Drug Costs in Medical Setting Found to Be 3x More than at Pharmacies

Medications given in medical settings are having a substantial impact on rising drug costs, according to an analysis conducted by the Minnesota Department of Health (MDH), in partnership with the PRIME Institute at the University of Minnesota.

The study, released Nov. 7, analyzed claims data from 2009 to 2013 (from Minnesota’s All-Payer Claims Database) and found that the spending growth for drugs given in medical settings was nearly three times more than the spending growth for drugs from pharmacies (35.5 percent vs. 13.5 percent).

“This results from this analysis is one of the main reasons we put together our MARCH Steering Committee,” said Janet Silversmith, MMA’s director of health policy. “We need to determine the main drivers for the increase in various health care costs, then figure out strategies to address them.”

MMA’s 16-member MARCH committee was convened in March 2016 and will continue to meet through the end of the year. The group’s charge is to focus on administrative burden and inefficiencies; prescription drug costs; and low-value and unnecessary care. 

Other key findings from the MDH study include:

•    Spending in 2013 on all prescription drugs for Minnesotans with insurance coverage captured in the APCD was about $7.4 billion.
•    Prescription drug spending in pharmacy and medical claims accounted for approximately 20 percent of total health care consumption that year.
•    Between 2009 and 2013, prescription drug spending rose 20.6 percent, with medical claims accounting for more than half (55.1 percent) of this growth.
•    The greater role of medical claims in drug spending, relative to pharmacy claims, is due to higher cost-per-claim (more than 200 percent) and faster year-over-year growth (23.5 percent between 2009 and 2013).
•    Across the five-year study period, Minnesotans with insurance coverage had, on average, 12 pharmacy claims and three medical claims per year for prescription drugs.

“Minnesota is one of the first states in the nation to show how drugs delivered in medical settings are increasingly important – and not well-understood – drivers of health care costs,” said Health Commissioner Ed Ehlinger, MD. “We are hopeful that this first analysis from a planned series of publications will help insurers and policy makers find solutions for managing unsustainable trends.”

For more information on the MDH study, click here

Additional information about broader, ongoing work using the APCD is also available online.