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What rising drug costs mean for Tennesseans’ budgets

It’s no secret that year over year, the average cost of goods and services rises. But while higher prices at the supermarket and at the gas pump are rarely a shock, many health care bills can have a jaw-dropping effect. 

Since prescriptions are the most common “point of sale” health care benefit, consumers feel the pinch of these higher costs immediately. And the prices for prescription drugs remain on the rise.

BlueCross has a responsibility to help manage these costs on behalf of our members.

Behind the numbers

In 2018, BlueCross paid $15.2 billion to cover claims on behalf of its 3.5 million members, with 85 cents out of every premium dollar going toward physician care, inpatient and outpatient services, and prescriptions. Across all lines of business, drugs purchased at the pharmacy or administered in a provider’s office accounted for $3.35 billion in claims costs.

And if you drill down to our fully insured, employer group plans, prescription drugs have become the single leading cost driver.  In the past six years, drugs rose from taking 24 cents to nearly 29 cents of every dollar BlueCross paid out for members in those plans. In 2018, the amount totaled $575 million.

For these members, we now spend more on drug claims than hospitalizations. The reasons for increase are twofold: more utilization – 8 out of 10 members use prescription drugs, at an average of 15 prescriptions per member per year – and more expensive medications.

Not surprisingly, the pharmaceutical industry plays the largest role in rising drug costs since they set the pricing for these medications.

For example, insulin, an effective blood-sugar management medication for those with diabetes, has been on the market for nearly a century. But in the last six years alone, its price has risen from about $100 a month to nearly $600 a month.

And pharma leads major industries with an average profit margin of 19%. This far outpaces other industries like oil and gas (8%), automobile (6%) and health insurers and hospitals. (For reference, our average net income over the past five years is 2.1%.)

How we help manage costs

BlueCross looks at how drugs are prescribed and delivered, as well as how we make coverage decisions. Our clinical staff is focused on making sure members have affordable access to safe, effective treatments.

Part of our role is advocating for and negotiating lower prices.  We know we’ll get rebate payments from drug manufacturers, and we pass those savings on to our customers and members.

We expect rising drug costs could affect our members even more every year.

By 2023, one study estimates the total national drug spend to be $655 billion, with more than half — $328 billion — being spent on specialty drugs.

These complex drugs – such as Remicade, used to treat various autoimmune conditions, or Ocrevus for multiple sclerosis– are often administered by health care providers and carry the sharpest cost increases.

Though specialty drugs are used by a small number of people, and it’s encouraging that they’re available to treat serious or complex conditions. But their associated costs affect everyone, as premiums collected by BlueCross go toward claims on behalf of all our members.

As drug prices keep escalating, we’ll keep looking for new ways to manage costs for the people we serve. It’s an extension of our mission, and our customers — our neighbors in Tennessee — expect it.

About Natalie Tate, Natalie Tate, PharmD, Vice President of Pharmacy

A photo of the authorNatalie Tate, PharmD, oversees all aspects of the pharmacy management program and provides strategic direction for our teams charged with helping BlueCross members improve their health outcomes.

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