One group of drugs now accounts for more than 60% of one health insurer's drug spending

Health insurance companies are starting to pay closer attention to the amount of money they’re spending on prescription drugs.

The Blue Cross Blue Shield Association (BCBSA) — an organisation that accounts for 36 independent companies, covering 106 million people — found that over the past seven years, prescription drug spending has gone up 10% a year, not accounting for rebates or discounts drug companies may have paid back to the insurer. And it’s especially being felt by the people on BCBSA’s plans.

On the whole, out of pocket spending on prescription drugs rose every year by 3%, but for branded drugs that are still on patent, the out of pocket spending rose by 18% every year.

That was in large part because of newer drugs that have been approved in recent years with high list prices, BCBSA’s chief strategy officer Maureen Sullivan told Business Insider. By 2016, branded drugs that didn’t face competition made up 63% of the total amount BCBSA spent on prescription drugs. At the same time, cheaper generic medications make up more than 80% of the prescriptions BCBSA filled.

Notably, the report doesn’t account for rebates or discounts drugmakers pay to insurers and pharmacy benefit managers for branded prescription drugs. It’s a topic that’s been hotly contested in the industry, and some drug companies including Johnson & Johnson and Merck have started disclosing how much prices have increased on a net level (that is, accounting for those rebates). The rebates are passed back to patients either via lower co-pay amounts, or in the form of lower insurance premiums.

The reason the rebates aren’t part of the report, Sullivan said, is that rebates are kept confidential, but from what she’s observed they’re not growing as quickly as the list prices for the new medications.

As far as keeping these price increases from continuing, Sullivan said she’s interested in getting some more transparency in how newer, pricey treatments compare to older drugs that treat the same conditions. That way, the new drugs would have to show whether they are worth using. Sullivan said she’d also like to have conversations among all the different parts of the healthcare system to come up with a solution to rising drug spending.

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