Updated May 17, 2018

Who really pays for prescription drugs

Caitlin Owens, author of Vitals
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Data: Peterson-Kaiser Health System Tracker; Graphic: Chris Canipe/Axios

The rising cost of prescription drugs is mostly falling to insurance companies and the government, while patients' out-of-pocket spending is holding steady.

Why it matters: This contradicts the narrative that the outrage over rising drug prices has intensified because consumers are shouldering more of those costs.

What pharma says: "The issue is really around, my perspective, that plans are systematically shedding risk as it relates to pharma and pharma costs," Steve Ubl, CEO of the Pharmaceutical Research and Manufacturers of America, told Axios in an interview last month. "With regard to medicine, you’re exposed to a much higher degree of those out-of-pocket costs."

Between the lines: Overall, insurers and employers are shifting more costs onto employees through higher deductibles and copays. And even though they're absorbing the bulk of the increase in drug spending themselves, some consumers are paying significantly more.

  • Out-of-pocket costs for Medicare Part D grew by 13% between 2013 and 2016, according to Avalere. Over the same time period, the number of seniors who reached the "catastrophic" threshold for out-of-pocket spending rose by about 300,000.
  • Overall drug spending for those enrollees grew by 45%, meaning the taxpayers' tab spiked even more.

Why now: The Affordable Care Act insured millions of new people and required insurance to cover prescription drugs, steering some people's costs away from out-of-pocket spending and into insurance premiums.

  • The law's contraception mandate made a big impact. Between 2012 and 2014, birth control alone accounted for 63% of the drop in out-of-pocket spending among people with employer coverage, per the Kaiser Family Foundation.

Yes, but: Experts say there are still plenty of reasons to be angry about drug costs.

  • "At a minimum it says that the [average out-of-pocket] spending on drugs is not the only thing driving anger," said AEI's Ben Ippolito. "It could very well be that we have more people in the high spending category, and that engenders sympathy, etc."
  • "When you go to a hospital you see tons of investment all around you," he continued. "With pharmaceuticals you only ever seen the finished product — a product that costs effectively $0 to make now that we know how to. The R&D and future investment incentives don’t resonate. It’s an easy target."

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