Cost or Utilization?

Drivers of Commercial
Prescription Drug Spending

Prescription drug spending has long been a major driver of total health care spending increases in Massachusetts.1 These increases have a direct impact on Massachusetts residents.

1 in 10

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Among Massachusetts residents who reported having problems paying family medical bills, approximately one in three reported prescription drug costs as a source of the problem.

One in ten Massachusetts residents reported going without prescription drugs due to cost.

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Total Pharmacy Spending PMPM, 2018-2022

The Overall Driver: Cost

Whether filling a prescription at a retail pharmacy or mail ordering medications, prescription drug spending reflects any spending—including out-of-pocket costs—for pharmaceuticals covered by a member's prescription drug benefit.

From 2018 to 2022, per member per month (PMPM) prescription drug spending for those enrolled in private commercial health insurance increased nearly 45% from $95 PMPM in 2018 to $136 PMPM in 2022.2 For each of the past three years, annual spending increases have hovered around 10%.

Notes: Expenditure amounts presented in this publication reflect payments made by pharmacy benefit managers (PBMs), health plans, and patients to pharmacies, and do not reflect manufacturer rebates, which impact net health plan spending. These payments do not represent manufacturer list prices or net revenue for manufacturers and other entities along the prescription drug supply chain. The dataset includes pharmacy claims for Massachusetts residents from fully-insured commercial lines of business for 10 payers and represents approximately 1.4 million covered lives per year. It does not reflect aggregate statewide pharmacy spending and findings should not be extrapolated for that purpose.

The Overall Driver: Cost

There are two main drivers of changes in prescription drug spending—the cost of each prescription (the total amount paid by payers and consumers) and the overall number of prescriptions (utilization). From 2018 to 2022, while the average cost per script increased (+54.2% from 2018-2022), the number of prescriptions steadily declined (-24.6% from 2018-2022).

Overall, prescription drug spending increases were driven by an increase in cost rather than utilization.

Cost and Number of Prescriptions, 2018-2022

The Overall Driver: Cost

Average cost for prescriptions can increase due to new high-cost drugs coming to market, which often account for costs required for research and development, as well as changes to the list price for existing drugs.

The amount that patients and health plans ultimately pay for a prescription drug at the pharmacy is based upon a complex process of negotiations and contracts among:

Where Cost > Utilization

Spending for drugs classified as immunosuppressants was consistently the largest driver of overall prescription drug spending increases from 2018-2022, with spending on this class increasing by $70 million-$80 million dollars every year.3

Immunosuppressants inhibit immune system activity and are prescribed to those who have conditions with an overactive immune system or an immune system that attacks healthy cells in the body. These medicines treat complex conditions such as autoimmune diseases, allergic reactions, and organ transplants, among other conditions.

For example, some of the top immunosuppressant drugs by spending were Humira (used to treat plaque psoriasis, Crohn's disease, and ulcerative colitis), Stelara (used to treat plaque psoriasis and psoriatic arthritis), and Enbrel (used to reduce signs and symptoms of rheumatoid arthritis).

Where Cost > Utilization

Compared to other drugs (shown here in light blue), spending on immunosuppressants (shown here in dark blue), accounted for a large proportion of overall prescription drug spending increases from 2018 to 2022. In fact, from 2021 to 2022, spending for all other drugs combined decreased, while spending on immunosuppressants increased.

Immunosuppressants as Drivers of Spending Increases

  • Immunosuppressants
  • Other Drugs

Where Cost > Utilization

Both utilization and costs for immunosuppressants increased year over year. However, the rate of increases in cost per prescription outpaced the increase in the number of prescriptions. From 2018 to 2022, the number of immunosuppressant prescriptions increased 18% while the increase in cost per prescription grew three times as quickly (55%) over the same period.

Cost and Number of Prescriptions for Immunosuppresants, 2018-2022

2022 Average Cost Per Prescription Immunosuppressant Brand Name vs. Generic Drugs

Where Cost > Utilization

The immunosuppressant therapeutic class has a high percentage of brand name drugs, which cost more than generic drugs due in part to the fact that pharmaceutical companies hold a patent on brand name drugs, which eliminates the option for a generic equivalent and market competition.

Where Utilization > Cost

For some drugs in the immunosuppressant category, spending increases were driven more by growth in the number of prescriptions than cost per prescription.

Dupixent Spending, 2018-2022

Where Utilization > Cost

Some examples include drugs commonly seen in commercials—like Dupixent—which topped the list as the highest national pharma ad spender in 2022 at $491 million.4 Dupixent is an immunosuppressant used for allergic diseases such as eczema, asthma, and nasal polyps.

Dupixent was a top five driver of immunosuppressant spending increases across all years, with spending for Dupixent increasing 703% from 2018 to 2022.

Where Utilization > Cost

This increase in spending for Dupixent was largely driven by an increase in the number of prescriptions. From 2018 to 2022, the number of prescriptions increased 589% compared to a 17% increase in cost per prescription.

Cost and Number of Prescriptions for Dupixent, 2018-2022

Conclusion

Pharmacy spending trends are based on both the cost of prescription drugs and the number of prescriptions filled. Overall pharmacy spending increases from 2018 to 2022 were largely driven by the increasing average cost of prescriptions, rather than overall patient utilization. Across all therapeutic classes, the immunosuppressant class has consistently been the largest driver of pharmacy spending increases due to higher costs and annual cost increases.

The year-to-year increases in prescription drug costs consistently result in pharmacy being the top driver of health care cost growth in the state. Prescription drug spending in Massachusetts strains the health care system's ability to meet spending benchmarks and has significant impacts on residents' ability to afford their health care needs.

For more data on cost and utilization of specific drugs and therapeutic classes, see CHIA's Prescription Drug Use and Spending report with data from 2018 to 2022. In addition to an interactive dashboard, a dataset is available for further analysis.

Sources

  • CHIA Annual Reports, www.chiamass.gov/annual-report
  • Expenditure amounts presented in this publication reflect payments made by pharmacy benefit managers (PBMs), health plans, and patients to pharmacies, and do not reflect manufacturer rebates, which impact net health plan spending. These payments do not represent manufacturer list prices or net revenue for manufacturers and other entities along the prescription drug supply chain. The dataset includes pharmacy claims for Massachusetts residents from fully-insured commercial lines of business for 10 payers and represents approximately 1.4 million covered lives per year. It does not reflect aggregate statewide pharmacy spending and findings should not be extrapolated for that purpose.
  • The dataset includes pharmacy claims for Massachusetts residents from fully-insured commercial lines of business for 10 payers and represents approximately 1.4 million covered lives per year. It does not reflect aggregate statewide pharmacy spending and findings should not be extrapolated for that purpose.
  • https://www.fiercepharma.com/special-reports/top-10-pharma-drug-brand-ad-spenders-2022