More Evidence That Drugs Aren't Driving U.S. Health Spending

The most-clicked link in yesterday’s newsletter was to the exceedingly geeky Health Affairs piece about the impact of Medicare Advantage on drug spending. Love it. Y’all are my people.

The National Health Expenditures projections dropped yesterday. This is the government’s best guess as to where the health care system will spend its money over the next decade or so, so it’s pretty important. The government’s press release is pretty good, and the paper itself is worth a read if you’re, like, flying to Bermuda this weekend and have a couple of hours of downtime. Plenty of coverage, too.

But I’m interested in a narrow slice: what’s going to happen with prescription drugs?** Some interesting answers from the Excel files:

• Medicare is about to spend a ton more on meds in 2024 and 2025 because of the out-of-pocket cap that the IRA added to Medicare Part D. The price controls should start bringing that number down later in the decade.

• Pharma spending by private health insurance is projected to squeak up by 1.4% next year and 1.1% in 2025. And this isn’t prices. This is total spending.

• Not surprisingly, the overall growth in drug spending will be less than overall spending. Medicines continue to reduce the rate of medical inflation.

• Per capita, the amount the average American spends out of pocket on meds will fall over the next decade.

• In 2026, for the first time, Medicare will spend more on medicines than private insurers do.

** CAVEAT: In the case of these figures, we’re talking about medicines sold at retail pharmacies, which excludes a meaningful chunk of medicines.

I wrote earlier in the week about this fascinating study of GoFundMe pages for people with diabetes. The first thing that caught my eye -- and this was the first thing that seemed to catch the eye of others -- was “hey … there are a lot of GoFundMe pages asking for diabetic alert dogs.”

Dogs are a great news hook, and stories about diabetic alert dogs are inherently fascinating.

But the real takeaway from the paper is not really about canines. It’s about where the true holes in the health care system lie. The reality is that the system works fine for most people in most circumstances. But where it breaks down, it breaks down catastrophically.

Understanding those failures becomes critically important when it comes to fixing the system, because otherwise we spend too much time “fixing,” often ham-handedly, things that may not be the real problem. (There is a lot of passive-aggressiveness baked into the previous sentence.)

The GoFundMe study helps illuminate some of the holes. Only 11% of the pages were explicitly from those who were uninsured. More than twice as many mentioned that they were insured, but insurance either didn’t cover what was needed or out-of-pocket costs were too onerous. (The New York Times, citing new KFF data, is out today with a story on how insurance isn’t the safety net that Americans think it is.)

A third of GoFundMe pages asked for help with expenses that weren’t related to glucose control. Medical bills and medical debt featured prominently. Insulin did not.

That’s not to let anyone off the hook, only to suggest that an over-focus on eliminating one financial barrier on one element of life with diabetes (insulin) is likely to be insufficient, even if it’s welcome. There has to be a recognition that this is a more complicated problem, and the GoFundMe paper helps make that point.

• I popped in on yesterday’s “Stakeholder Meeting and Dashboard Discussion” held as part of the Colorado prescription drug affordability board’s work. (As a reminder, the board will, probably this summer, pick some drugs to subject to an “affordability review” that could lead to price-setting later this year.) The participants expressed some reservation about the project, the scariest of which -- for me -- was the revelation that the data in the dashboard was maybe not, you know, universally accurate. There wasn’t any coverage of any kind, and I have a whole rant on that that I’ll spare you.

• Lilly CEO David Ricks has emerged as the highest-profile, most cogent voice about the impact of the IRA. He spoke yesterday on a conference call organized by J.P. Morgan and dropped a handful of bombs, railing against the pill penalty and suggesting that companies may choose to just bail on Medicare rather than face price control. But, for snark, his comment about the number of drugs lost to the IRA was my favorite.

• Everything Adam Fein has said about the gross-to-net bubble in insulin is true (rebates grew from $22 billion in 2019 from just under $5 billion in 2012), according to a JAMA Network Open study that doesn’t mention Adam at all. Adam just rolled his eyes. Naturally, the Harvard PORTAL folks have an invited commentary.

• One theme from yesterday: hospitals are suddenly performing a lot more surgeries on older Americans, mostly long-delayed elective surgeries. That’s good news for hospital revenues, per a Cowen survey written up by Axios, and bad news for the insurance companies who have to pay for those procedures. Insurance stock got hammered yesterday over this concern, which the WSJ -- in a hysterical turn of phrase -- is calling “revenge surgeries.”

• For visual learners, I wanted to pass along this video of BIO’s chief advocacy officer, Nick Shipley, making the case against price controls.

• There is more PBM legislation, this time from the Senate Finance Committee.