In a recent article in the Journal of Managed Care Pharmacy, Niu et al analyze the increasing concentration of spending in Medicare Part D among a few select classes of drugs. In 2012, the Top 1% of drugs made up just over 31% of total spend while in 2021, that same Top 1% of drugs made up 41% of total spend despite having a lower share of prescriptions. Cutting the data by the Top 5% and Top 10% show directionally similar trends.
Why does this matter?
In Medicare Part D pre-Inflation Reduction Act, the federal government paid the overwhelming majority of the “catastrophic” costs of the top 1%. Insurers paid a small chunk through premium revenue. The IRA, effective 1/1/25 flips this. The insurer now covers most of the catastrophic costs which is funded by higher premiums while the federal government takes on a fraction of the catastrophic costs.
This article shows (as many others have) that the truly catastrophic costs are a growing share of total costs. Changing who is responsible for these costs will change the shape of the Part D program and insurers that have a large number of people with catastrophic costs will have very strong incentives/reasons to run like hell from those enrollees.
Ohio Mom
David, as I have remarked many times, I was an art major. Many of your finer points fly over me.
With that warning, how accurate is my knee-jerk reaction that this is evidence that we are being overcharged by Big Pharma?
They did not have to scrounge around for the data cited in this study, they had on hand. They created it in a way. They know what drugs are best candidates for scalping Medicare.
Also, how does this data overlap with the drugs the Biden administration identified for Medicare price negotiations?
JaySinWA
This chart needs some explanation.
I tried to find what top 1-5-10% of prescriptions ment and got this sentence from the linked article:
Lorentz curves and Gini coefficients are measures of income inequality from my limited understanding. I don’t understand how they are using that in determining top prescriptions. As near as I can figure out the charts are saying that highest priced drugs are most of the spending (and growing I guess) in the section of the top of the high priced drug market. Which seems kind of obvious, except maybe for the growth part. Obviously I am missing something.
At any rate the catastrophic payment responsibility shift sounds broken. Were they trying to move risk pools to the private sector? Is this just cost control taking precedence over best treatment?
JaySinWA
@JaySinWA: Taking another stab at understanding the chart, It’s somewhat muddy because they are using percent in both axis
I think they use the term top in two different ways, one is most prescribed and the other is highest spend. They also talk about specialty and non-specialty drugs which I guess is another term for most prescribed vs other in the chart.
I am having trouble reconciling the chart to the conclusions.
Trivia Man
@JaySinWA: my take:
If there are 1,000 medications that cost $10,000 total
10 of them account for $4,000 and 990 of them combine for $6,000
David Anderson
@Trivia Man: yep