How Your Prescriptions Can Lower Health Care Spending

There is a pervasive belief in Washington, D.C. that the only way to generate savings in a complex health system is with more complexity. But that’s a cruel myth that, too often, leads to higher costs.  

There is a better way, a proven strategy that is already curbing costs: access and use of prescription medicines.   

There is a long history of medicines making an impact in government-run programs such as Medicare and Medicaid. The Congressional Budget Office has estimated that every 1% rise in the use of prescription drugs in the Medicare program pushes spending down by 0.2%.   

So the coverage of prescription drugs in Medicare, beginning in 2006 through the Part D drug benefit program, may be part of the reason why Medicare, long assumed to be on an unsustainable trajectory, has seen growth slow to a manageable level.   

Since 2006, study after study has shown the same link: better use of medicine means less health spending.  

Following implementation of the Medicare drug benefit, one estimate pegs savings to Medicare in heart failure alone to have been $27 billion over a decade. Another analysis found every additional $1 spent on medicines was associated with a reduction in total health care costs of between $3 and $10 for patients with high cholesterol, diabetes, congestive heart failure, and hypertension.

Making it easier for patients to take the medicines they are prescribed can have startling positive impacts, too. Data show Medicare patients with diabetes and Parkinson’s who are adherent to their medicines not only live better, they save the system thousands of dollars a year.  

If medication use is a key to controlling overall medical spending, especially in government programs, it is worth asking the question of what we can do to accelerate the trend.  

The first way to boost outcomes and cut costs is to eliminate the unnecessary hoops patients have to jump through to get the medicine prescribed by their doctor when they need it. Saddling patients with additional payments, including high coinsurance or deductibles, discourages them from picking up their medicines at the pharmacy. The same goes for onerous “prior authorization” requirements that ensure that doctors are continuously drowning in paperwork. Insurers and their pharmacy benefit middlemen have amassed incredible control over decisions that should be left between patients and their doctors.

We know that those kinds of obstacles can be bad for patients, bad for health care providers, and — in the end — cost the system money. We can do better with reforms that make sure these middlemen stop putting short-term profits over the long-term health of patients.

The second way to drive pharmaceutical-related cost savings is to incentivize innovation that can deliver the next generation of cost-saving treatments. Take hepatitis C. The first medicine of its kind, Sovaldi, was approved a decade ago. Since then, Sovaldi and other powerful new cures for hepatitis C have been so effective at preventing expensive complications that, by 2026, the cumulative savings to Medicaid will reach $43 billion. And those savings will only grow over time, as generic competition enters the market.   

Similarly, breakthrough Alzheimer’s treatments are bringing hope to patients and caregivers and could transform health care spending if we can put short-term thinking on hold. Alzheimer’s impacts 6 million Americans and is the sixth leading cause of death in the U.S. The financial toll of this neurodegenerative disease is huge and it’s growing. More than 11 million caregivers are providing $257 billion in uncompensated care. The CDC estimates the annual cost of Alzheimer’s could exceed $1 trillion by 2050 — giving us two choices. We can find ways to pay for a new generation of cost-effective treatments. Or we can accept the status quo that delays and denies life-changing treatments for patients while the financial toll of Alzheimer’s on caregivers and the health care system continues to rise.   

Generic drugs are part of the reason why the pharmaceutical industry fights so hard to protect innovation: today’s new breakthroughs, after a limited period of exclusivity, pave the way for less-expensive generic medicines. The advantages of those workhorse medicines last forever, at ever-lower prices. The 39 most-prescribed medicines in Medicare Part D are all generics. Compare that to a doctor’s visit or a surgery, where prices only go in one direction: up.   

So when biopharmaceutical innovation is harmed, and the flywheel of generic savings stops, too. That’s not to say that drugs are only valuable if they deliver cost savings, nor should we ignore other effective ways to control spending that center on other parts of the health system. 

A look at the recent history shows that hospital and physician spending is growing in a way that the use of medicines can’t entirely counterbalance. 

But it’s hard to beat biopharmaceutical innovation as an effective way to bend the cost curve. That only happens, though, if patients can access their medicines. We can help achieve these savings by making sure safety-net programs like the 340B program work as intended and lowering out-of-pocket costs through reforms to pharmacy benefit managers.

Indeed, we’re at one of the great inflection points in American public health. An explosion of vaccines stopped the COVID-19 pandemic — adding well over a trillion dollars to the economy. Vaccines are revolutionizing the way we treat and prevent everything from infectious diseases to cancers.

Leaning into biopharmaceutical innovation is a simple and proven approach. If we want to be serious about controlling costs, we must be serious about accounting for the long-term savings of today’s breakthroughs.  

Stephen J. Ubl is president and chief executive officer of the Pharmaceutical Research and Manufacturers of America (PhRMA), which represents America’s leading biopharmaceutical research companies.