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Expensive Drugs are Becoming Ultra-Expensive

Health Affairs, June 2021, Ultra-Expensive Drugs And Medicare Part D: Spending And Beneficiary Use Up Sharply, By So-Yeon Kang, Daniel Polsky, Jodi B. Segal, and Gerard F. Anderson

Drugs with exceptionally high prices have sparked debate on their sustainability and affordability. We refer to these as “ultra-expensive” drugs, defined as drugs with average annual per beneficiary total spending in excess of the annual US per capita gross domestic product ($62,996 in 2018). In the context of Medicare, this includes both Medicare’s and the beneficiary’s responsibilities. Our findings show a rapid increase in the share of Medicare Part D spending on these drugs compared with other drugs.

It is a limitation of our study that we analyzed only Medicare Part D data and thus could not draw any conclusions regarding Medicaid or private insurance.

Medicare Part D spending for ultra-expensive brand-name drugs, 2018:

  • 122 – Total number of drugs
  •  278,000 – Total number of beneficiaries
  •  $24,550,000,000 – Total spending
  •  $175,513 – Average spending per beneficiary per drug

(The table also includes a section for drugs that are only expensive, defined as those that were not ultra-expensive but whose annual per beneficiary total spending was more than the yearly average Social Security benefits of retired workers [$16,848 in 2018]. These expensive drugs were consumed by 651,000 beneficiaries at an average of $34,451 per drug for total Medicare Part D spending of $21,552,000,000.)

The number of ultra-expensive drugs covered by Medicare Part D increased from 23 in 2012 to 122 in 2018.

We note that sixty-one drugs (50 percent of ultra-expensive drugs in 2018) entered the market as ultra-expensive drugs between 2012 and 2018; 31 percent were on the market but not ultra-expensive in 2012 and became ultra-expensive by 2018.

One challenge for policy makers is that half of these ultra-expensive drugs are new, and their sustained therapeutic and economic benefit for the price has not yet been demonstrated.

The concentration of Part D spending on the growing number of beneficiaries using ultra-expensive drugs suggests that policy makers should pay attention to this drug category.

Comment by Don McCanne

Drug spending is out of control and getting much worse. By the standards in the article, the newly released, likely-ineffective Alzheimer’s drug, aducanumab, at $56,000 per year, is considered onl expensive and not ultra-expensive.

Imagine, single drug pricing per beneficiary in excess of the per capita GDP. Wasn’t the equivalent of taking a full year’s Social Security retiree benefits for a single drug enough?

Perhaps the most important statement in this article, which is decidedly an understatement, is that “policy makers should pay attention to this drug category.”

Perhaps we should approach Sen. Joe Manchin, as a moderate conservative, and explain the situation to him so he can lead a unified Congress to do something about it. But, wait a minute, wasn’t it his daughter, Heather Bresch, as CEO of Mylan, who purchased the company, Abbott, that sold the EpiPen brand of epinephrine, and then increased its price by 461 percent?

Sadly, this Congress has already shown its lack of concern by its inaction; this price gouging is taking place under its very nose. No, we need to elect a Congress that will not only pay attention, but one that will actually do something about it. We certainly can no longer leave it up to the pharmaceutical industry to come up with fair pricing for its products.

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