Department of Managed Health Care Issues Prescription Drug Cost Transparency Report for Measurement Year 2019

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By Meena Kaypour

On December 30, 2020, the Department of Managed Health Care (DMHC) released its Prescription Drug Cost Transparency Report for Measurement Year 2019. Pursuant to SB 17 (Hernandez) (Chapter 603, Statutes of 2017), Health and Safety Code section 1367.243 requires health plans that offer commercial products and file rate information with DMHC to report, for all covered prescription drugs annually, the 25 most frequently prescribed drugs, the 25 most costly drugs by total annual spending, and the 25 drugs with the highest year-over-year increase in total annual plan spending.  This provision also requires DMHC to compile the data into a report for the public and the legislature that demonstrates the overall impact of drug costs on health care premiums and post its report on its website every year on January 1. [23:1 CRLR 26–27]  The most recent report looks at the impact of the cost of prescription drugs on health plan premiums compared to data over three reporting years: 2017, 2018, and 2019.

In a press release issued by the Department, DMHC Director Mary Watanabe is quoted as stating “[t]he amount health plans paid for prescription drugs has increased by $1 billion since 2017, . . . [t]he cost of prescription drugs is continuing to grow rapidly every year, which is having a real impact on the cost of premiums and the affordability of health care. This report provides greater transparency into prescription drug costs and the impact on health plan premiums.” Other key findings indicated that health plans paid more than $9.6 billion for prescription drugs in 2019, an increase of almost $600 million or 6.3% from 2018. The Department found that Prescription drugs accounted for 12.8% of total health plan premiums in 2019, a slight increase from 12.7% in 2018. Prescription drugs accounted for 12.9% of total health plan premiums in 2017.

Health plans’ prescription drug costs increased by 6.3% in 2019, whereas medical expenses increased by 5.2%. Overall, total health plan premiums increased by 5.3% from 2018 to 2019. Manufacturer drug rebates totaled approximately $1.205 billion, up from $1.058 billion in 2018 and $922 million in 2017, representing about 12.5% of the $9.6 billion spent on prescription drugs in 2019.

According to the report, while specialty drugs accounted for only 1.5% of all prescription drugs dispensed, they accounted for 56.1% of total annual spending on prescription drugs. Generic drugs accounted for 88.5% of all prescribed drugs but only 20.9% of the total annual spending on prescription drugs. Brand name drugs accounted for 10% of prescriptions and constituted 23% of the total annual spending on prescription drugs. The 25 Most Frequently Prescribed Drugs represented 47.4% of all drugs prescribed and approximately 44.9% of the total annual spending on prescription drugs. For the 25 Most Frequently Prescribed Drugs, enrollees paid 2.9% of the cost of specialty drugs, 11.5% of the cost of brand name drugs, and 53% of the cost of generics. Of the 12.8% of total health plan premium spent on prescription drugs, the 25 Most Costly Drugs accounted for 7.1%. Overall, health plans paid 92.4% of the cost of the 25 Most Costly Drugs across all three categories (generic, brand name, and specialty).

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