Cost to Medicaid of prescription drugs more than doubles over 5 years, state report shows
Spending increased at much larger rate than size of population covered
A 39% increase in the number of Nevadans on Medicaid over five years, while substantial, was also substantially smaller on a percentage basis than the 125.6% increase in Medicaid spending on medications over the same period. (iStock/Getty Images)
The amount spent on medications through Medicaid in Nevada increased 126% from 2017 to 2022, according to a state report on prescription drug pricing.
The Nevada Department of Health and Human Services (DHHS) annual Drug Transparency Report tracks drug manufacturer costs and profits, financial assistance and rebates for prescriptions, sales representatives’ compensation, Medicaid spending on prescriptions, and suppliers’ justifications for increased costs, based on data collected from manufacturers.
Since the state started publishing the annual reports in 2017, total spending for prescription drugs by Medicaid increased by 125.6%, from $428.8 million to $967.4 million in 2022. The number of claims increased by 59.2%, from a little more than 5 million to just over 8 million, and the cost per claim increased by 41.7%, from about $85 to $126. The increases in cost far outpace the U.S. Labor Department’s Medical Consumer Price Index for Nevada, which rose by 14.7% over the same five-year time period, according to the state report.
The number of Nevadans covered by Medicaid over that same five-year period grew from about 670,000 to roughly 930,000, much of the rising enrollment driven by pandemic related job losses accompanying expansion of federal relief programs.
That 39% increase in the number of Nevadans on Medicaid, while substantial, was also substantially smaller on a percentage basis than the 125.6% increase in Medicaid spending on medications.
‘Small number…most spent’
Three drugs accounted for a disproportionately large share of Medicaid spending last year — Humira, which treats inflammatory diseases, Strensiq, which treats Hypophosphatasia, a rare genetic disorder that impairs mineralization of bones and teeth, and Advate, which treats hemophilia, a disorder where blood doesn’t clot properly.
Humira cost the state $15.5 million, Strensiq cost the state $12.2 million, and Advate cost the state $11.8 million. According to the report, these prescriptions represented 879 patients (856 Humira, 10 Strensiq, 13 Advate). But while provided to less than two-tenths of a percent of Medicaid patients, the cost of the drugs accounted for 4% of state Medicaid spending on medications.
“I did note the number of patients, it was such a small number of patients and still the most spent. In one case, it was only ten patients,” said Linda Fox, the Drug Transparency Program Manager for DHHS.
For every patient that was on Strensiq, the state paid just over $1.2 million to give them their necessary medication.
The first state laws for drug prescription transparency started in 2016 with Vermont. More than a dozen states, including Nevada, have enacted transparency laws since. Nevada has been characterized in one comparative study as among the most comprehensive transparency programs.
Pharmaceutical companies are required to report why there is an increase in prices by April 1 of each year. Three manufacturers are out of compliance and are subject to penalties if they do not respond to DHHS, according to the report.
Nevada started to produce these reports annually in 2017 for essential diabetes drugs after Senate Bill 539 was passed in the legislative session. Large pharmaceutical companies sued shortly after but dropped the lawsuit in 2018 after the state adopted regulations to ensure that their trade secrets wouldn’t be disclosed.
Essential asthma drugs were added into the fold in the 2019 session. In the 2021 legislative session, asthma drugs were removed and Nevada lawmakers strengthened the Nevada Drug Transparency Program with Senate Bill 380, which mandates the state to track the pricing of prescription drugs over $40 and experienced significant price increases.
Efforts have been made at the federal level to ensure pharmaceutical cost transparency — the Biden-Harris Administration announced a new Department of Health and Human Services proposal last week to increase transparency by giving the Centers for Medicare and Medicaid (CMS) more insight into what the most expensive drugs on the market today cost to manufacture and distribute through a drug price verification survey.
Provisions in the Inflation Reduction Act, which became law last August, lowered insulin prices so that Americans with diabetes don’t pay more than $35 per month, impose a tax penalty if drug companies increase their prices faster than inflation, and allow CMS to negotiate prices for high-cost prescription drugs.
Marketplace and marketing
Pinpointing the actual cost of pharmaceutical drugs is murky at best. The price of a prescription includes the wholesale price but is also determined by the contracts that drug manufacturers have with pharmacy benefit managers, health plan companies, and individual health plans.
The DHHS report also includes data on drug manufacturers who provide financial assistance to consumers or to pharmacy benefit managers, which are third-party administrators for prescription drug programs for health insurance companies, like Express Scripts, CVS Caremark, or OptumRx.
Most of the essential diabetic drugs are generic and don’t have rebates, patient assistance, or coupons attached. Drugs over $40 did have some of the information, but were much smaller — with the total financial assistance provided through these programs totaling $4 billion the rebates provided to pharmacy benefit managers for Nevada drugs sales was $2.2 billion. The number is not entirely accurate, as some of the 12 manufacturers didn’t provide state-specific information, according to the report.
The manufacturers of pharmaceuticals also had to report the reasoning for the cost increase — with the most common explanation being inflation, research and development, and marketplace dynamics or commercial conditions that induced in part the need for a price increase.
As of now, no penalties have been assessed related to 2022 reporting, according to DHHS in a statement to the Current.
The DHHS report does not provide provide pharmaceutical manufacturers’ reports, but did forward a response from one unnamed company: “When pricing our medicines, we strive to maintain a balance between value to patients and society and our ability to invest in future medicines, while ensuring the financial viability of our company and commitment to shareholders.”
The state report also found that pharmaceutical sales representatives spent a total of $5 million marketing drugs to medical providers. The bulk of that spending was for food and beverages ($4.8 million) and mostly going to office staff, which accounted for $2.5 million The primary drugs marketed at these events or meals were diabetes, mental health, and migraine, according to the report. Asked for additional details, DHHS said that there was no cap on how much pharmaceutical sales representatives can spend on office staff, just that it must be reported.
More than half of Nevadans reported being somewhat or very worried about affording prescription drugs, and one-third reported not filling a prescription, cutting pills in half, or skipping a dose of medicine in the last year due to cost, according to a survey by Altarum, a non-profit research and consulting organization that focuses on health care, released last fall.
Legislators this year sent a bill to Gov. Joe Lombardo’s desk that sought to limit price increases of some of the most expensive and frequently used medications, but Lombardo vetoed it.
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