Prescription drug costs are the fastest growing component of total U.S. health care costs, with the increase in retail prescription drug spending (12%) outpacing overall health care spending (5%) in 2014 Spending on specialty drugs—which are used to treat complex, chronic medical conditions and typically require special handling, administration, and monitoring—is a significant component of drug spending, amounting to 22 percent of all drug costs in Michigan and 32 percent in the U.S. in 2014, according to a study published today by the Center for Healthcare Research & Transformation (CHRT).

“Specialty drug costs are expensive, taking a toll on patients and the health care system,” says Marianne Udow-Phillips, executive director of CHRT. “These drugs can significantly improve patients’ quality of life, yet cost increases often lead to high out-of-pocket costs for consumers and could increasingly put these drugs out of reach for many.  Policy solutions are essential to help make these important drugs affordable for those most in need.”

The CHRT study, Rising Cost of Specialty Drugs in Michigan and the United States, looked specifically at specialty drugs for Multiple Sclerosis using 2014 data to allow for national comparisons.

The Midwest region, including Michigan, has a higher prevalence of multiple sclerosis than the U.S. as a whole.  MS specialty drug cost increases are outpacing the annual 3 to 5 percent inflation for overall prescription drugs. Annual per patient spending on MS drugs has grown substantially since the 1990s.

For example, when the MS drug Copaxone was introduced in the mid-1990s, its annual cost per patient was approximately $12,000 (in 2013 dollars). By 2013, Copaxone’s annual cost per patient was nearly $60,000—an average annual increase of 36%. In 2016 alone, the unit cost of MS drugs increased by 7.4 percent, while utilization stayed relatively flat. Tecfidera, another MS treatment, has averaged a 14 percent annual cost increase.

“The good news is that there are proposed policies that could markedly reduce accelerating drug cost trends,” says Udow-Phillips.

One proposal at the federal level, the bipartisan Fair Accountability and Innovative Research Drug Pricing Act (S. 1131), would increase price transparency by requiring drug manufacturers to disclose price increases that exceed certain thresholds. Introduced in the U.S. Senate in May 2017, the Senate referred the proposal to the Committee on Health, Education, Labor, and Pensions.

Another proposal, the Affordable and Safe Prescription Drug Importation Act (S. 469), would allow prescription drugs to be reimported back to the U.S. The bill, which was introduced in the Senate in February 2017, would allow Americans to buy American-made prescription drugs from Canada, where prices are lower. For example, the MS drug Copaxone has an annual cost of $15,000 in Canada – one-fourth of its U.S. cost.

“According to the Congressional Budget Office, reimportation could save consumers $7 billion over 10 years,” says Udow-Phillips. “And, it could greatly improve access to these life-changing drugs.”

 

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A study released by the Center for Healthcare Research & Transformation (CHRT) shows that the ACA Medicaid expansion provided additional support to people who need substance use services—an increasing number of people in light of the opioid crisis.

The study examined the impact of the ACA Medicaid expansion on public mental health and substance use services in three demographically-similar Midwestern states: Michigan and Indiana, both expansion states, and Wisconsin, a non-expansion state.

The study suggests that the Medicaid expansion has had an overall beneficial effect for the substance use population including those with opioid addiction. The Medicaid expansions have brought opportunities for coverage for needed mental health and substance abuse service but also introduced challenges in reduced flexibility of funding.

To date, 32 states have expanded Medicaid including the District of Columbia. Maine is poised to become the 33^rd Medicaid expansion state, after Maine voters approved a referendum on the November 2017 ballot.

“The Medicaid expansion in Michigan and Indiana provided significantly increased funding for substance use services,” says Marianne Udow-Phillips, director of CHRT. “The Medicaid expansion is a net positive: in addition to the overall expanded coverage that resulted from the Medicaid expansion, there were more total resources available for substance use treatment.”

Data show that in 2015, 1 in 6 U.S. adults (about 18%) had some type of mental illness and 7% needed substance use services. Those with Medicaid coverage have a higher prevalence of mental health or substance abuse (38%) than low-income, privately-insured individuals (19%). A recent Council of Economic Advisors analysis estimated that the economic cost of the opioid crisis alone—a subset of all substance use disorder-related costs—was $504 billion in 2015.

All states receive federal block grant funding for substance use services. When states such as Michigan and Indiana expanded Medicaid, the Medicaid funding was additive to the substance use block grant funding. Medicaid resulted in more net resources in expansion states for additional substance use resources, such as recovery housing and other supportive services that state and local areas previously struggled to support.

“These funding changes have both state and federal implications. If the Medicaid expansion is scaled back as some reform proposals in Congress have proposed, it will be enormously challenging for states to find the funds to care for those with mental health and addiction issues,” says Udow-Phillips. “These are serious health issues that cannot be ignored.”

Wisconsin, a non-expansion state, did make some improvements in Medicaid eligibility, though not as extensive as expansion states. Wisconsin reported a 6% increase in Medicaid and Children’s Health Insurance Program (CHIP) enrollment from 2013 to 2015. Over this same period of time, enrollment increased by 22% in Michigan and by 34% in Indiana during this same period.

“As coverage shifted from state-funded mental health services to Medicaid-covered services, there were some challenges for states that expanded Medicaid,” explains Udow-Phillips. “Medicaid dollars are less flexible than state and so some services previously funded lost support. But the net benefits for substance use treatment and overall expanded coverage are quite significant.”

Other highlights of CHRT’s issue brief, The Impact of the ACA on Community Mental Health and Substance Abuse Services: Experience in 3 Great Lakes States, show that:

• Medicaid coverage may be particularly important for individuals with serious mental illness and emotional disorders as it pays for services that can lead to improved mental health, such as case management and wraparound services.
• In Michigan, 14% more people received substance use services in 2016 after the Medicaid expansion than in 2012. Residential admissions increased nearly 40%.
• State leaders interviewed in the three-state study reported enhancements to substance use treatment, and reductions in historically long wait times for services.

CHRT’s Issue Brief, The Impact of the ACA on Community Mental Health and Substance Abuse Services: Experience in 3 Great Lakes States, was developed with support from the Commonwealth Fund.

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The Center for Healthcare Research & Transformation (CHRT) at the University of Michigan is an independent 501(c)(3) impact organization with a mission to advance evidence-based care delivery, improve population health and expand access to care.