Key Takeaways From the HHS’ Prescription Drug Cost Report

The Consolidated Appropriations Act, 2021 (CAA) established consumer protections related to surprise billing and health care transparency. As required by the CAA, the Office of the Assistant Secretary for Planning and Evaluation (ASPE) and the Office of Health Policy released a report for the U.S. Department of Health and Human Services (HHS) that is focused on health policy issues, such as prescription drug spending, pricing trends and contribution to premium changes.

This article summarizes the main points of the Prescription Drug Spending, Pricing Trends and Premiums in Private Health Insurance Plans report, which was published for the first time in November 2024.

Prescription Drug Pricing Highlights

Prescription drug prices are a major concern for both policymakers and consumers. The HHS’ prescription drug cost report highlighted that more than 4,200 drug products saw manufacturer list price increases from January 2022 to January 2023, with an average increase of 15.2%. Notably, 46% of these drugs had price hikes that exceeded the general inflation rate. However, the list prices are often not the final prices paid to manufacturers since payers or pharmacy benefit managers (PBMs) negotiate discounts through rebates for formulary placement.

Despite these negotiations, the net prices paid by private health insurance plans and issuers can be higher due to supply chain markups and amounts retained by PBMs. Comprehensive data on these net prices is lacking. Section 204 of the CAA mandates that group health plans and health insurance issuers submit annual data on premiums, enrollment, medical spending and prescription drug rebates to various departments to address this. This initiative, known as the Prescription Drug Data Collection (RxDC), aims to enhance transparency in prescription drugs and health care spending. The report analyzes RxDC data for 2020 and 2021. Consider the following key report takeaways related to prescription drug spending and coverage:

• Covered persons—About 143 million Americans had prescription drug coverage from private group health insurance plans (mostly employer-sponsored), and an estimated 11 million had prescription drug coverage from individual market health insurance plans in 2020.
• Coverage—While individual and small group market plans are required to provide prescription drug coverage, large group market plans are not. However, nearly all large group market plans do provide prescription drug coverage.
• Cost sharing—Average deductibles and out-of-pocket maximums in employer-sponsored coverage have generally increased since 2014. Employer-sponsored health insurance plans are making greater use of coinsurance. Employer-sponsored health insurance plans have also adopted benefit designs with more cost-sharing tiers, allowing them to set higher cost sharing for more expensive brand drugs.

Despite differences in methods, data sources and prescription drugs analyzed in this ASPE report, recent trends consistently imply that gross drug prices have grown more rapidly than prices net of rebates paid by manufacturers to PBMs. The first two years of RxDC data revealed that the United States spent $406 billion on retail prescription drugs net of rebates in 2022, rising from $291 billion in 2014. Additionally, rebates accounted for 20%-22% of gross drug spending in employer-sponsored and individual market plans, compared to 31% for Medicare Part D and 53% for Medicaid.