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Study Suggests Policy Solutions Could Tame Skyrocketing Specialty Drug Costs Michigan

December 12, 2017 | Press Releases

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.”

For more information, see Rising Cost of Specialty Drugs in Michigan and the United States: A Case Example for Multiple Sclerosis at chrt.org.

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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.