Employer-Sponsored Health Plans Pay More for Drugs than Medicare

Employer-sponsored health plans paid more than Medicare for most physician-administered drugs with the highest use and the highest spending, according to data published in JAMA Health Forum.

In Medicare, physician-administered drug prices are based on average sales price (ASP). However, drug prices are negotiated between healthcare providers or health systems and insurers in employer-sponsored health plans.

Researchers used data from the Medicare ASP files and the Health Care Cost Institute to compare unit prices and price growth of physician-administered drugs in Medicare and employer-sponsored health plans from 2016 to 2020. They specifically looked at drugs with the highest use and the highest spending.

In 2020, the highest employer-sponsored insurance price markups over Medicare among top spend drugs were for pegfilgrastim (54 percent), trastuzumab (33 percent), nivolumab (24 percent), pertuzumab (22 percent), and rituximab (20 percent).

Employer-sponsored insurance paid a unit price of $6,355.90 for pegfilgrastim, while Medicare paid $4,137.60, the highest price for both payers. The unit price for trastuzumab was $144.80 for employer-sponsored plans and $109.20 for Medicare.

Meanwhile, the prices of bevacizumab, natalizumab, and vedolizumab were similar in employer-sponsored health plans and Medicare.

Between 2016 and 2020, price markups increased for five of the ten drugs with the highest spending. Prices markups more than doubled for three of the drugs.

Among the ten drugs with the highest use, unit prices were lower, but employer-sponsored insurance markups were higher, researchers found.

In 2020, employer-sponsored health plans paid more than 30 times much as Medicare per unit of midazolam ($4.10 versus $0.10) and more than 20 times as much for ondansetron ($2.20 versus $0.10).

Fentanyl citrate (583 percent), propofol (519 percent), saline solution (473 percent), ketorolac tromethamine (307 percent), and dexamethasone (280 percent) had employer-sponsored insurance prices that were over 200 percent higher than Medicare prices.

Among top-use drugs, employer-sponsored health plans paid the most for saline solution with a unit price of $15.60, while Medicare paid the most for methylprednisolone acetate at $6.40.

“High [employer-sponsored insurance] prices for physician-administered drugs raise overall spending and threaten access to innovative and lifesaving products for close to half of the US population with health insurance through their employer,” the study stated.

Stakeholders should consider policies to reduce employer-sponsored insurance prices for low-price, commonly used drugs as well as expensive drugs, researchers wrote.

Research from AHIP found that prescription drugs account for the largest portion of the average healthcare premium dollar between 2018 and 2022, at 22.2 cents.

While the Inflation Reduction Act will allow Medicare to negotiate prescription drug costs, these savings could potentially lead to higher costs for employers and employer-sponsored health plan members. Employers and payers have expressed concern about a so-called loophole in the legislation that would allow pharmaceutical companies to shift costs to consumers with private health insurance.

However, things could go in the other direction, and employers could gain access to Medicare drug prices. The result largely depends on the leverage employers can exercise in their negotiation, Katherine Hempstead, senior policy adviser at the Robert Wood Johnson Foundation (RWJF), told HealthPayerIntelligence.