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2023
Prescription Medicines:
Costs in Context
2
We are in a New Era of Medicine Where Breakthrough Science
is Transforming Patient Care
45 new medicines were approved by the FDA in 2022.
Cancer mortality rates continue
to decline amid 'major progress'
in lung cancer early detection
and treatment
Newly approved drug being
called ‘game changer’ for people
who suffer from hemophilia
FDA authorizes new Covid
antibody drug to fight
omicron variant
Cancer Treatments Game Changer Coronavirus Treatments
Source: US FDA. Center for Drug Evaluation and Research (CDER) Advancing Health through Innovation. New Drug Therapy Approvals 2022. & US FDA. Center for Biologics Evaluation and Research (CBER)
Prescription Medicines: Costs in Context www.phrma.org/cost
3
Spending on Medicines Is a Small and Stable Share of Total
Health Care Spending
Prescription medicines
account for just
In 2022, per capita spending
on medicines* grew, below
inflation, at
2.5%
* Excludes spending on COVID-19 vaccines and treatments
Source: Altarum, IQVIA, 2023.
0%
20%
40%
60%
80%
100%
2021 2022 2023 2024 2025 2026 2027 2028
Hundreds
Retail Nonretail* Other health care spending
Projected US Health Care Expenditures Attributable to
Retail and Nonretail Prescription Medicines, 2021-2028
Note: Nonretail prescription medicines are those purchased through physicians’ offices, clinics and hospitals and are typically administered to the patient by the provider. Retail prescription
medicines are those filled at retail pharmacies or through mail service.
Prescription Medicines: Costs in Context www.phrma.org/cost
of total health care spending
14%
4
$0
$1,000
$2,000
$3,000
$4,000
$5,000
Prescription Medicines Other Health Care Cell & Gene Therapy
2021
SOURCES: Young CM et al. Drug Discovery Today, 27(1): 2022.; CMS National Health Expenditures (NHE) Projections, 2022.; Altarum Institute. “Projections of the Non-Retail Prescription Drug Share of National Health Expenditures.” September 2020.
Prescription Medicines: Costs in Context www.phrma.org/cost
2022 2023 2024 2025
Projected Spending on Prescription Medicines, Total Health Care,
and Anticipated Cell & Gene Therapies ($B), 2021-2025
A New Era of Medicine is Not Expected to Impact the Share
of Total Health Care Spending on Medicines
5
Net Prices for Brand Medicines Have Stayed Nearly Flat For
The Past Five Years
0.3%
1.7%
-2.9%
0.9%
0.0%
2018 2019 2020 2021 2022
Average Net Price Growth for Brand Medicines, 2018-2022
On average, a brand
medicine’s net price is
50%
lower than its list price.
Source: IQVIA, 2023.
Prescription Medicines: Costs in Context www.phrma.org/cost
6
Unlike Other Aspects of the Health Care System, Medicine
Costs Decrease Over Time
The price of medicines used to prevent
cardiovascular disease decreased…
…while the cost of the surgical procedure
to treat it increased over a decade.
Source: IQVIA analysis for PhRMA, June 2020.; AHRQ HCUP, July 2020.
Prescription Medicines: Costs in Context www.phrma.org/cost
$2.37
$0.13
-95%
2017
2007
$51,460
$99,859
+94%
2017
2007
7
CONFIDENTIAL
Generic and biosimilar medicines drive significant savings in
the health care system.
Nearly
$2.6 trillion
10-year savings from use of
generic and biosimilars
(2013 - 2022)
91% of All Drugs Dispensed in
the United States are Generics
Looking Ahead, Biosimilar
Savings Projected to Grow
More than 4x
19%
33%
52%
90%
1984 1990 2002 2022
Sources: Drug Channels, AAM, IQVIA.
2018 - 2022
2023 - 2027
$40B
$181B
4.5x
8
The Influence Pharmacy Benefit Managers (PBMs) Have
Over Patient Access and Affordability Continues to Grow
Negotiating power is increasingly concentrated among a small number of PBMs.
Source: Drug Channels Institute, March 2023.
22%
33%
24%
21%
Top 3 PBMs’
Market Share:
79%
OptumRx (UnitedHealthGroup)
CVS Caremark
Express Scripts
All Other
Insurers & PBMs determine:
IF MEDICINE IS COVERED
on the formulary
PATIENT OUT-OF-POCKET COST
based on tier placement
ACCESS BARRIERS
like prior authorization or fail first
PROVIDER INCENTIVES
through preferred treatment guidelines and
pathways
Prescription Medicines: Costs in Context www.phrma.org/cost
9
The Majority of Brand Medicines Face Generic and
Brand Competition
More than 99% of Part D spending in 2019 was for medicines with competition
Class analysis is based on USP classification system. Part D plans are generally required to cover two medicines per USP class, and CMS uses USP to review Part D plan formularies to ensure plans meet formulary standards.
Source: Avalere, 2022.
Prescription Medicines: Costs in Context www.phrma.org/cost
29%
63%
8%
<0.001%
Generics, and brands that have generic versions
Brands without their own generic but in classes
that include generics
Brands in classes with competing brands (but no generics)
Brand medicines alone in their class
10
More than Half of Every Dollar Spent on Brand Medicines
Goes to Entities Who Did Not Develop Them
Prescription Medicines: Costs in Context www.phrma.org/cost
Other Entity Received
Brand Manufacturer
Source: Berkley Research Group, 2022.
11
Insurers, PBMs And Others Receive An Increasing Share Of
Total Spending On Brand Medicines
Total Brand Medicine Spending ($B)
2013-2020
Total Brand Medicine Spending
Received by Payers ($B)
Payers include health plans, PBMs, federal and state governments, and employers
$50.3
$141.1
2013 2020
180% increase
Prescription Medicines: Costs in Context www.phrma.org/cost
Source: Berkley Research Group, 2022.
12
Middlemen are Shifting Costs to Patients Through
Coinsurance and Deductibles
Prescription Medicines: Costs in Context www.phrma.org/cost
More than half of commercially
insured patients’ out-of-pocket
spending for brand medicines
is based on the full list price
39.7%
44.8%
15.5%
60%
Copay
Deductible
Coinsurance
Source: IQVIA, August 2020. Fein A, March 2023.
In 2022, rebates, discounts and other payments made by brand manufacturers reached
$256B, but insurers and PBMs do not always share these savings directly with patients.
13
Patients Face Higher Out-of-Pocket Costs at the Pharmacy
Counter than Other Parts of the Health Care System
Source: Drug Channels Institute analysis of National Health Expenditure Accounts, Office of the Actuary in the Centers for Medicare & Medicaid Services, December 2021. Outpatient prescription drug figures exclude
inpatient prescription drug spending within hospitals and nearly all provider-administered outpatient drugs. Figures in billions.
Prescription Medicines: Costs in Context www.phrma.org/cost
Total U.S. Spending
Hospital Care Retail Prescription Drugs
$1,270B
$348B
Total Patient Out-of-Pocket Spending
Hospital Care Retail Prescription Drugs
$47B
$33B
Total hospital spending is much higher
than total prescription drug spending
Yet, total patient spending on medicines
is more than on hospital care
14
Hospitals Account for 1/3 of All U.S. Health Care Spending and
Contribute to Patient Costs by Marking Up Medicines
Hospitals that mark up the cost of medicines can make more from administering
a medicine than the pharmaceutical company that manufactured it.
250%
The average amount
hospitals mark up the cost
of medicines for patients
with commercial insurance
The amount 340B hospitals
receive for administering
medicines to commercially
insured patients is
than what they paid to
acquire the medicines
3x more
634%
Amount some hospitals
mark up the cost of
oncology medicines
Prescription Medicines: Costs in Context www.phrma.org/cost
Source: STAT, 2021. Source: Milliman, 2019.
15
Brand Medicine Spending Retained by Hospitals and Other
Providers From the 340B Program Grew 12x Since 2013
Source: Berkeley Research Group.
Prescription Medicines: Costs in Context www.phrma.org/cost
12x
16
More Medicines are Available to U.S. Patients as Compared
with Other Countries that Set Prices Artificially Low
The 5-year survival rate for all cancers is 42% higher for men and 15% higher for
women in the U.S. than in Europe.
Source: PhRMA analysis of IQVIA MIDAS® and country regulatory data. October 2022.
Note: New active substances approved by FDA, EMA and/or PMDA and first launched in any country between January 1, 2011, and December 31, 2020. Many launched medicines are subject to additional government coverage restrictions.
Prescription Medicines: Costs in Context www.phrma.org/cost
85%
61% 59%
52% 51%
45%
34%
United States Germany United Kingdom France Japan Canada Australia
Number of New Medicines Available by Country, 2012-2022
17
PhRMA Created the Medicine Assistance Tool, or MAT,
To Help Patients Navigate Medicine Affordability
MAT makes it easier for those struggling to afford their medicines to find and learn
more about various programs that can make prescription medicines more affordable.
Prescription Medicines: Costs in Context www.phrma.org/cost
A search engine to connect patients with
900+
assistance programs offered by
biopharmaceutical companies, including
some free or nearly free options
Resources to help patients
navigate their insurance coverage
Links to biopharmaceutical
company websites where
information about the cost of a
prescription medicine is available
The Medicine Assistance Tool Includes:
18
Making sure patients share in the savings our industry provides
Common-sense, Patient-centered Reforms to Make
Medicines More Affordable
Capping what seniors pay out of pocket for medicines
Addressing insurance practices that restrict access to care
Strengthening safety-net programs to ensure they deliver the support
vulnerable patients need
Learn more at phrma.org/betterway
Prescription Medicines: Costs in Context www.phrma.org/cost

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Prescription Medicines: Costs in Context - May 2023

  • 2. 2 We are in a New Era of Medicine Where Breakthrough Science is Transforming Patient Care 45 new medicines were approved by the FDA in 2022. Cancer mortality rates continue to decline amid 'major progress' in lung cancer early detection and treatment Newly approved drug being called ‘game changer’ for people who suffer from hemophilia FDA authorizes new Covid antibody drug to fight omicron variant Cancer Treatments Game Changer Coronavirus Treatments Source: US FDA. Center for Drug Evaluation and Research (CDER) Advancing Health through Innovation. New Drug Therapy Approvals 2022. & US FDA. Center for Biologics Evaluation and Research (CBER) Prescription Medicines: Costs in Context www.phrma.org/cost
  • 3. 3 Spending on Medicines Is a Small and Stable Share of Total Health Care Spending Prescription medicines account for just In 2022, per capita spending on medicines* grew, below inflation, at 2.5% * Excludes spending on COVID-19 vaccines and treatments Source: Altarum, IQVIA, 2023. 0% 20% 40% 60% 80% 100% 2021 2022 2023 2024 2025 2026 2027 2028 Hundreds Retail Nonretail* Other health care spending Projected US Health Care Expenditures Attributable to Retail and Nonretail Prescription Medicines, 2021-2028 Note: Nonretail prescription medicines are those purchased through physicians’ offices, clinics and hospitals and are typically administered to the patient by the provider. Retail prescription medicines are those filled at retail pharmacies or through mail service. Prescription Medicines: Costs in Context www.phrma.org/cost of total health care spending 14%
  • 4. 4 $0 $1,000 $2,000 $3,000 $4,000 $5,000 Prescription Medicines Other Health Care Cell & Gene Therapy 2021 SOURCES: Young CM et al. Drug Discovery Today, 27(1): 2022.; CMS National Health Expenditures (NHE) Projections, 2022.; Altarum Institute. “Projections of the Non-Retail Prescription Drug Share of National Health Expenditures.” September 2020. Prescription Medicines: Costs in Context www.phrma.org/cost 2022 2023 2024 2025 Projected Spending on Prescription Medicines, Total Health Care, and Anticipated Cell & Gene Therapies ($B), 2021-2025 A New Era of Medicine is Not Expected to Impact the Share of Total Health Care Spending on Medicines
  • 5. 5 Net Prices for Brand Medicines Have Stayed Nearly Flat For The Past Five Years 0.3% 1.7% -2.9% 0.9% 0.0% 2018 2019 2020 2021 2022 Average Net Price Growth for Brand Medicines, 2018-2022 On average, a brand medicine’s net price is 50% lower than its list price. Source: IQVIA, 2023. Prescription Medicines: Costs in Context www.phrma.org/cost
  • 6. 6 Unlike Other Aspects of the Health Care System, Medicine Costs Decrease Over Time The price of medicines used to prevent cardiovascular disease decreased… …while the cost of the surgical procedure to treat it increased over a decade. Source: IQVIA analysis for PhRMA, June 2020.; AHRQ HCUP, July 2020. Prescription Medicines: Costs in Context www.phrma.org/cost $2.37 $0.13 -95% 2017 2007 $51,460 $99,859 +94% 2017 2007
  • 7. 7 CONFIDENTIAL Generic and biosimilar medicines drive significant savings in the health care system. Nearly $2.6 trillion 10-year savings from use of generic and biosimilars (2013 - 2022) 91% of All Drugs Dispensed in the United States are Generics Looking Ahead, Biosimilar Savings Projected to Grow More than 4x 19% 33% 52% 90% 1984 1990 2002 2022 Sources: Drug Channels, AAM, IQVIA. 2018 - 2022 2023 - 2027 $40B $181B 4.5x
  • 8. 8 The Influence Pharmacy Benefit Managers (PBMs) Have Over Patient Access and Affordability Continues to Grow Negotiating power is increasingly concentrated among a small number of PBMs. Source: Drug Channels Institute, March 2023. 22% 33% 24% 21% Top 3 PBMs’ Market Share: 79% OptumRx (UnitedHealthGroup) CVS Caremark Express Scripts All Other Insurers & PBMs determine: IF MEDICINE IS COVERED on the formulary PATIENT OUT-OF-POCKET COST based on tier placement ACCESS BARRIERS like prior authorization or fail first PROVIDER INCENTIVES through preferred treatment guidelines and pathways Prescription Medicines: Costs in Context www.phrma.org/cost
  • 9. 9 The Majority of Brand Medicines Face Generic and Brand Competition More than 99% of Part D spending in 2019 was for medicines with competition Class analysis is based on USP classification system. Part D plans are generally required to cover two medicines per USP class, and CMS uses USP to review Part D plan formularies to ensure plans meet formulary standards. Source: Avalere, 2022. Prescription Medicines: Costs in Context www.phrma.org/cost 29% 63% 8% <0.001% Generics, and brands that have generic versions Brands without their own generic but in classes that include generics Brands in classes with competing brands (but no generics) Brand medicines alone in their class
  • 10. 10 More than Half of Every Dollar Spent on Brand Medicines Goes to Entities Who Did Not Develop Them Prescription Medicines: Costs in Context www.phrma.org/cost Other Entity Received Brand Manufacturer Source: Berkley Research Group, 2022.
  • 11. 11 Insurers, PBMs And Others Receive An Increasing Share Of Total Spending On Brand Medicines Total Brand Medicine Spending ($B) 2013-2020 Total Brand Medicine Spending Received by Payers ($B) Payers include health plans, PBMs, federal and state governments, and employers $50.3 $141.1 2013 2020 180% increase Prescription Medicines: Costs in Context www.phrma.org/cost Source: Berkley Research Group, 2022.
  • 12. 12 Middlemen are Shifting Costs to Patients Through Coinsurance and Deductibles Prescription Medicines: Costs in Context www.phrma.org/cost More than half of commercially insured patients’ out-of-pocket spending for brand medicines is based on the full list price 39.7% 44.8% 15.5% 60% Copay Deductible Coinsurance Source: IQVIA, August 2020. Fein A, March 2023. In 2022, rebates, discounts and other payments made by brand manufacturers reached $256B, but insurers and PBMs do not always share these savings directly with patients.
  • 13. 13 Patients Face Higher Out-of-Pocket Costs at the Pharmacy Counter than Other Parts of the Health Care System Source: Drug Channels Institute analysis of National Health Expenditure Accounts, Office of the Actuary in the Centers for Medicare & Medicaid Services, December 2021. Outpatient prescription drug figures exclude inpatient prescription drug spending within hospitals and nearly all provider-administered outpatient drugs. Figures in billions. Prescription Medicines: Costs in Context www.phrma.org/cost Total U.S. Spending Hospital Care Retail Prescription Drugs $1,270B $348B Total Patient Out-of-Pocket Spending Hospital Care Retail Prescription Drugs $47B $33B Total hospital spending is much higher than total prescription drug spending Yet, total patient spending on medicines is more than on hospital care
  • 14. 14 Hospitals Account for 1/3 of All U.S. Health Care Spending and Contribute to Patient Costs by Marking Up Medicines Hospitals that mark up the cost of medicines can make more from administering a medicine than the pharmaceutical company that manufactured it. 250% The average amount hospitals mark up the cost of medicines for patients with commercial insurance The amount 340B hospitals receive for administering medicines to commercially insured patients is than what they paid to acquire the medicines 3x more 634% Amount some hospitals mark up the cost of oncology medicines Prescription Medicines: Costs in Context www.phrma.org/cost Source: STAT, 2021. Source: Milliman, 2019.
  • 15. 15 Brand Medicine Spending Retained by Hospitals and Other Providers From the 340B Program Grew 12x Since 2013 Source: Berkeley Research Group. Prescription Medicines: Costs in Context www.phrma.org/cost 12x
  • 16. 16 More Medicines are Available to U.S. Patients as Compared with Other Countries that Set Prices Artificially Low The 5-year survival rate for all cancers is 42% higher for men and 15% higher for women in the U.S. than in Europe. Source: PhRMA analysis of IQVIA MIDAS® and country regulatory data. October 2022. Note: New active substances approved by FDA, EMA and/or PMDA and first launched in any country between January 1, 2011, and December 31, 2020. Many launched medicines are subject to additional government coverage restrictions. Prescription Medicines: Costs in Context www.phrma.org/cost 85% 61% 59% 52% 51% 45% 34% United States Germany United Kingdom France Japan Canada Australia Number of New Medicines Available by Country, 2012-2022
  • 17. 17 PhRMA Created the Medicine Assistance Tool, or MAT, To Help Patients Navigate Medicine Affordability MAT makes it easier for those struggling to afford their medicines to find and learn more about various programs that can make prescription medicines more affordable. Prescription Medicines: Costs in Context www.phrma.org/cost A search engine to connect patients with 900+ assistance programs offered by biopharmaceutical companies, including some free or nearly free options Resources to help patients navigate their insurance coverage Links to biopharmaceutical company websites where information about the cost of a prescription medicine is available The Medicine Assistance Tool Includes:
  • 18. 18 Making sure patients share in the savings our industry provides Common-sense, Patient-centered Reforms to Make Medicines More Affordable Capping what seniors pay out of pocket for medicines Addressing insurance practices that restrict access to care Strengthening safety-net programs to ensure they deliver the support vulnerable patients need Learn more at phrma.org/betterway Prescription Medicines: Costs in Context www.phrma.org/cost