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The California Department of Managed Health Care (DMHC) today released the Prescription Drug Cost Transparency Report for Measurement Year 2021. The report looks at the impact of the cost of prescription drugs on health plan premiums and compares this data over five reporting years, 2017 through 2021. Among other findings, the report reveals that health plan spending on prescription drugs increased by $2.1 billion since 2017, including an increase of almost $700 million in 2021.
“This report provides important information and transparency about prescription drug costs and the impact on health plan premiums,” said DMHC Director Mary Watanabe. “Health plans paid almost $700 million more on prescription drugs in 2021 than they did in 2020. This year the cost of prescription drugs continued to increase impacting the affordability of health care with health plans paying about $10.8 billion for prescription drugs in 2021.”
The DMHC considered the total volume of prescription drugs covered by health plans and the total cost paid by health plans for those drugs. The Department also analyzed how the 25 most frequently prescribed drugs, the 25 most costly drugs, and the 25 drugs with the highest year-over-year increase in total annual spending impacted health plan premiums.
The report’s key findings include:
- Health plans paid about $10.8 billion for prescription drugs in 2021, an increase of almost $700 million, or 6.6%, from 2020. Since 2017, prescription drug costs paid by health plans increased by $2.1 billion or 22.2%
- Prescription drugs accounted for 13.3% of total health plan premiums in 2021, an increase from 12.7% in 2020.
- Total prescription drug costs increased by 6.6% in 2021, whereas total medical expenses increased by 9.2%. Overall, total health plan premiums increased by 2.2% from 2020 to 2021.
- Manufacturer drug rebates totaled approximately $1.674 billion, up from $1.437 billion in 2020 and $1.205 billion in 2019. This represents about 15.5% of the $10.8 billion spent on prescription drugs in 2021.
- While specialty drugs accounted for only 1.6% of all prescription drugs dispensed, they accounted for 62.9% of total annual spending on prescription drugs.
- Generic drugs accounted for 88.2% of all prescribed drugs but only 16.3% of the total annual spending on prescription drugs.
- Brand name drugs accounted for 10.2% of prescriptions and constituted 20.8% of the total annual spending on prescription drugs.
- For the first time, the Pfizer and Moderna COVID-19 vaccines were amongst the 25 most frequently prescribed drugs, 25 most costly drugs and 25 drugs with the highest year-over-year increase in total spending. While the cost of the COVID-19 vaccines was covered by the federal government, health plans were responsible for the cost of administration of a significant number of vaccines in 2021.
California Health and Safety Code (HSC) section 1367.243 (SB 17, 2017) requires health plans in the commercial market to annually report their prescription drug costs to the DMHC. The Department must prepare an annual report summarizing the findings and the impact of prescription drug costs on health care premiums.
This report is part of a larger effort by the Newsom Administration to rein in the costs of prescription drugs. To address the drug affordability crisis California launched the CalRx Biosimilar Initiative. Under the CalRx Biosimilar Initiative, the state will help remedy the market failure for affordable insulin by contracting with a manufacturing partner and funding $50 million for development of the most popular short- and long-acting types of insulin. An additional $50 million will be used to support a partner in standing up an insulin manufacturing facility based in California. This facility will have the added benefit of economic development through the creation of jobs and a strengthened supply chain for insulin. The development partnership is expected to be announced in 2023.
Additionally, Medi-Cal Rx launched under the Department of Health Care Services on January 1, 2022. Medi-Cal Rx standardizes the Medi-Cal pharmacy benefit for more than 14 million beneficiaries under one statewide delivery system. This means that no matter what county a person lives in the same access to their prescriptions is available. Medi-Cal Rx improves access to pharmacy services with a pharmacy network that includes the vast majority of the state’s pharmacies, centralizes pharmacy policy, transactions, and reimbursements, leading to greater efficiency for pharmacies, prescribers, the Medi-Cal program, and Californians.
