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Report to the President

Prescription Drug Coverage, Spending, Utilization, and Prices

From the Department of Health & Human Services

April 2000

TABLE OF CONTENTS

Executive Summary
Introduction (pdf version)
Chapter 1: Prescription Drug Coverage (pdf version )
Chapter 2: Effects of Prescription Drug Coverage on Spending and Utilization ( pdf version)
Chapter 3: Prescription Drug Prices (pdf version)
Future Research (pdf version)

Appendix A: Issues in Prescription Drug Coverage, Pricing, Utilization, and Spending: What We Know and Need to Know (Literature Review)  (pdf version)
Appendix B: Development of MCBS and MEPS Estimates for This Report  (pdf version)
Appendix C: State and Regional Variations  (pdf version)


LIST OF TABLES

Table 1- 1. Medicare Beneficiaries with Prescription Drug Coverage for at Least One Month, by Primary Source of Medicare Supplemental Coverage, 1996

Table 1- 2. Duration of Prescription Drug Coverage for Medicare Beneficiaries Who Had Coverage in 1996

Table 1- 3. Medicare Beneficiaries with and without Prescription Drug Coverage, For at Least One Month, by Income, 1996

Table 1- 4. Medicare Beneficiaries Who Never Had Drug Coverage During the Year, by Income, as Percent of All Beneficiaries without Coverage, 1996

Table 1- 5. Medicare Beneficiaries with and without Prescription Drug Coverage for at Least One Month, by Age, 1996

Table 1- 6. Medicare Beneficiaries with and without Prescription Drug Coverage for at Least One Month, by Sex, 1996

Table 1- 7. Medicare Beneficiaries with and without Prescription Drug Coverage for at Least One Month, by Race, 1996

Table 1- 8. Medicare Beneficiaries with and without Prescription Drug Coverage for at Least One Month, by Metropolitan Residence, 1996

Table 1- 9. Medicare Beneficiaries with and without Prescription Drug Coverage for at Least One Month, by Self-Reported Health Status, 1996

Table 1-10.Medicare Beneficiaries with and without Prescription Drug Coverage for at Least One Month, by Functional Status, 1996

Table 1-11.Medicare Beneficiaries with and without Prescription Drug Coverage, by Number of Chronic Conditions, 1996

Table 1-12.Medicare Beneficiaries with and without Prescription Drug Coverage, by Use of Inpatient Hospital Services, 1996

Table 1-13.Percent of Non-Medicare Population with Drug Coverage at Any Time During the Year, by Source of Coverage, 1996

Table 1-14.Drug Coverage of Non-Medicare Population, by Income, 1996

Table 1-15.Percent of Non-Medicare Population with Drug Coverage, by Self-Reported Health Status, 1996

Table 1-16.Distribution of Health Insurance Coverage by Type of Insurance, 1996 and 1998

Table 2- 1. Utilization and Spending for Prescription Drugs by Medicare Beneficiaries with and without Drug Coverage, 1996

Table 2- 2. Utilization and Spending for Prescription Drugs by Non- Medicare Individuals with and without Drug Coverage, 1996

Table 2- 3. Average Prescriptions, Total Spending, and Out-of-pocket Spending for Prescription Drugs by Medicare Beneficiaries, by Months of Coverage, 1996

Table 2- 4. Average Number of Prescriptions, Total Spending, and Out- of-pocket Spending for Prescription Drugs by Medicare Beneficiaries with and without Drug Coverage, by Primary Source of Supplemental Coverage, 1996

Table 2- 5. Average Total Spending and Out-of-pocket Spending for Prescription Drugs by Medicare Beneficiaries with and without Drug Coverage, by Family Income as a Percent of Poverty, 1996

Table 2- 6. Average Total Spending and Out-of-pocket Spending for Prescription Drugs by Non-Medicare Individuals with and without Drug Coverage, by Family Income as a Percent of Poverty, 1996

Table 2- 7. Medicare Beneficiaries Filling at Least One Prescription and Number of Prescriptions Filled, by Drug Coverage and Self- Reported Health Status, 1996

Table 2- 8. Average Total Spending and Out-of-pocket Spending for Prescription Drugs by Medicare Beneficiaries with and without Drug Coverage, by Self-Reported Health Status, 1996

Table 2- 9. Average Total Spending and Out-of-pocket Spending for Prescription Drugs by Medicare Beneficiaries by Duration of Drug Coverage and Self-Reported Health Status, 1996

Table 2-10.Average Total Spending and Out-of-pocket Spending for Prescription Drugs by Medicare Beneficiaries with and without Drug Coverage, by Other Indicators of Health Status, 1996

Table 2-11.Average Number of Prescriptions and Average Total Spending for Prescription Drugs by Prescription Drug Users with and without Drug Coverage, by Self-Reported Health Status, 1996

Table 2-12.Average Total Spending and Out-of-pocket Spending for Prescription Drugs by Medicare Beneficiaries with and without Drug Coverage, by Age, 1996

Table 2-13.Average Total Spending and Out-of-pocket Spending for Prescription Drugs by Medicare Beneficiaries with and without Drug Coverage, by Race/Ethnicity, 1996

Table 2-14.Distribution of Medicare Beneficiaries with and without Drug Coverage by Amount of Prescription Drug Spending, 1996

Table 2-15.Medicare Beneficiaries with and without Drug Coverage, as Share of Total Population and Share of the Highest Drug Spenders, by Primary Source of Supplemental Coverage, 1996

Table 2-16.Medicare Beneficiaries with and without Drug Coverage, as Share of Total Population and Share of the Highest Drug Spenders, by Selected Demographic Characteristics, 1996

Table 2-17.Medicare Beneficiaries Reporting Selected Measures of Health Status, as Share of Total Population and Share of the Highest Drug Spenders, by Drug Coverage, 1996

Table 2-18.Distribution of Non-Medicare Individuals with and without Drug Coverage by Amount of Prescription Drug Spending, 1996

Table 2-19.Out-of-pocket Spending for Prescription Drugs as a Percent of Income, for all Medicare Beneficiaries and for the Highest Drug Spenders, by Income, 1996

Table 2-20.Out-of-pocket Spending for Prescription Drugs as a Percent of Income, for all Medicare Beneficiaries and for the Highest Drug Spenders, by Source of Supplemental Coverage, 1996

Table 2-21.Out-of-pocket Spending for Prescription Drugs as a Percent of Income, for all Medicare Beneficiaries and for the Highest Drug Spenders, by Selected Demographic Characteristics, 1996

Table 2-22.Out-of-pocket Spending for Prescription Drugs as a Percent of Income, for all Medicare Beneficiaries and for the Highest Drug Spenders, by Selected Indicators of Health Status, 1996

Table 2-23.Illustration of Out-of-pocket Costs under Different Coverage Sources for a Beneficiary with Total Spending of $2,000

Table 2-24.Out-of-pocket Spending as a Percent of Income for Non- Medicare Individuals with and without Drug Coverage, by Income Quintile, 1996

Table 2-25.Components of Average Consumer Unit Spending, by Income and Age of Reference Person, 1997-1998

Table 2-26.Change in Components of Average Consumer Unit Spending for Units with a Reference Person Age 65 or Older, 1992-1993 to 1997-1998

Table 2-27.Percent of Population Not Receiving Prescription Medicine Because of Cost, by Insurance Coverage and Selected Characteristics, 1997

Table 2-28.Percent of Population Not Receiving Prescription Medicine Because of Cost, by Detailed Insurance Status, 1997

Table 2-29.Growth in National Health Expenditures and Prescription Drug Expenditures, 1970-1998 and Projected 1999-2008

Table 2-30.Growth in Prescription Drug Expenditures by Source of Payment, 1970-1998 and Projected 1999-2008

Table 2-31.Growth in Utilization and Spending for Prescription Drugs by Medicare Beneficiaries, 1992-1996

Table 2-32.Percent Change in Average Expenditures and Out-of-pocket Expenditures for Prescription Drugs for Medicare Beneficiaries with and without Drug Coverage, by Primary Medicare Supplement, 1995-1996

Table 2-33.Percentage Contribution of Changes in Price and Utilization to 1993-98 Increase in Prescription Drug Spending

Table 2-34.Percent Change in Average Number of Prescriptions and Expenditures per Prescription for Medicare Beneficiaries with and without Drug Coverage, by Primary Medicare Supplement, 1995-1996

Table 3- 1. Illustrative Example of Pricing for Brand Name Prescription Drugs

Table 3- 2. Average Invoice Price Paid for 100 Top-Selling Brand Name Drugs, 1994

Table 3- 3. Average Retail Unit Price Per Prescription by Type of Drug, Drug Coverage Status, and Source of Insurance, 1996

Table 3- 4. Illustrative Example of Different Mix of Prescription Drugs Received by Two Beneficiaries with Identical Medical Conditions

Table 3- 5. Average and Median Retail Percent Over Benchmark Price for All Drugs by Drug Coverage Status and Source of Insurance, 1996

Table 3- 6. Median Retail Percent Over Benchmark Price for Brand Name and Generic Drugs by Drug Coverage Status and Source of Insurance, 1996

Table 3- 7. Median Percent Over Benchmark Price for All Drugs by Length of Coverage During the Year

Table B-1.Comparison of Sources of Coverage Estimates for MEPS and MCBS

Table C-1.Percent of Total Population with Drug Coverage, by Region, 1996

Table C-2.Prescription Drug Utilization and Spending, Total Population, by Region, 1996

Table C-3.State and Regional Price Differences


LIST OF FIGURES

Figure 1- 1.Duration of Prescription Drug Coverage for Medicare Beneficiaries in 1996

Figure 1- 2.Duration of Coverage for Beneficiaries who Had Coverage in 1996, by Source of Coverage

Figure 1- 3.Medicare Beneficiaries Who Never Had Drug Coverage During the Year, by Income, 1996

Figure 1- 4.Beneficiaries Who Never Had Drug Coverage During the Year, by Metropolitan Residence, 1996

Figure 1- 5.Beneficiaries Who Never Had Drug Coverage During the Year, by Health Status, 1996

Figure 1- 6.Sources of Drug Coverage for Non-Medicare Population, 1996

Figure 2- 1.Out-of-pocket and Insurer Spending on Prescription Drugs by Medicare Beneficiaries with and without Drug Coverage, 1996

Figure 2- 2.Medicare Beneficiaries Who Filled A Prescription and Number of Prescriptions Filled, by Coverage Status, 1996

Figure 2- 3.Out-of-pocket and Insurer Spending on Prescription Drugs by Non-Medicare Beneficiaries with and without Drug Coverage, 1996

Figure 2- 4.Out-of-pocket and Insurer Spending on Prescription Drugs by Medicare Beneficiaries, by Duration of Drug Coverage, 1996

Figure 2- 5.Out-of-pocket and Insurer Spending on Prescription Drugs by Medicare Beneficiaries, by Type of Drug Coverage, 1996

Figure 2- 6.Out-of-pocket and Insurer Spending on Prescription Drugs by Medicare Beneficiaries with and without Drug Coverage, by Income, 1996

Figure 2- 7.Percentage of Medicare Beneficiaries with and without Drug Coverage Filling at Least One Prescription, by Health Status, 1996

Figure 2- 8.Out-of-pocket and Insurer Spending for Medicare Beneficiaries with and without Drug Coverage, by Health Status, 1996

Figure 2- 9.Out-of-pocket and Insurer Spending for Medicare Beneficiaries with and without Drug Coverage, by Age, 1996

Figure 2-10.Distribution of Medicare Beneficiaries and Prescription Drug Expenditures by Amount of Spending, 1996 62

Figure 2-11.Out-of-pocket Spending on Prescription Drugs as a Proportion of Income for Medicare Beneficiaries with and without Drug Coverage, by Income Level, 1996

Figure 2-12.Out-of-pocket Prescription Drug Spending as a Proportion of Health Spending, by Age and Income, 1997-1998

Figure 2-13.Medicare Beneficiaries Who Did Not Get a Needed Drug Because They Could Not Afford It, by Source of Insurance and Income, 1997

Figure 2-14.Real Spending for Prescription Drugs for the Total Population, 1965-1998 and Projected 1999-2008, in 1998 Dollars

Figure 2-15.Prescription Drug Expenditures as a Percent of National Health Expenditures, 1965-1997

Figure 2-16.Spending for Prescription Drugs by Payment Source, Total Population, 1965-1998, in 1998 Dollars

Figure 2-17.Growth in Drug Spending and Number of Prescriptions per Medicare Beneficiary, 1993-1996 89

Figure 3- 1.Payment Sources for Prescription Drug Purchases, 1990-1998

Figure 3- 2.Percent of Prescriptions Filled with Generic Drugs by Coverage Status and Source of Insurance, 1996

Figure 3- 3.Percent Difference Between Average Price for Cash Purchasers and Average Price for Third Parties (Without Rebates) in 1996 and 1999, for the Most Commonly Prescribed Drugs

Figure 3- 4.Percent Difference between Average Price for Cash Purchasers and Average Price for Third Parties (Without Rebates), 1999, for Drugs Most Frequently Used by Medicare Beneficiaries in 1996

Figure 3- 5.Percent Difference between Median Price for Cash Purchasers and Median Price for Third Parties (Without Rebates), 1999, for the Most Commonly Prescribed Drugs

Figure 3- 6.Percent Difference Between Average Price for Cash Purchasers and Average Price for Third Parties (Without Rebates) in 1999, for the Most Commonly Prescribed Brand Name and Generic Drugs

Figure A-1.Public Funding as a Percentage of Total Pharmaceutical Spending

Figure A-2.Health Care Expenditures as a Share of GDP, 1995

Figure A-3.Pharmaceutical Expenditures Per Capita in G7 Countries, 1997

Figure C-1.Average Percent Over Benchmark Price, by Region