Prescription Drug Pricing Is Not Just an Election Issue.

Abstract

I t is hardly surprising that rising prescription drug pricing found its way into the 2016 election. Prescription drug costs frequently get more attention than their share of the health care dollar would suggest—approximately 10% of total spending on health care (although it’s more than 16% if both retail drugs and nonretail drug spending such as hospital spending is considered relative to personal health spending).1 Two reasons help explain the disproportionate focus on prescription drugs. First, insurance coverage for prescription drugs has typically been less extensive than the coverage for physician and hospital care. As a result, many people are more aware of pricing changes in prescription drugs because they are more likely to experience some portion of the cost change. Second, spending growth for prescription drugs periodically spikes and focuses attention on drug pricing. This happened from 2000 to 2003 and again in 2014. The former was driven by the release of a large number of new, branded products that replaced older, less expensive drugs. The spending spike in 2014 came after several years of unusually low prescription drug spending growth (a rate slower even than the rest of health care spending, which was also growing relatively slowly). The primary reason for this spike was the introduction of several new biologic or specialty drugs. Most attention went to new drugs treating the hepatitis C virus (HCV)—Gilead’s Sovaldi, which was the highestselling drug in 2014 at $7.9 billion—along with several specialty drugs introduced for cancer, diabetes, and multiple sclerosis. More recently, we saw huge price jumps for two older drugs with expired patents. In 2015, Turing Pharmaceuticals increased the price of Daraprim, an old drug used to treat protozoal and malarial infections, to $750 a pill. In 2016, Mylan raised the price of the EpiPen, a delivery