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Soaring prescription drug costs increase premiums for small businesses

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Politicians and insurers are scrambling to solve a rising prescription drug crisis that leaves small businesses and employees paying higher premiums. 

Kevin Dunn, CEO of Decisely, said medical premiums are rising 14-16% annually, on average, mostly because of increasing drug costs. Decisely is a human resources platform that works with Gravie to provide healthcare coverage options through the Society of Collision Repair Specialists (SCRS) benefits center. 

“In the repair business, you typically see an employer pay 30% to 70% of the premium, and the employee picks up the rest. Everyone ends up paying more ultimately,” he said.

recently released Small Business For Future America (SBFA) survey found that 94% of 1,015 small business respondents believe the current prescription drug pricing market needs to be changed, including 69% who believe it needs a major overhaul. 

U.S. Office of the Assistant Secretary For Planning and Evaluation (ASPE) reported in October that 4,200 drug products had price increases in 2022. It said 46% of the increases were higher than the inflation rate. The average drug increase was 15.2% or $590 per drug product. 

Price changes ranged from a decrease of 99% to an increase of more than 3,000%, it reported. A drug to treat spinal muscular atrophy increased $63,750 (3%) from $2.12 million per kit to $2.18 million per kit, the report says. 

Dunn said drugs marketed on television tend to come with the highest price tag.

Skyrizi, a popular drug on the rise, costs between $18,000-$20,000 a dose, Dunn said. The drug treats autoimmune disorders such as arthritis and Chron’s disease. 

A few employees taking Skyrizi could raise costs for an entire business, Dunn said. 

A New Jersey small business owner voiced her concerns about rising prescription costs in a letter to the editor earlier this week. Katherine Sheldon, CEO of Prasada in Home, said she’s “deeply concerned” about the issue. 

“These costs not only strain our financial resources but also hinder our ability to hire new employees,” Sheldon said. “I just added a new member to my team and had to pay a $1,000 prescription drug fee through my insurance provider.” 

She urged state lawmakers to take action by meeting with the state’s Drug Affordability Council. The council was created by approved legislation last year and is focused on formulating legislative and regulatory policy recommendations with the goal of prescription drug affordability and accessibility. 

New Jersey isn’t the only state attempting to address rising prescription costs. A bill introduced in Nebraska earlier this year looks to cap drug costs. 

LB833, introduced by Sen. Carol Blood (D-3), would establish the Nebraska Prescription Drug Affordability Advisory Council to establish upper payment limits for prescription drugs and make policy recommendations to improve the affordability of prescription drugs. 

The Biden Administration is also involved in the prescription drug fight. A portion of the Inflation Reduction Act is focused on lowering prescription drug and health care costs. The administration met with key administrators for a roundtable discussion on the topic earlier this week

SBFA says its survey shows 81% of small businesses support the Inflation Reduction Act’s measures to lower prescription drug prices but believe more needs to be done. The survey found 87% of respondents support extending negotiated drug prices to small business insurance plans. 

December 2023 survey from SBFA found 90% of 1,015 respondents experienced increased premiums in 2022. One in four said they saw a 15% hike. 

“Small business owners surveyed said high healthcare costs have constrained growth (34%), hiring (27%), and led to price increases for goods/services (33%),” SBFA said in a report on the survey. 

Insurance companies are also feeling the pain from prescription drug costs. The Detroit News recently reported Blue Cross and Blue Shield of Michigan had a $544 million operating loss in 2023. The loss is partly to blame for rising pharmaceutical costs, including popular medications used for weight loss and diabetes. 

The company said three drugs for weight management — Mounjaro, Wegovy, and Ozempic — grew by $320 million in claims, according to the article. Specialty drug claim costs increased by $750 million with $400 million of that increased due to the utilization of drugs for autoimmune diseases, it says. 

Dunn said Decisely is also monitoring weight loss drugs, such as Ozempic. He said stringency has been placed around non-FDA usage of the drug for weight loss by ensuring authorizations are medically necessary. 

“We aim to combat the rapid growth in this drug utilization category,” Dunn said. 

Employers can attempt to lower prescription drug costs by encouraging employees to purchase drugs through cheaper options, Dunn said. For example, some drugs are covered through assistance programs depending on a policyholder’s income. 

The Novartis Patient Assistance Foundation is a program that consumers can enroll in annually to receive some Novartis drugs for free. Novartis often has some of the highest-cost drugs on the market, with GoodRx Health ranking its Zolgensma as the highest-priced drug in 2023. The annual cost of the drug is $2.2 million. The drug is often used to treat spinal muscular atrophy. 

Consumers also can buy some of the same prescription drugs much cheaper through international programs. 

“We are encouraging the utilization of international sourcing from tier 1 countries such as Canada, New Zealand, and the UK,” Dunn said. “Members can benefit from these programs with waived member cost shares, allowing procurement at a fraction of the domestic cost.” 

Decisely also is looking for partnerships and opportunities that could cut prescription costs through discount programs such as Good RX, Dunn said. He said the more members that join SCRS healthcare programs, the more opportunities will be available. 

Dunn said there’s also hope that new programs, such as Amazon PillPack that delivers prescriptions to customers’ doors, will be able to help reduce costs in the future. 

Photo courtesy of deliormanli/iStock

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