The changing landscape of drug pricing is an ongoing concern for self-funded employers, brokers, third-party administrators, and pharmacy benefit manager consultants. As we advance into 2024, gaining insights into these fluctuations is crucial to strategizing healthcare benefit plans effectively. Let’s explore the projected trends for drug price changes in the coming year, offering a clear picture of the challenges and opportunities that lie ahead.
Understanding the Trends of Price Inflation
The Wall Street Journal reported that at the onset of the new year, there was a notable increase in the prices of 775 brand-name pharmaceuticals by various companies.
Each year, drug manufacturers reassess their pricing strategies, often leading to cost increases that impact the entire healthcare system. These annual adjustments are a critical time for those managing healthcare plans, as they recalibrate to the new price baselines set by the manufacturers. It’s important for stakeholders to recognize that these adjustments are made by manufacturers, not PBMs, who simply navigate these new terrains alongside plan managers.
Expectations of Price Hikes in 2024
In 2024, we anticipate a continuation of the drug price increases that have become a common expectation at the turn of each year. However, the upcoming increases are projected to be higher than usual, which can be attributed to several factors, including inflation, changes in regulatory policies, and the cost of innovation. These factors contribute to the overall rise in the price of medications, thus affecting plan expenditures significantly.
Recent reports from Reuters reveal that the monthly list price for Ozempic, a diabetes medication by Novo Nordisk, experienced a 3.5% increase, bringing it close to $970. Concurrently, Eli Lilly’s comparable diabetes medication, Mounjaro, saw a price hike of 4.5%, with its monthly list price nearing $1,070.
These pharmaceutical companies also market the active components of these diabetes drugs for weight management purposes, branded as Wegovy by Novo Nordisk and Zepbound by Eli Lilly, respectively. Following its approval for obesity treatment by U.S. regulators, Eli Lilly introduced Zepbound to the market with a list price of $1,059.87.
Both Novo Nordisk and Eli Lilly extend discount programs via savings cards for individuals with commercial insurance plans that do not encompass the weight loss applications of these medications. With these savings initiatives, eligible patients could see a reduction by as much as $500 on their monthly expenses for either drug, translating to around a 50% decrease from the original list price.
According to another report, Gilead Sciences has raised the price of its HIV medication Biktarvy by 4.9%, taking the cost to approximately $3,980. Vertex Pharmaceuticals adjusted the price of its cystic fibrosis drug Trifakta by nearly 6%, with the new price averaging around $25,550. The roster of medications with reported price hikes also encompasses the pain reliever Oxycontin, the anticoagulant medication Plavix, and the antidepressant Wellbutrin. Additionally, the cost of Dupixent, a collaborative creation from Sanofi and Regeneron, experienced a 6% price hike, bringing it to about $3,800.
Spotlight on High-Utilization Medications
Mounjaro and Ozempic: A Closer Look
These medications are commonly prescribed to treat type 2 diabetes by improving blood sugar control. Their role in diabetes management has become increasingly significant due to their proven effectiveness in helping patients achieve and maintain glycemic targets.
What They Treat
Mounjaro (Tirzepatide) is a once-weekly injectable medication. It’s used not only to improve blood sugar levels but also has shown potential in assisting with weight loss, which can be particularly beneficial for obese or overweight patients with type 2 diabetes.
Ozempic (Semaglutide) similarly is a once-weekly injection but also effective in reducing the risk of major cardiovascular events like heart attack or stroke in adults with type 2 diabetes and known heart disease.
Cost and Usage Perspectives
While actual costs can vary greatly depending on the health plan, coverage, and region, these medications typically come with a significant price tag. For instance, without insurance, the list price for a month’s supply of these drugs can amount to hundreds of dollars, and even with coverage, copays can be substantial.
Impact on Payers
The use of these drugs has intensely grown over the past few years, leading to a more substantial share of the budget being allocated to them. The overall impact on payers hinges on a few key factors:
- The prevalence of type 2 diabetes in the covered population
- The adoption rate of these medications by treating physicians
- The efficacy of the drugs, potentially reducing the need for other, more costly interventions or treatments
From a payer’s perspective, the drug’s efficacy needs to justify its cost. The imperative is to assess both the short-term implications of the drug’s price on the healthcare budget and the long-term health benefits for the patient population, which could translate to lower healthcare costs down the line.
Statistics to Consider
When considering the inclusion and coverage of these medications within a health plan, payers should look at various statistics:
- The percentage of the patient population diagnosed with type 2 diabetes
- The average reduction in HbA1c (a measure of blood sugar control) among patients using these drugs
- The rate of adherence to these medications compared to other diabetes treatments
- Projected cost savings from the prevention of diabetes-related complications
For instance, clinical trials have demonstrated that considerable proportions of those treated with Mounjaro or Ozempic have achieved significant reductions in HbA1c, with numbers well within the recommended range for adults with type 2 diabetes. Factoring in these statistics can imply a high therapeutic value, potentially counterbalancing the upfront costs of the medication.
Statistical Glimpse at Cost Changes
With drugs such as Mounjaro showing promising treatment outcomes, especially for chronic conditions like type 2 diabetes, the focus on cost-effectiveness becomes more pronounced. Here are some key statistical areas of interest:
- Treatment Efficiency: The percentage of patients reaching their glycemic goals with Mounjaro, for example, is a critical statistic. This figure shows whether the drug is delivering the promised health benefits.
- Cost-Effectiveness: While Mounjaro and similar drugs might be more expensive upfront, they could offer savings down the line by preventing expensive complications from diabetes, such as hospitalizations or the need for other medications. This is where a statistic like the quality-adjusted life year (QALY) comes into play, as it quantifies the health outcomes gained for the money spent.
- Comparative Pricing: Year-over-year pricing changes give insights into inflation trends and market dynamics. For instance, a 4.5% increase in Mounjaro’s price can affect a healthcare plan differently depending on whether that plan’s budget increased concomitantly.
- Utilization Patterns: Statistics on how many patients within a healthcare plan are using these medications give a sense of their importance to the plan’s pharmacy benefit spend. A sudden surge in the prescription of Mounjaro, for example, can signal an increased need for budgetary allocation.
- Patient Out-of-pocket Costs: Tracking the average out-of-pocket expense for patients can indicate how price changes impact medication adherence. If patients are unable to afford their medications, adherence may drop, leading to worse health outcomes and potentially higher overall healthcare costs in the long-term.
The Silver Lining: Medications with Reduced Costs
Despite the overarching trend of price increases, some medications may see a reduction in costs. These reductions are often a result of generic competition, loss of patent exclusivity, or strategic pricing adjustments by manufacturers in response to market dynamics. Lowering medication costs can provide significant relief for healthcare plans, and these opportunities should be leveraged to their fullest extent.
This year has also seen an extraordinary wave of drug price reductions, most notably among insulin and inhalers. One of the standout cuts is a 70% reduction in the price of the Advair Diskus inhaler made by GlaxoSmithKline. Moreover, major insulin manufacturers such as Eli Lilly, Novo Nordisk, and Sanofi have implemented price cuts ranging from 65% to 80%.
Although fewer medications have enjoyed price drops, there have been decreases for some prominent drugs, including Cialis, a well-known erectile dysfunction treatment, the antidepressant Prozac, and several widely-used insulin products. The substantial decrease in the cost of insulin has been largely driven by recent federal policy initiatives designed to restrict the out-of-pocket cost of insulin to a monthly maximum of $35.
As we analyze these cost changes, it is paramount to understand that drug manufacturers are the entities responsible for setting the prices of medication. Their pricing strategies consider a variety of factors, from research and development costs to market competition. Knowing this helps us shape realistic expectations and strategies in response to their annual price changes.
MaxCare’s Commitment to Transparency and Affordability
Depending on the specifics of their health insurance plans, consumers often contribute just a copayment for their medications, and even individuals with high-deductible plans generally don’t bear the full brunt of the list price. Nevertheless, as copayments are often tied to the list prices, any escalation in the listed cost of a drug usually translates into higher copayment amounts for consumers.
At MaxCare, our mission is to act in the best interest of plan administrators and their beneficiaries, despite the unpredictable nature of drug pricing. We remain vigilant, continuously monitoring medication cost changes and their impact on healthcare plans. Our philosophy hinges on transparency and shared data, essential in delivering insights into drug utilization and expenditure.
Our approach empowers plan sponsors to make well-informed decisions. We analyze drug utilization patterns, provide cost-management strategies, and suggest alternative therapies where appropriate to ensure the financial health of the plan and accessibility to necessary medications. Ultimately, MaxCare’s commitment is to maintain the delicate balance between drug efficacy and cost-effectiveness.
Healthcare plan administrators must brace for the upcoming drug price changes in 2024. Staying informed and proactive is the best defense against the unpredictability of the pharmaceutical market. MaxCare stands beside you, offering the intelligence and support needed to navigate these changes with confidence.
