Rx Price Watch Report: Trends in Retail Prices of Specialty Prescription Drugs Widely Used by Older Americans, 2006 to 2020

by Leigh Purvis, and Dr. Stephen Schondelmeyer (PRIME Institute, University of Minnesota), Public Policy Institute, September 28, 2021

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Report

Trends in Retail Prices of Specialty Prescription Drugs Widely Used by Older Americans, 2006 to 2020 (PDF)

Specialty Prescription Drug Prices Continue to Climb (PDF)

Specialty drugs treat conditions that commonly affect older populations, such as cancer, rheumatoid arthritis, and multiple sclerosis. They are among the most expensive drugs on the market, with prices that can reach hundreds of thousands of dollars per year. Until recently, relatively few patients used specialty drugs, but several trends indicate that a much larger share of the population will use them in the future. The US population is steadily aging, and older adults typically use more specialty medications than younger populations. In addition, specialty drugs are increasingly being used to treat common chronic conditions that affect millions of Americans. Specialty drug products also represent a growing share of new drug approvals and the late-stage research and development pipeline.

The AARP Public Policy Institute has been reporting prescription drug product price changes since 2004. This latest Rx Price Watch report examines a “market basket” of 180 widely used specialty prescription drugs and shows that average annual increases in the prices of these drugs have consistently exceeded the general inflation rate since 2006. Between 2019 and 2020, for example, that increase was 4.8 percent, more than three-and-a-half times higher than general inflation during that period (1.3 percent).

In 2020, the average annual cost of therapy for a single specialty prescription drug, based on the market basket used in this study, was $84,442 per year. This average annual cost was: almost $20,000 higher than the median US household income ($65,712); nearly three times the median income for Medicare beneficiaries ($29,650); more than four-and-a-half times higher than the average Social Security retirement benefit ($18,530). It was also 13 times higher than the average annual price of therapy for brand name prescription drugs ($84,442 v. $6,604, respectively).

Notably, the average annual cost for one specialty medication used on a chronic basis would have been $39,068 in 2020—more than $45,000 lower than the $84,442 —if the price changes for these products had been limited to general inflation between 2006 and 2020.

High prescription drug prices and price increases translate into higher out-of-pocket costs, especially for consumers who pay a percentage of drug costs (coinsurance) rather than a fixed dollar amount (copayment). Higher prices can also be passed along to consumers in the form of higher cost sharing, deductibles, and premiums. Pricing practices for specialty pharmaceuticals also affect taxpayer-funded programs like Medicare and Medicaid. For example, the Medicare Payment Advisory Commission (MedPAC) has consistently noted that drug price increases are a major factor driving Medicare Part D spending growth. Higher government spending driven by large price increases will affect all Americans in the form of higher taxes, cuts to public programs, or both.

Current market forces do not adequately protect against excessively high drug prices and price increases, and the resulting growth in pharmaceutical expenditures is not sustainable. While policy options should encourage meaningful pharmaceutical innovation, such options should be balanced with the impact that drug prices and expenditures have on the affordability of medications for consumers and other payers.

These AARP Public Policy Institute reports are a continuation of our Rx Watchdog report series that has been tracking manufacturer price changes for widely used prescription drugs since 2004.

Suggested citation:

Purvis, Leigh, and Stephen W. Schondelmeyer. Rx PriceWatch Reports. Washington, DC: AARP Public Policy Institute, various dates. https://doi.org/10.26419/ppi.00073.000

Previous Reports

2021

2019