May 1, 2019

Medicare's skyrocketing specialty drug spending

Expand chart
Data: Medicare Payment Advisory Commission; Chart: Andrew Witherspoon/Axios

There's been an explosion in spending on specialty drugs within Medicare's prescription drug benefit over the past decade, and it may be warping insurers' incentives to keep overall costs down.

The bottom line: A single expensive prescription now sends hundreds of thousands of beneficiaries straight into the benefit's "catastrophic phase," where the government picks up most of the tab and insurers have little incentive to manage costs.

By the numbers: In 2007, only 6% of part D spending was on specialty drugs. By 2017, they accounted for 25% of spending, according to the Medicare Payment Advisory Commission's 2019 report.

  • While only 33,000 beneficiaries filled a prescription that was expensive enough to place them in the program's catastrophic phase after a single claim in 2010, by 2016, that number had risen to 360,000.

Once a beneficiary reaches the catastrophic phase, the government covers 80% of their prescription drug costs. The insurer pays 15% and the enrollee pays 5%.

  • Experts say this removes the incentive for plans to manage beneficiaries' spending, driving up costs.
  • Along with other changes to Part D, "the expanding role of high-cost medicines may be eroding plans' incentives for and ability to achieve cost control," MedPAC's James Mathews wrote in congressional testimony delivered yesterday.

The big picture: Prescription drug spending is increasingly driven by specialty drugs, a trend that isn't going to change anytime soon.

  • Drug development is heading more in this direction, as new therapies are increasingly individualized and complicated. This means they often come to market with a high price tag.
  • In 2018, 39 of the 59 new drugs that came to market were specialty drugs, according to a recent IQVIA report.

Go deeper:

Go deeper

Coronavirus dashboard

Illustration: Sarah Grillo/Axios

  1. Global: Total confirmed cases as of 2 p.m. ET: 1,066,706 — Total deaths: 56,767 — Total recoveries: 223,697Map.
  2. U.S.: Total confirmed cases as of 2 p.m. ET: 258,214 — Total deaths: 6,605 — Total recoveries: 9,408Map.
  3. Business latest: Mark Cuban criticizes "arrogant" 3M on respirator production — The wartime mobilization effort to produce ventilators and medical supplies got started too late.
  4. Politics latest: Lawmakers on both sides of the aisle are worried about the difficulties of delivering the $2.2 trillion in stimulus aid.
  5. Jobs update: The U.S. lost 701,000 jobs in March, but the new report doesn't reflect the height of the virus' impact on the economy.
  6. World update: About half of the deaths worldwide are in Italy and Spain, with fatalities exponentially increasing across Europe.
  7. What should I do? Answers about the virus from Axios expertsWhat to know about social distancingQ&A: Minimizing your coronavirus risk.
  8. Other resources: CDC on how to avoid the virus, what to do if you get it.

Subscribe to Mike Allen's Axios AM to follow our coronavirus coverage each morning from your inbox.

Mark Cuban criticizes "arrogant" 3M on respirator production

Photo: Axios Events

Businessman and Dallas Mavericks owner Mark Cuban said during an Axios virtual event Friday that 3M is "arrogant" for not speaking up about respirator production in the midst of the coronavirus outbreak.

What he said: Cuban criticized the company for "making more globally than domestically," echoing a similar line from President Trump now that the U.S. is the epicenter of the pandemic. "You can't ghost the American people," he told Axios CEO Jim VandeHei from Dallas.

Coronavirus puts ambitious plans for self-driving cars on the shelf

Illustration: Sarah Grillo/Axios

In two weeks, the coronavirus has brought the entire U.S. auto industry to a screeching halt. When it finally sputters back to life, many companies may be forced to change, defer — or even abandon — their ambitious plans for self-driving vehicles.

The big picture: Auto factories are shut down across North America to prevent the spread of the virus among workers, while stay-at-home orders have kept car shoppers away from showrooms. The resulting financial shock means carmakers have shifted their focus to survival, not investing in expensive technologies with no clear payoff.