Why Older Adults Are Seeing a Spike in Drug Prices

(This article ran previously on SquaredAwayblog.bc.edu.)

Total U.S. spending on prescription drugs by individuals, insurers and governments jumped 13 percent last year – the largest increase since 2001. One in four Americans report having difficulty paying for medications.

Older Americans are somewhat shielded from the full impact of rising drug prices by Medicare’s Part D program, which greatly expanded their coverage. Since Part D’s implementation in 2006, seniors’ average out-of-pocket spending on medications has actually declined, from $708 to $564 annually in 2012.

But a recent trend of price spikes for specialty drugs might be a snake in the grass for seniors on fixed incomes. Since most take multiple prescriptions, they face greater odds of needing at least one of these expensive medicines.

Drug cost stability for seniors “is starting to reverse as newer specialty drugs come into the marketplace,” said Juliette Cubanski, a senior Medicare policy researcher for the Kaiser Family Foundation. Part D plans “are covering these drugs and people are taking them, but the costs are going up.”

They include new breakthrough drugs that cure – rather than just treat – Hepatitis C, as well as medications for rheumatoid arthritis, multiple sclerosis and cancer. Kaiser estimates that a senior who takes one of the 12 specialty drugs it analyzed can pay anywhere from $4,400 to $12,000 per year out of their own pockets, even after taking into account Part D’s subsidies.

Under Part D, after Medicare beneficiaries and their drug plan together spend $3,310 on prescriptions, the senior moves into the “donut hole,” where their drug costs are partly subsidized. After incurring $4,850 in personal out-of-pocket costs, seniors receive more heavily subsidized catastrophic coverage – they pay 5 percent of the cost. Even this can amount to several thousand dollars.

Low-cost generics have largely put downward pressure on seniors’ drug spending, but pharmacists and others are watching the relatively new phenomenon of price spikes for a handful of generics. Common examples are the antibiotic doxycycline, which recently soared from $20 to $1,849 for 500 capsules, and pravastatin, a cholesterol drug that recently had a seven-fold price increase. Increases in generics prices “may turn out to be the more significant problem” than specialty drugs, the chairman of the Massachusetts Health Policy Commission, Stuart Altman, recently told The Boston Globe.

Part D plan design is key to how much individuals pay out-of-pocket. The plans typically sort medications into price tiers – from preferred and non-preferred generics to more expensive brand name drugs, and specialty drugs, which have the highest prices. Most plans charge co-insurance – instead of flat copayments – for specialty drugs, but some use co-insurance in all the tiers, Cubanski said, exposing seniors to paying “a percentage of an increasing amount.”

Seniors can also be hit by surprises – one preventable, one not. Seniors can prevent surprises by comparing their specific prescriptions every time they re-enroll in Part D. During re-enrollment, Cubanski said, some seniors make the mistaking of looking only at a plan’s monthly premium. “If it’s up $2, it’s no big deal. They might not look under the hood” for changes in how they’re charged for specific prescriptions, she said.

One surprise isn’t preventable: a physician prescribes a high-cost specialty drug that isn’t covered in the senior’s current Part D plan, and they must wait until open enrollment to find a plan that does cover it.