Health and Science

Drug price shock: Feds reveal how medication costs hit Medicare and Medicaid

We have to do something about Social Security and Medicare: MacGuineas
We have to do something about Social Security and Medicare: MacGuineas

And you thought the inflation rate was low.

New data on drug spending by the nation's two biggest health-coverage programs released Monday shows eye-popping price hikes for a number of medications, as well as steep overall costs for several drugs.

Ativan, a drug that is used to treat anxiety, had an average unit cost increase of a stunning 1,264 percent between 2014 and 2015 for Medicaid, the jointly run federal-state health coverage program primarily for poor people, officials revealed.

Turing Pharmaceutical's Daraprim, a drug used to treat a parasitic condition in pregnant women, infants and people with HIV, had its costs per unit spike 874 percent for Medicaid during the same time period, according to the federal Centers for Medicare and Medicaid Services.

Three other drugs, Phenergan, Epitol and hydroxychloroquine sulfate each had per unit costs rise by more than 400 percent, according to a new Medicaid Drug Spending Dashboard launched by CMS on Monday.

Mylan's EpiPen, the anti-allergy device that has draw intense publicity this year because of its big price increase, did not make Medicaid's list of 20 biggest price hikes for 2015. While EpiPen's price has increased more than 500 percent since 2011, the cost increases were spread out over that time.

The data also showed that out of the 20 drugs that had the highest increases in per-unit costs for Medicaid, almost half — nine — were generic drugs. Generic medication is popularly seen as costing less than brand-name drugs, but that is not always the case, nor is the case that generics see lower price increases year-to-year.

CMS said that while about 25 percent of the increased drug spending by Medicaid from 2013 to 2014 was due to increased utilization of medications, the remaining 75 percent was due to price increases.

There were also big cost per unit increases for Medicare, the massive federal health coverage program for primarily senior citizens, according to CMS, which updated its Medicare Drug Spending Dashboard.

The cost of Glumetza, a drug used to manage high blood sugar, got even higher, rising 381 percent for its average unit cost to Medicare Part D, the prescription drug benefit program for Medicare. Three other drugs covered by Medicare Part D had per-unit cost increases of more than 200 percent.

Total Medicare drug spending for both Part D and Part B, which covers medications administered in a doctor's office or hospital outpatient setting, went from $143 billion in 2014 to $162 billion last year.

In addition to highlighting big percentage price hikes, the data released Monday also showed the growing effect of several other drugs on Medicaid's total $57.3 billion in spending in 2015.

Medicaid spending on the drug Harvoni, a highly effective treatment for hepatitis C from Gilead Sciences, went from just $94.7 million in 2014, the year that it was introduced, to more than $2.17 billion last year. Meanwhile, Medicare spent less than $1 billion in 2014 on Harvoni, but last year it spent more than $7 billion.

Spending by Medicaid on Lantus, a diabetes management treatment and insulin pen, has gone from almost $411 million in 2011 to more than $1.4 billion in 2015. At Medicare, spending on Lantus rose slightly to more than $4 billion last year.

Medicaid spending on Abilify, an anti-psychotic drug, dropped a bit, going from about $2.5 billion in 2014 to just over $2 billion last year.

The updated data released Monday does not reflect rebates paid by drug companies to Medicare and Medicaid for sales of medications through those programs.

Andy Slavitt, the acting administrator of CMS, noted that increased drug spending by the two government-run health programs that his agency oversees reflect the broader trend in the costs of medications paid by all Americans.

"Overall, there is significant growth in spending on prescription drugs, representing a significant burden," Slavitt wrote in a blog post. "In 2015, total prescription drug costs were estimated to have been $457 billion, or 16.7 percent of personal health care spending. That is up from $367 billion, or 15.4 percent of personal health care spending in 2012."

"With annual growth expected to average 6.7 percent annually through 2025, we can expect increasing drug costs to continue to put pressure on families and programs that cover prescription drugs."