Department of Managed Health Care releases new Prescription Drug Cost Transparency Report

The California Department of Managed Health Care (DMHC) released its Prescription Drug Cost Transparency Report last week, detailing data submitted by 25 health plans on the costs of covered prescription drugs and their impact on health plan premiums. The report concludes that prescription drug costs have a significant impact on health plan premiums, primarily related to the cost of specialty drugs.

As part of legislation (SB 17) passed in 2017, certain health plans and health insurers are required to submit yearly reports related to prescription drug costs, with the goal of improving drug pricing transparency. The data in the new report is based off measurement year 2017.

According to data released in the report, health plans paid nearly $8.7 billion for prescription drugs during 2017 (a 5 percent increase from 2016), representing 13.1 percent of total health plan premiums.


Image: DMHC, impact on premiums (in millions)


The report broke down the costs and volume of specific types of drugs. While specialty drugs made up just 1.6 percent of all prescription drugs, they accounted for 51.5 percent of annual spending on drugs. Generic drugs made up 87.8 percent of the volume of drugs and 23.6 percent of the cost, and brand name drugs made up 10.6 percent of the total volume and 24.8 percent of annual spending.


Image: DMHC


When evaluating the list of the 25 most frequently prescribed drugs, generic drugs made up 39.9 percent of the list, but just 4.8 percent of annual spending and had a .3 percent impact on plan premiums. By comparison, specialty drugs made up 1 percent of the top 25 most frequently prescribed drugs, but accounted for 25.4 percent of total spending and had a 3.6 percent impact on health plan premiums.

For this same list of most frequently prescribed drugs, health plans paid 86.2 percent of brand name drugs (13.8 percent paid by consumers), 97.1 percent of specialty drugs (2.9 percent to consumers), and 43.4 percent of generic drugs (56.6 percent to consumers).

“This is the first annual report the DMHC has prepared on prescription drug costs since the enactment of SB 17 in 2017,” reads the report. “The report begins to shed some light on the impact of prescription drug costs on health care premiums. The DMHC will continue to collect and report on the data required by SB 17 which will enable the public to understand how prescription drugs impact health care premiums over time.”