GOODRX HOLDINGS, INC. Key takeaways:
Many Americans are caught in a "Big Pinch" as insurance plans - both Medicare and commercial - cover fewer medications and add more restrictions on coverage.
The Big Pinch isn't the only way insurance squeezes consumers. Over the past decade, consumers have taken on an increasing share of medication costs due to higher deductibles, copays, and coinsurance.
Despite ongoing efforts by lawmakers and policymakers to address soaring drug prices, many Americans still struggle to afford medications. And while headlines often focus on climbing drug costs or expensive brand therapies as the cause of high out-of-pocket costs, this is only half the story.
For most Americans, the difficulty with affordable medications isn't over the ones that cost thousands of dollars. It's about affording routine drugs for chronic conditions, and finding that their insurance doesn't cover what it used to.
In other words, Americans are shouldering more of the cost as prescription insurance coverage gets more complex and more restrictive. And they are caught in a Big Pinch as insurance covers fewer medications and places more restrictions on the drugs that are covered.
Below, we discuss four worrisome insurance trends that are leaving patients on the hook for more:
Insurance plans are covering fewer medications.
Insurance on covered drugs is getting more restrictive.
The patient's share of the cost is rising through higher copays, coinsurance, and deductibles.
Despite continued efforts to reduce drug prices, things are not getting better.
Drug formularies are lists of drugs that an insurance plan will pay for, or cover. They are set by pharmacy benefit managers (PBMs). Formularies ultimately determine how much a patient will pay out of pocket for their medication. These lists change frequently as PBMs add and remove medications based on the drug's effectiveness, price, popularity, and available alternatives.
But as it turns out, these formularies have been shrinking over the last 10+ years, leaving people with few options to obtain their drugs.
The GoodRx Research team analyzed coverage for over 3,700 Medicare Part D plans from 2010 to 2024. We found that on average, the share of medications covered dropped by 19%. In 2010, the average plan covered 73% of prescribed drugs. In 2024, the average plan covered just 54% of prescribed drugs.
Unfortunately, Medicare Part D formularies generally have better coverage than commercial insurance formularies. That's mainly because Medicare plans are required to offer a standard level of coverage.
Specifically, Medicare plans must cover at least two medications per condition category. They also must cover most medications in the following classes: antidepressants, antipsychotics, anticonvulsants, antiretrovirals, immunosuppressants, and anticancer.
Mandates for commercial insurance plan coverage vary from state to state. So while the percentage of medications the typical Medicare plan covers has dropped in the last 10+ years, it's possible that commercial plans have seen an even steeper decrease.
As PBMs design their formularies and decide on the medications to add and remove, they also add restrictions to drugs they cover. PBMs add these restrictions, referred to as utilization management tools, to medications that have cheaper alternatives in an effort to save money. These restrictions are placed on nearly every aspect of healthcare, from tests to procedures to prescription medications.
PBMs say these restrictions control costs by limiting unnecessary care. But research has suggested that they can affect physicians' ability to care for their patients, which can end up delaying patient care and increasing overall out-of-pocket costs.
Patients face insurance restrictions on medications in the form of quantity limits, step therapy, prior authorizations, and refill-too-soon limits. These restrictions allow insurers to evaluate the medical necessity of a patient's prescribed medication and require them to jump through hoops to receive coverage.
The use of these restrictions has increased substantially in recent years. Between 2010 and 2024, the average number of drugs with restrictions in Part D plans increased by 23%, from 27% of drugs in 2010 to 50% of drugs with some form of restriction in 2024. In other words, nearly half of all medications covered by Medicare plans have a restriction.
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Patients who have a restriction on their medication are left with few options. While they can jump through the hoops to receive coverage for their prescription, many pay entirely out of pocket for their medication or delay taking or abandon their medication completely. Both options result in higher costs for the patient overall.
If a patient decides to pay entirely out of pocket instead of going through their insurance, they will pay the cash price of the drug, which is typically unaffordable. And with high costs, it's no wonder many patients end up abandoning their prescriptions. According to a survey from the American Medical Association, 80% of healthcare professionals reported that prior authorizations lead to patients abandoning treatment.
The patient's share of cost is rising through higher copays, coinsurance, and deductiblesOf course, this isn't the only phenomenon at play with regard to insurance coverage. In order to understand the magnitude of the Big Pinch, it also helps to understand other trends in insurance coverage. In essence, insurance isn't what it used to be, and as a result, patients are paying more out of pocket for their medications and the rest of their healthcare.
Patient cost-sharing is increasingCost-sharing refers to the portion of healthcare covered by the patient through deductibles, copayments, and coinsurance. To PBMs, cost-sharing tactics serve an important purpose: They reduce the use of unnecessary medical expenses and encourage patients to switch to lower-cost medications.
But while cost-sharing is a common strategy used by PBMs, the landscape continues to change. In the last few years, high-deductible health plans have become more common and copayments have risen, leaving Americans to pick up more of the tab for their healthcare costs.
High-deductible health plans and rising average deductibles are becoming the normA deductible refers to the amount a patient must pay out of pocket before their insurance starts to cover in-network medical costs. For example, an annual deductible of $1,500 means that patients must pay that amount for covered services before their insurance kicks in.
While deductibles are a common cost-sharing tactic (90% of workers have some form of deductible in their plan), high-deductible health plans are becoming increasingly more common.
On top of that, a growing number of Americans also have a separate deductible applied to prescription medications. This is referred to as a pharmacy deductible. Pharmacy deductibles can be anywhere from $134 per month to $465 per month, and only prescription medications can count toward it.
As the number of plans that use deductibles rise, so does the average deductible. Over the last 10 years, the average deductible for a single enrollee almost doubled, from $917 to $1,644.
What's more, deductible relief day, the day that the average commercially insured patient will satisfy their deductible, continues to get later every year. In 2019, the average commercially insured patient fulfilled their deductible on May 19, nearly 3 months later than the deductible relief day in 2006.
Copayments and coinsurance are risingAs PBMs design formularies, they divide medications into different tiers, also referred to as levels of coverage. Each tier has a defined out-of-pocket cost through either a copay (a fixed price for a drug), or coinsurance (a defined percentage of the cost of a drug that the patient pays).
In general, low tiers, like tiers 1 and 2, consist of affordable generics. High tiers, like tiers 4 and 5, include more expensive brand-only and specialty drugs. Over the past few years, the landscape around tiering, copayments, and coinsurance has changed. The result is more medications with higher copays.
Some of this increase in copays can be explained by the changes in tiering. Years ago, most formularies only had three tiers - a tier for preferred generic drugs, a tier for preferred brand drugs, and a third tier for expensive specialty medications. But in recent years, plans have created additional tiers to account for more expensive medications, and more tiers simply means higher costs.
In 2004, more than 50% of commercial insurance plans had only three tiers. But now, the majority of plans are four-tier plans that have higher copays.
According to KFF, the average copay for third-tier medications in 2023 was $66, while the average copay for fourth-tier drugs was $125. To put this in perspective, nowadays more than half of patients will pay over $100 for a fourth-tier medication that used to cost only $66 on the third tier.
As average copays rise in line with the number of drugs on high tiers, the result is more drugs with higher out-of-pocket costs.
On top of this, drugs aren't getting cheaperDespite various efforts by policymakers and pharmaceutical manufacturers to combat rising drug prices, the cost of medications remains a significant burden for many Americans. Legislative attempts to cap insulin prices and manufacturer programs to provide discounts on expensive therapies have not led to a substantial decrease in overall drug costs.
While prices aren't skyrocketing at the same rate as before, they aren't getting any lower, either.
Since 2014, the list prices of brand-name and generic drugs have increased by 37%, far outstripping the rate of inflation. This surge in prices includes not only the much-publicized gene therapies and specialized treatments but also everyday medications that people need for chronic conditions.
The lack of significant price decreases, coupled with poorer insurance coverage, has profound implications for patients. Many people are experiencing the financial strain of paying out of pocket for their medications, especially as insurance plans cover fewer drugs and impose stricter conditions on the medications they do cover. This situation results in rising out-of-pocket costs, medication nonadherence, delayed care, poor health, and inequitable access to healthcare.
So, what can be done?For years, insurance has been seen as the best way to help Americans access and afford their medications and healthcare. But this is no longer the case. Cost-management tactics have reached a point where the drug patients need is often no longer covered, or there are more restrictions on their coverage.
In addition, prior authorizations, step therapy, and other restrictions delay treatment, and high costs lead to patients skipping or putting off taking their medications. All of this leads to sicker patients and higher healthcare expenses for the country as a whole.
Given the new realities of insurance coverage, patients can explore other savings options.
One of these is GoodRx. By providing access to prescription discounts, GoodRx has saved Americans over $65 billion on their prescriptions. On average, GoodRx users save up to 82% off the retail price of their medications, and 88% of GoodRx users report that they pay less for their prescriptions than they would with insurance. These substantial savings can help lessen the financial burden on patients, ensuring they can afford the medications they need without compromising their health or financial stability.
MethodologyMedicare Part D analyses: For all Medicare analyses, we used theCenters for Medicare & Medicaid Services Prescription Drug Plan Formulary, Pharmacy Network, and Pricing Information files. These data include specific formulary structures, benefits, plans, and networks, and they are updated monthly and quarterly. All analyses related to Medicare Part D plans used first-quarter data of each year between 2010 and 2024. Our analysis does not include National PACE plans, employer-sponsored plans, and demonstration plans per Medicare's documentation.
Medicare Part D covering fewer drugs: In each year, we counted the total number of unique medications covered by all formularies and included in the GoodRx database. A plan that would cover all these medications is defined as the "best plan" in that year. To calculate the drug coverage for each plan in each year, we calculated the number of medications covered on that plan as a proportion of the drugs covered on the "best plan." To summarize for each year, we then took the weighted average of all plans' medication coverage, which was weighted based on the number of enrollees on the plan.
Medicare Part D covered drugs getting more restrictive: For all Medicare Part D plans in each year, we looked at medications on formularies for drugs in the GoodRx database. For each plan in each year, we calculated the proportion of medications that had any coverage restrictions (quantity limits, prior authorization, step therapy) of all drugs on that plan. To summarize for each year, we then took the weighted average of all plans' proportion of medications that had any coverage restrictions, which was weighted based on the number of enrollees on the plan.
Medicare Part D average copay/coinsurance on highest tier: For all Medicare Part D plans in each year, we looked at the highest tier on all formularies. We evaluated each Medicare Part D plan's highest tier using the cost file; in particular, we used cost information for a 30-day supply of a medication at preferred pharmacies. The cost file details if a tier on a plan is copay or coinsurance. If a plan's highest tier is a copay tier, the average cost of that plan's tier is the copay. If a plan's highest tier is a coinsurance tier, we pulled in pricing information for all National Drug Codes (NDCs) in that tier using the pricing file. We then multiplied the coinsurance percentage with the price of the medication to get the coinsurance price for the drug. We then averaged all the coinsurance prices in the plan's highest tier to get the average cost of that plan's tier. To summarize for each year, we took the weighted average of all plans' highest-tier average cost, which was weighted based on the number of enrollees on the plan. This portion of the analysis is only updated until 2019 due to changes in the structure of the pricing data.
Medicare Part D percent of drugs on highest tier: For all Medicare Part D plans in each year, we looked at the highest tier on all formularies. We then calculated the proportion of medications on the highest tier of all drugs on that plan. To summarize for each year, we took the weighted average of all plans' proportion of drugs on the highest tier, which was weighted based on the number of enrollees on the plan.
American Medical Association. (2022). 2023 AMA prior authorization physician survey.
American Society for Radiation Oncology. (2019). Prior authorization and cancer patient care.
Chandler, I. (2019). Medicare Part D: What you need to know. HSS.
CMS.gov. (2023). Prescription drug plan formulary, pharmacy network, and pricing information files for order.
Gregg, R., et al. (2022). 2022 trends in specialty drug benefits report. PSG.
KFF. (2019). Deductible relief day: How rising deductibles are affecting people with employer coverage.
KFF. (2023). 2023 Employer Health Benefits Survey.
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GoodRx Holdings Inc. published this content on 26 June 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 27 June 2024 18:34:10 UTC.
