New HHS Reports Illustrate Potential Positive Impact of Inflation Reduction Act on Prescription Drug Prices [press release]
For decades, Americans have spent more on prescription drugs than people in other countries. The Biden-Harris Administration has prioritized making prescription drugs more affordable for Americans both to improve public health and to provide economic relief to Americans, many of whom pay a significant part of their income for the medication they need to stay healthy.
Today, the U.S. Department of Health and Human Services (HHS) released two new reports that illustrate the urgency of addressing skyrocketing prescription drug costs in America, a key Biden-Harris Administration priority. HHS’s analyses of prescription drug prices from 2016-2022 show that if the Inflation Reduction Act had been in place from July 2021 to July 2022, more than 1,200 prescription drugs potentially would have been subject to the new provision requiring drug manufacturers to pay rebates to Medicare if they enact price increases greater than inflation for drugs. Price increases on those drugs in the month the price change took effect averaged more than 30%.
The publication of these reports coincides with a key date related to a provision of the Inflation Reduction Act, which requires drug manufacturers to pay rebates for drugs in Medicare Part D whose price increases exceed inflation for the 12-month period beginning October 1, 2022. A similar provision for Part B drugs takes effect beginning in January 2023. In addition, the Inflation Reduction Act requires the federal government to negotiate drug prices on certain high spending prescription drugs for Medicare beneficiaries. . . .
The Biden-Harris Administration has been working to lower costs for American seniors and families – and these provisions of the Inflation Reduction Act are yet another way President Biden is taking action to make that happen. Under President Biden’s leadership, thanks to the American Rescue Plan and other Administration efforts, more Americans than ever before have health insurance coverage – and now, with the Inflation Reduction Act, millions of Americans will see lower health care costs and get relief from high prescription drug prices.
Key findings from today’s reports, published by HHS’s Office of the Assistant Secretary for Planning and Evaluation (ASPE), include the following:
Report: Price Increases for Prescription Drugs, 2016-2022
-- High prescription drug prices create affordability challenges for patients and the health care system. Among existing products, increases in average prices over time have added to these challenges.
-- Most prescription drug price increases occur in either January or July each year, with the greatest number taking place in January. The number of increases in both months during 2022 was higher than in previous years.
-- In January 2022, the average list price increase was nearly $150 per drug (10%), and in July 2022, it was $250 (7.8%).
-- Several drugs increased their list prices by more than $20,000 or by more than 500%.
-- There were 1,216 products whose price increases during the twelve-month period from July 2021 to July 2022 exceeded the inflation rate of 8.5% for that time period. The average price increase for these drugs was 31.6%.
-- The Inflation Reduction Act introduces a new requirement for manufacturers to pay rebates for drugs in Medicare Part D whose price increases exceed inflation, beginning October 1, 2022, which was designed to reduce the frequency and size of drug price increases.
Report: Trends in Prescription Drug Spending, 2016-2021
-- In 2021, the U.S. health care system spent $603 billion on prescription drugs, before accounting for rebates, of which $421 billion was on retail drugs.
-- Spending growth on drugs was largely due to growth in spending per prescription, and to a lesser extent by increased utilization (i.e., more prescriptions).
-- Drug spending is heavily driven by a relatively small number of high-cost products. The cost of specialty drugs has continued to grow, totaling $301 billion in 2021, an increase of 43% since 2016. Specialty drugs represented 50% of total drug spending in 2021. While the majority (80%) of prescriptions that Americans fill are for generic drugs, brand name drugs accounted for 80% of prescription drug spending in both retail and non-retail settings, with little change over time. The top 10% of drugs by price make up fewer than 1% of all prescriptions, but account for 15% of retail spending and 20%-25% of non-retail spending.
-- Several provisions in the Inflation Reduction Act address drug pricing, including allowing the Secretary of HHS to negotiate prices in Medicare Parts B and D for selected medications and introducing Medicare rebates for drug prices that rise faster than inflation. These provisions may impact future drug spending trends.
Price Increases for Prescription Drugs, 2016-2022 https://aspe.hhs.gov/reports/prescription-drug-price-increases
Trends in Prescription Drug Spending, 2016-2021 https://aspe.hhs.gov/reports/trends-prescription-drug-spending
Press release: https://www.hhs.gov/about/news/2022/09/30/new-hhs-reports-illustrate-potential-positive-impact-inflation-reduction-act-prescription-drug-prices.html