Thursday, January 23, 2025
DMHC Issues Annual Drug Pricing Report in Continued Commitment to Transparent & Affordable Health Care
(Sacramento) – The California Department of Managed Health Care (DMHC) today released the Prescription Drug Cost Transparency Report for Measurement Year 2023. The report looks at the impact of the cost of prescription drugs on health plan premiums and compares the data submitted from 2017 through 2023. Results show that health plan spending on prescription drugs has increased by $4.9 billion, or 56% since 2017. These increases underscore the importance of the Administration’s efforts to slow per capita health care spending to 3% through the Office of Health Care Affordability (OHCA) and forthcoming proposals to further increase transparency in the pharmaceutical supply chain and eliminate inflated costs from middlemen like pharmacy benefit managers.
“This report is part of the state’s continued commitment to providing greater transparency and insight into health plan prescription drug costs and showing the impact these costs have on health plan premiums,” said DMHC Director Mary Watanabe. “Prescription drug costs continue to impact the affordability of health care overall, and we are committed to ensuring that health care in our state is affordable, accessible, and available to those who need it.”
KEY FINDINGS:
- Health plans paid about $13.6 billion for prescription drugs in 2023, an increase of almost $1.3 billion, or 10.8%, from 2022. Since 2017, prescription drug costs paid by health plans increased by $4.9 billion or 56%.
- Prescription drugs accounted for 15.1% of total health plan premiums in 2023, an increase from 14.3% in 2022.
- Total prescription drug costs increased by 10.8% in 2023, dramatically outpacing total medical expenses which increased by 2.6%. Overall, total health plan premiums increased by 4.8% from 2022 to 2023.
- Specialty and brand name drugs were the primary drivers of the increase in the total prescription drug cost spending for 2023. In particular, drugs used in the management of diabetes or weight loss, such as Jardiance, Ozempic, Victoza, Farxiga, and Wegovy, had the highest year over year increase in total annual spending.
- While specialty drugs accounted for only 2% of all prescription drugs dispensed, they accounted for 65.8% of total annual spending on prescription drugs.
- Generic drugs accounted for 89.2% of all prescribed drugs but only 12.7% of the total annual spending on prescription drugs.
- Brand name drugs accounted for 8.8% of prescriptions and constituted 21.5% of the total annual spending on prescription drugs.
ABOUT THE REPORT: This report provides greater transparency into prescription drug costs and the impact of prescription drug costs on health plan premiums. In developing the report, the DMHC considered the total volume of prescription drugs covered by health plans and the total cost paid by health plans for those drugs. The Department also analyzed how the 25 most frequently prescribed drugs, the 25 most costly drugs, and the 25 drugs with the highest year-over-year increase in total annual spending impacted health plan premiums.
Health plans in the commercial market must annually report their prescription drug costs to the DMHC. The Department then prepares an annual report summarizing the findings and the impact of prescription drug costs on health care premiums.
BIGGER PICTURE: This report is part of a larger effort by the Newsom Administration to rein in health care costs. Another initiative designed to combat high costs is the creation of the OHCA within the Department of Health Care Access and Information (HCAI). Established in 2022, OHCA collects, analyzes, and publicly reports data on total health care expenditures, and enforces spending targets set by the California Health Care Affordability Board.
In April 2024, the California Health Care Affordability Board adopted the state’s first spending growth target, which will start at 3.5% for 2025-2026 then move to 3.2% for 2027-28 and 3% for 2029. Building on the DMHC’s analysis, OHCA will examine trends in prescription drug spending across coverage sources, consumer out-of-pocket payments, and regions and aims to identify underlying drivers of cost growth, including utilization, price and the introduction of new drugs to the market.
In its efforts to ensure a balanced approach to slow spending growth, OHCA also promotes high value system performance by measuring quality, equity, adoption of alternative payment models, investment in primary care and behavioral health, and workforce stability. In October 2024, the California Health Care Affordability Board approved primary care investment benchmarks to address historic underinvestment and shift greater health care resources toward primary care, and to promote improved health outcomes. The Board approved a statewide investment benchmark of 15 percent of total medical expense allocated to primary care for all payers by 2034. Lastly, through cost and market impact reviews, OHCA analyzes transactions that are likely to significantly impact market competition, the state’s ability to meet targets, or affordability for consumers and purchasers. Based on results of the review, OHCA will then coordinate with other state agencies to address consolidation as appropriate.
HCAI also administers the CalRx Program, which aims to bring down the cost of prescription drugs through strategic partnerships in development and distribution. CalRx was able to reduce the price of naloxone by over 40%.
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About DMHC:
The DMHC protects the health care rights of more than 29.8 million Californians and ensures a stable health care delivery system. The DMHC Help Center has assisted approximately 2.9 million Californians to resolve complaints and issues with their health plan. The DMHC Help Center provides assistance in all languages and all services are free. For more information visit www.DMHC.ca.gov or call 1-888-466-2219.