As prescription drug costs continue to increase, it’s important for employers to understand the trends behind the rise and what they can do to better manage their health care expenses.

This blog post sets out to provide context for why prescription prices continue to rise and offers cost-cutting solutions for employers and employees.

Prescription Drug Cost Drivers

In 2019, the United States spent nearly $370 billion on prescription drugs, keeping trend with significant increases year over year. Although prescription drug spending has historically been a small proportion of national health care costs compared to hospital and physician services, it has grown rapidly in recent years—comprising about 10% of national health care spending.

A multitude of reasons led to this steady rise in prescription drug costs, including the following.

Influx of Specialty Drugs

Specialty medications account for a smaller portion of U.S. prescriptions than non-specialty drugs, yet they commanded nearly half of the pharmaceutical market in 2016 ($180 billion). And that dominance is likely to remain. Specialty drug spending is projected to experience rapid growth over the next several years, due to pricing increases.

Note: Since publishing this post (as seen below), the FFCRA legislation has been revised. While it's been billed as a "technical correction" by Democratic leaders, the changes are substantial. The new measure will still provide two weeks of paid sick leave to workers affected by the pandemic, but the next 10 weeks paid leave will be limited to only those workers caring for a child whose school or day care has been shut down. (Workers who had been in quarantine, or caring for a family member affected by the crisis, will not be eligible for the additional 10 week of paid leave.)

In a press conference just a few hours ago, Senate Majority Leader Mitch McConnell (R-Ky.) announced that the Senate will, in fact, pass the Families First Coronavirus Response Act (FFCRA) which was passed by the U.S. House of Representatives over the weekend.

Senators had been critical of the House legislation, describing it as a “non-comprehensive bill” that simply doesn’t do enough to help small business. Earlier today Senator McConnell went so far to say that the the Senate would not pass the bill unless it included “significant and bold new steps”.

Realizing that changes to the bill would result in the measure having to go back to the House for approval, the Senate reversed course this afternoon, anxious to show the country bipartisanship in the face of a global pandemic.

"A number of my members think there were considerable shortcomings in the House bill. My counsel to them is to gag and vote for it anyway," McConnell said.

McConnell then pledged not to adjourn the Senate until passing the House bill, as well as a third stimulus package, which is expected to top $850 billion and focus on small business and industry.

Here are the details of the "phase two" package the Senate looks to pass as early as this evening.

Yesterday, in an effort to prevent the spread of coronavirus (Covid-19) on its campus, Eli Lilly became yet another high-profile U.S. company outside the state of Washington to ask some of its employees to work from home.

This comes on the heels of similar actions last week by several Seattle-based companies; Amazon, Facebook, Microsoft, Twitter, and Google have all told their employees to remain home.

With a prediction by Harvard epidemiologist Dr. Mark Lipsich that 40-70 percent of the global population will eventually become infected with Covid-19, U.S. companies are all taking note. And with Health and Human Services (HHS) Secretary Alex Azar acknowledging that this is now a public health emergency, government and non-governmental agencies are finally in lockstep.

Accordingly, the Department of Homeland Security (DHS) has issued Covid-19 preparedness guidelines which call for, among other things, stockpiling a 2-week supply of water and food, and obtaining "a continuous supply in your home of prescription medications".

Having Extra Medications on Hand Is An Excellent Idea

The advice of having an emergency supply of medications on hand "is excellent," according to Peter Jacobson, with the University of Michigan's School of Public Health. In an interview yesterday with National Public Radio, Mr. Jacobson went on to say, "People should not be caught short of having enough heart medication, diabetic medication, and anything potentially lifesaving, that they need on a routine daily, weekly, or monthly basis."

That said, and as you and your employees are probably finding out, stocking-up on prescription medications is not as easy as it sounds. Here's why.

Last week, President Donald Trump delivered the 2019 State of the Union Address (SOTU). The SOTU is an annual message delivered by the president to a joint session of Congress at the beginning of each year.

At this year’s SOTU, President Trump discussed issues that have the potential to impact the employee benefits industry, as well as employers offering healthcare and benefits to their employees. The issues he discussed included pre-existing conditions, lower prescription drug prices, and nationwide paid family leave.

While the SOTU is just a speech, often times packed with lofty aspirations, it does sometimes lead to policy. Here is a recap of what was addressed:

Pre-existing Condition Protection

In a departure from 2018 Department of Justice actions, President Trump announced in the address that people who have pre-existing conditions should receive protections. If the administration holds true to this goal, they will likely find cross-aisle support, as pre-existing condition patient protection was a key campaign issue in the midterm elections.

So it was with great interest that we took note of last Friday’s White House Rose Garden announcement by President Trump to “bring soaring drug prices back down to earth” by promoting competition among pharmaceutical companies, and giving private entities more tools to negotiate better deals on the behalf of consumers, insurers and employers.

Somewhat surprising in his announcement was his abandonment of some of the more populist proposals which he boasted about during his presidential campaign, including his promise to authorize the Feds to negotiate directly with drug companies in an effort to lower Medicare drug prices and disallowing American consumers from importing low-cost prescription drugs from overseas.

Nevertheless, both Republican and Democrats (as well as all of us here at the JP Griffin Group) welcomed the President’s attention on combating high drug prices. The looming question remains just how the President’s promises to lower drug prices will play out and if the concepts proposed will ever come to pass.

We certainly hope the plan gains traction as both employers and employees alike could sure use a break from escalating drug prices which have now become a primary driver of health-related expenditures.