The cost of prescription drugs is one of the leading health care issues in the United States, accounting for $335 billion of total health care spending in 2018 [1] and over 23 percent of total health insurance premium costs.[2] And the cost of prescription drugs is rising. The cost of prescription drugs is one of the leading health care issues in the United States. Read full report.
According to the Centers for Medicare & Medicaid Services Office of the Actuary, prescription drug spending growth is projected to outpace all other major sectors of health care, averaging 6.3 percent for 2017-2026.[3] West Virginia has not been immune to the increasing costs of prescription drugs. Between 1991 and 2014, per capita spending on prescription drugs in West Virginia grew by an average of 6.8 percent per year, from $304 per capita to $1,377, faster than all other health care spending. Nationally, per capita prescription drug spending grew by 6.4 percent per year.
Figure 1
West Virginia’s Per Capita Prescription Drug Cost Increases Outpace National Averages (1991-2014)
Understanding how prescription drug prices are set will allow both patients and the state to make more informed decisions about whether prices are excessive, as well as introduce some rationality and evidence into the health care system.
West Virginia’s recently passed law is a good first step, incorporating some of the best policies from other states, which include covering both generic and patented drugs, research and development costs, and the rationale for price increases.
As the law is implemented, its impacts must be comprehensively analyzed. West Virginia should presume that all information related to prescription drug costs is public information that should be released, allowing company rebuttal only if they can demonstrate that a specific fact is a trade secret. West Virginia policymakers should also give the public the legal right to object to the withholding of specific information.
West Virginia could also consider expanding its law to cover pharmacy benefit managers (PBMs), including which rebates PBMs negotiate. Pharmaceutical companies, without disclosing research and development costs to PBMs, set the prices that PBMs then negotiate down. Laws that require disclosure of drug prices set by pharmaceutical companies would also help in evaluating the pricing practices of PBMs.
Finally, with the information from its price transparency law, West Virginia should explore more active roles in constraining prescription drug prices. For example, Maryland gives discretion to the Attorney General to prosecute drug companies that engage in excessive price increases for “essential generic drugs,” with a suggested threshold of, but not limited to, more than 50 percent over a two-year period.[4] West Virginia could also consider a push for more drug affordability, as well as the creation of a prescription drug affordability review board with the power to regulate drug prices like a public utility.
[1] Centers for Medicare & Medicaid Services. National Health Expenditure Fact Sheet. www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NHE-Fact-Sheet
[2] America’s Health Insurance Plans. “Where Does Your Premium Dollar Go?” https://www.ahip.org/health-care-dollar/
[3] Cuckler, Gigi A., Andrea M. Sisko, John A. Poisal, Sean P. Keehan, Sheila D. Smith, Andrew J. Madison, Christian J. Wolfe, and James C. Hardesty. “National Health Expenditure Projections, 2017–26: Despite Uncertainty, Fundamentals Primarily Drive Spending Growth.” Health Affairs, 37 (3): 482-92.
[4] Maryland General Assembly, 2017 Session, HB 631 http://mgaleg.maryland.gov/2017RS/bills/hb/hb0631F.pdf
