Press Release  AG Report Examines Specialty Drug Spending, Suggests Greater Transparency Regarding Rebates Needed

Boston — A report released today by the Attorney General’s Health Care Division shows that despite a variety of approaches being taken to manage pharmaceutical spending, drug costs continue to grow, even when accounting for manufacturer rebates.

The report suggests that as medicine becomes more personalized and pharmaceutical spending shifts more toward specialty drugs, new approaches may be needed to spur competition. Specialty drugs refer to those higher-cost medications that are commonly used to treat chronic and complex diseases like cancer, Hepatitis C, neurological diseases, and HIV and they account for an increasingly significant part of health care spending for businesses, government, and families.

“As a global leader in life sciences and biopharmaceutical research and development, the Massachusetts community of companies, universities, and hospitals will continue to develop new treatments and therapies that will improve human health,” said AG Healey. “This report gives policymakers an important baseline to understand some of the health spending dynamics in this critical and evolving sector.”

This is the sixth report the AG’s Office has issued in its ongoing work to examine health care cost trends, and the first to look at pharmaceutical spending. These reports aim to increase transparency around the forces and conditions that drive health care spending. For the first time in Massachusetts, the AG’s Office analyzed the actual cost of prescription drugs for the major health plans, after factoring in all discounts and manufacturer rebates.

Today’s report builds on the work of the Massachusetts Health Policy Commission (HPC) and the Massachusetts Center for Health Information and Analysis (CHIA), both of which have documented significant pharmaceutical spending growth annually since 2013. In issuing this report, the AG’s Office used its unique authority to examine information from health plans, pharmacies, and pharmacy benefit managers (PBMs), and publish results.

The new report outlines three key findings regarding prescription drug spending in Massachusetts:

• Even after accounting for all discounts and rebates, growth in the health plans’ spending on prescription drugs has significantly outpaced overall health care spending growth. The majority of growth was driven by spending on specialty drugs. Nationally, specialty drugs are less than one percent of all private insurance prescriptions, but more than 30 percent of prescription drug spending.
• When looking at how drug prices are set, major health plans use different approaches to negotiate and pay for specialty drugs.
• Despite this variety of payment strategies, the plans ended up paying similar prices across 10 specialty drugs for multiple sclerosis that the AG’s Office examined. The plans also experienced similar growth in these drug prices over the past five years.

These findings have important implications for ongoing policy discussions about ways to optimize pharmaceutical spending. The report suggests that existing strategies for managing pharmaceutical spending should be utilized whenever possible and that new strategies that better measure value may become important tools.   

The AG’s Office makes three recommendations to increase transparency and spur additional competition in drug pricing:

• Require Reporting on Drug Rebates: To facilitate understanding of actual spending on prescription drugs, require reporting of aggregated, standardized information on drug rebates.
• Continue Fostering Competitive Markets: Efforts could include promoting the availability of generic and biosimilar drugs and broader implementation of existing strategies to increase competition, including the use of formularies.
• Focus on Comparative Value of Different Drugs: Improve the measurement and transparency of the effectiveness of different drugs that treat the same disease to encourage research, development, and spending on drugs that make the greatest difference for patients.

For more information on these findings and recommendations, please see the AG’s report.

Today’s report was prepared by Assistant Attorneys General Eric Gold, Stephen Vogel, and David Brill, Division Chief Karen Tseng, and Legal Analyst Tara Ruttle, all of Attorney General Healey’s Health Care Division.

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