Prescription Drug Costs: Addressing Access & Affordability
Today, millions of families across the United States are worried about affording the healthcare they need. Whether it’s paying for medicines for heart disease, diabetes, cancer or a host of other illnesses, millions of Americans wonder what expenses they can cut to afford these ever-increasing bills. A Kaiser tracking poll found that three out of four adults say they are worried about being able to afford unexpected medical bills and three out of four were worried about the cost of healthcare services.
Unfortunately, these concerns are well-founded. Most families will see their healthcare costs go up significantly in 2024, in large part fueled by big drug companies’ quest for even higher profits by increasing prescription drug prices.
As the leaders of the largest not-for-profit health plan in the Mid-Atlantic and a non-partisan, national nonprofit committed to advocating for healthcare consumers, we think Congress must go farther in efforts to rein in the cost of prescription drugs for the millions of families struggling.
We know this can be done. Congress made progress when it passed the Inflation Reduction Act of 2022 (IRA), giving Medicare the authority to negotiate drug prices for an initial 10 lifesaving drugs that treat common conditions like diabetes, cancer, arthritis and heart failure. These groundbreaking negotiations have yielded results and Medicare enrollees should see lower prices starting in 2026. Ten drugs may not sound like many—and it is only the start—but these drugs alone cost taxpayers more than $50 billion per year.
In fact, seven of the 10 selected drugs produce more than $25 billion in earnings after big drug companies invest in research and development, which shows the opportunity for savings is significant.
As drug companies increase prices to drive up outrageous profits, what taxpayers, employers, and insurers pay to cover those drugs also increases. For example, each year drug companies release new “blockbuster” drugs that set new records for their high price. This year, a gene therapy was announced that would cost $4.25 million dollars per treatment. The result of all of these efforts to drive up already exorbitant profits is higher prices for everyone, whether they take prescription drugs or not. This is clearly revealed by a recent Families USA report , which notes over 20% of health insurance premiums are driven by the high costs of drugs. Drug costs have increased by nearly half (42%) in just five years and we will continue to see premiums and deductibles rise unless these out-of-control drug prices are reined in.
CareFirst BlueCross BlueShield (CareFirst) experiences this problem firsthand, even while enacting new programs to help people get the medications they need at a price they can afford. In 2023, Blue Cross Blue Shield Companies formed Synergie Medication Collective, a venture to radically improve affordability and access to costly medications — ones that are injected or infused by a healthcare professional in a clinical setting — for nearly 100 million Americans. These high-cost treatments represent a substantial portion of overall drug spend, with significant growth in future spend anticipated.
In 2022, CareFirst joined partners from across the healthcare ecosystem to support Civica’s Affordable Insulin Initiative, which has committed to lowering costs for people who rely on insulin to no more than $30 per vial starting this year. However, this effort is undermined when the underlying price of that drug remains unreasonably high because manufacturers continue to increase list prices. Since 2014, CareFirst has experienced a roughly 5% average annual increase in spending on prescription drugs , and to offset those year over year increases, in addition to other increases in the total cost of care, premiums and deductibles have had to rise too.
It doesn’t have to be this way.
The good news is that solutions already exist, and they can have a bigger impact if we continue to advance them. In 2022, the Inflation Reduction Act gave Medicare the authority to negotiate prices for certain drugs, and lower prices for ten lifesaving drugs that will go into effect starting in 2026. This fundamental reform creates accountability for the high drug prices charged by drug companies. According to the Centers for Medicare & Medicaid Services, negotiation will lower the prices paid by Medicare, potentially saving taxpayers billions of dollars, and lowering out-of-pocket costs for seniors across the country. The full impact remains to be revealed, but providing Medicare this authority was a good first step. The Inflation Reduction Act also included provisions to hold drug companies accountable by imposing fees if they increase their prices year-over-year at a rate higher than inflation. These fees are being used to reduce out-of-pocket costs for people who rely on Medicare for their prescriptions.
In addition to Medicare drug negotiation, the IRA included provisions to hold drug companies accountable by imposing fees if they increase their prices year-over-year at a rate higher than inflation. These fees are being used to reduce out-of-pocket costs for people who rely on Medicare for their prescriptions.
These are significant wins in the fight against high and rising drug prices, but Congress should extend these solutions to be modeled in the private market as well.
To provide affordable private health coverage and ensure all families have access to high-quality healthcare, we must continue to aggressively address high drug prices. The work being done to implement the new Medicare drug negotiation program is critical, but 65% of people in this country rely on private insurance and they deserve these benefits too. We encourage federal and state policymakers across the political spectrum to prioritize healthcare affordability for workers and families over increased profit margins for pharmaceutical companies, to advance a more affordable, accessible, equitable and quality-driven health system for all.