Spending on pharmaceuticals is on the rise in New Jersey, a scenario that has forced hospitals here to more than double their budgets for medications over the past decade. The rising cost of drugs also contributes to an estimated four in 10 older residents not filling their prescriptions as recommended.
And while lower-cost generic drugs make up the majority of those dispensed nationwide, spending on brand-name formulations absorbs more than three-quarters of the total cost, according to industry reports.
To address that disparity, U.S. Rep. Frank Pallone (D-NJ) is rallying support for bipartisan federal proposals designed to promote the development of generic medications, reduce the power of drug companies to protect brand-name patents and improve transparency around the drug development process.
Pallone joined healthcare advocates at Boyt Drugs in Metuchen Monday to highlight seven related bills that were subject to a hearing earlier this month in the Congressional Energy and Commerce Committee, which he chairs. Several of the proposals — sponsored by Democrats and Republicans from around the country — call for technical changes to various regulations that he said have put those who make generic drugs at a competitive disadvantage.
“The American people have been clear: We need to take action to lower the soaring costs of prescription drugs,” Pallone said. “These bipartisan bills will lower costs for consumers by removing barriers to competition that prevent cheaper generic drugs from coming to market. Preventing companies from gaming market loopholes is a commonsense approach to reduce costs for consumers right away.”
Fill prescriptions or buy groceries?
The issue is also a priority for the AARP, which launched a national campaign last week urging federal officials to take action to address these rising costs and supports several of the bills Pallone identified. Some 72 percent of those over age 50 are concerned about the high cost of their medications and nearly 40 percent do not fill their prescriptions, usually because of the high cost, according to a recent national survey the group conducted.
“It’s unfair that Americans pay the highest prescription drug prices in the world. And it’s just wrong that many seniors are forced to choose between filling a prescription or buying groceries,” said Ev Liebman, the director of advocacy for AARP New Jersey, who joined Pallone on Monday.
Pharmaceutical companies — which have continued to play a large role in the economy of New Jersey, long known as the nation’s medicine chest — have argued that the high costs required by some of their formulations reflect the long, expensive and often circuitous path to developing successful treatments. The costs can be particularly steep in the process of developing drugs to treat rare disease, which naturally have a limited market.
Spending on prescription drugs actually accounts for a relatively small percentage of the country’s overall healthcare tab. But studies show these costs tend to be more volatile and are rising at an alarming rate. A review of healthcare claims data from 2012 to 2016, commissioned by the New Jersey Health Care Quality Institute, showed that while overall healthcare spending in the Garden State rose 18 percent — outpacing the national rate (15 percent) — pharmaceutical costs shot up 27 percent during that time.
Hospitals have been hit hard
Hospitals have been particularly hard hit by these escalations, according to survey findings released in February by the New Jersey Hospital Association, whose members may be suffering more than their counterparts nationwide. While drug spending rose 18.5 percent between 2015 and 2017 at acute-care facilities nationwide, it jumped more than 25 percent in New Jersey.
Data from New Jersey hospitals also shows that overall expenses for acute-care facilities here rose less than 30 percent between 2008 and 2017, but spending on drugs doubled during that decade, to reach nearly $1.6 billion. The per-patient cost of medications also escalated 132 percent in that time.
“These skyrocketing drug prices are handcuffing hospitals in New Jersey and beyond by forcing them to divert resources that could be better used to enhance patient care,” the NJHA notes in the report.
The increase is actually driven by a small share of the total prescription drug pie, according to a report based on 2017 claims from 88 million Americans insured through various Blue Cross Blue Shield plans, and released in November by Horizon BCBS, the state’s largest health insurance company. Nationwide, these groups spent $100 billion on pharmaceuticals that year, or 20 percent of their total costs.
Nationwide, Blue Cross found that 83 percent of the prescriptions it covered were for generic brands and only 17 percent involved brand-name pills. But the latter brands accounted for most of the spending, or nearly $8 out of $10 the company paid for pharmaceuticals; this totaled almost $80 billion in 2017 alone.
Looking toward 2018, for which claims data is still being compiled, Blue Cross predicted the use of more costly, branded drugs was expected to grow even more. There is limited competition for certain patent-protected and specialty formulations, the report notes, which allows these costs to continue to rise.
Similar concerns drove Pallone to advocate for the legislative reforms, which he said would boost competition and help control prescription drug prices.
The proposed legislation includes measures that address issues with drug testing, competition, and access to information: