High Drug Prices: Costing Millions of Lives and Billions of Dollars

September 11, 2020
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Key Findings

By 2030, on average: 

  • 112,000 seniors each year could die prematurely because drug prices are so high that they cannot afford their medication.
  • Because seniors cannot afford high drug prices, Medicare is projected to spend an additional $17.7 billion annually on avoidable medical spending because of health complications.
  • All else being equal, lower drug prices resulting from Medicare negotiation could prevent nearly 94,000 seniors’ deaths annually and save $475.9 billion.

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Existing ProblemMedication adherence refers to how well patients follow the instructions given by their healthcare providers for taking a medication regimen. While nonadherence can be a result of many factors, unaffordable drug prices can significantly impair medication adherence (we call this “cost-related nonadherence”). When patients are unable to adhere to their medications because of high prices, medical spending significantly increases to treat patients’ conditions; over time, these complications can lead to worse health outcomes and premature death.

The benefit design structure of the Medicare Part D program leaves many beneficiaries particularly vulnerable to complications from cost-related nonadherence. Under the standard benefit design, Medicare beneficiaries are responsible for 25% of a drug’s cost until they hit the out-of-pocket maximum. This means that even with Medicare insurance, what seniors pay is linked to a drug’s price. This linkage allows us to model how cost-related nonadherence would change under policies that would reduce drug prices, such as Medicare negotiation, and to simultaneously model changes in mortality and avoidable medical spending that would follow from lower drug prices.

Existing publications on the impact of medication adherence are dated, using models from the 1990s that do not reflect the efficacy, safety, and pricing of current treatments. The West Health Policy Center commissioned Xcenda, the research arm of drug distributor AmerisourceBergen, to model the current relationship between cost-related nonadherence and mortality and cost outcomes in the Medicare program. This analysis considers the impact of cost-related nonadherence on the general Medicare population, and on five individual conditions – Atrial Fibrillation, Chronic Kidney Disease, Chronic Obstructive Pulmonary Disorder, Type 2 Diabetes, and Ischemic Heart Disease – that significantly affect seniors and for which effective pharmaceutical treatments are available. Xcenda modeled the impact of cost-related nonadherence on a ten-year period, from 2021-2031.

Analysis of Results

Over the ten-year period, high out-of-pocket costs for drugs are estimated to cause 1.1 million premature deaths of seniors in the Medicare program and lead to an additional $177.4 billion in avoidable Medicare medical costs. The plurality of premature deaths is due to cardiac conditions (atrial fibrillation and ischemic heart disease), causing 354,800 seniors to die prematurely over the ten-year period. High drug prices are estimated to contribute to 70,400 premature deaths from chronic kidney disease, 69,300 premature deaths from chronic obstructive pulmonary disease, and 62,700 premature deaths from diabetes among seniors by 2031.

Reducing drug prices through Medicare negotiation could significantly reduce the number of premature deaths. After calibrating to the Congressional Budget Office’s score of H.R. 3, the Elijah E. Cummings Lower Drug Costs Now Act, the model estimates that granting Medicare the authority to negotiate and limit drug price increases could prevent 93,900 deaths per year. These policy changes are projected to reduce Medicare spending by $475.9 billion by 2030.

Considerations for Policymakers

Under existing policies, Medicare Part D plans and manufacturers only cover up to 75% of a drug’s list price cost, leaving the patient responsible for the remaining 25% until they reach the catastrophic phase. As drug companies continue to raise list prices, patients may experience a significant increase in their coinsurance costs.

High drug prices and annual price increases both affect seniors’ ability to afford medication, leading to nonadherence, higher medical spend, and death. Medicare negotiation and limits on drug price increases would significantly reduce cost-related nonadherence, leading to fewer premature deaths and lower medical spending.

The rising of out-of-pocket costs for medications covered by Part D Medicare is a major concern for seniors. Instead of paying high prescription costs, many seniors are opting to not take their life-saving prescriptions. By enacting policies that eliminate out-out-pocket expenses at the pharmacy counter, we have an opportunity to help prevent 112,000 premature deaths of seniors each year, while saving an average of $17.7 billion in unnecessary Medicare medical expenses.

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