications, with patient out-of-pocket costs nearly doubling for some categories between 2014 and 2020. Rebates for on-patent, brand-name drugs often reduce net prices by substantial margins (e.g., up to 80% for some therapeutic classes like insulins), but these savings primarily benefit insurers rather than lowering patients’ costs at the point of sale.
Why it Matters
Understanding the dynamics of prescription drug pricing and spending is crucial for addressing rising healthcare costs and ensuring equitable access to medications. High list prices, even when offset by rebates, disproportionately impact patients through higher out-of-pocket costs, particularly for those in plans with coinsurance or high deductibles. Transparent data, like that collected through RxDC, can help policymakers design more effective interventions to reduce drug prices, improve benefit design, and ensure that cost savings from rebates benefit consumers rather than intermediaries. This is especially timely given ongoing debates over healthcare affordability and the role of Pharmacy Benefit Managers (PBMs) in the pharmaceutical supply chain.
Medicare Advantage: National Carriers Expand Market Share While Regional Carriers Without Affiliation Decline, 2012-23
Joseph G. P. Hnath, J Michael McWilliams, and Michael E. Chernew. Health Affairs. December 2024. Available here.
Researchers at Harvard examined national enrollment and acquisition trends by type of carrier through publicly available data from CMS to analyze trends in Medicare Advantage (MA) market competition from 2012 to 2023. They analyzed national carrier consolidation, local market dynamics, and their implications for competition and policy reforms.
What it Finds
- From 2012 to 2023, the market share of five major national MA carriers grew from 46% to 66%, primarily due to acquisitions, while the share held by regional carriers without affiliations (the primary target of acquisitions) declined from 25% to 6%.
- Local market concentration (measured at the county level) decreased moderately, with the average Herfindahl-Hirschman Index (weighted by county Medicare population) declining from 4,300 to 3,000. However, most local markets remain highly concentrated.
- Growth in MA was driven by service expansions into new counties and states, with national carriers entering more markets. Startups and smaller players remained marginal contributors, holding just 2% of market share collectively by 2023.
- Increased competition at the local level has largely plateaued in areas where MA penetration exceeds 20%, suggesting future MA growth may not significantly enhance local market competition.
Why it Matters
Examining the market dynamics of the expanding MA program is vital, as national-level consolidation risks diminishing competition, potentially driving up costs and reducing benefits for beneficiaries. Although some local markets have experienced greater competition, the majority remain highly concentrated, highlighting concerns about equitable access to competitive plan choices. These findings are particularly significant for policymakers, as payment reforms based on competitive bidding may not deliver the desired cost savings or benefit enhancements without tackling consolidation and market imbalances.
