Cost Cap finds drugs driving up healthcare spending, but we knew that, and their numbers are misleading

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The latest analysis by Mathematica for the Office of Health Strategy’s plan to cap healthcare costs used a small slice of a small slice of Connecticut’s drug spending. We already knew, from other sources, that drug spending is a main driver of rising healthcare costs in Connecticut and the problem is skyrocketing prices. OHS’s analysis adds little to the discussion and could be very misleading if acted upon. Hopefully, the analysis won’t be used to drive policy decisions, as it invites potentially serious unintended consequences.

The analysis used OHS’s APCD database, which doesn’t include the uninsured, traditional Medicare, or Medicaid which excludes about half of Connecticut residents. It also doesn’t include people with self-insured commercial plans, which excludes 64% of Connecticut residents with private insurance. In addition, OHS’s drug spending data doesn’t include drug company rebates, which average 51% off list prices nationally for commercial plans. The rebate amounts vary significantly by drug and payer. All the missing data exists elsewhere.

Given all the exclusions, the findings are questionable. It is unlikely that drug spending is 28% of commercial insurance spending, drug spending may or may not have grown the most among healthcare sectors, and we have no idea from this data if prices are responsible for the increase in spending. (Although the latter is probably true as utilization was flat or down and analyses by others with comprehensive data  have found that drug prices are up while utilization is down). Without rebate information, the lists of ten mostly costly drugs are useless.

This analysis may be valuable to fully-insured plans, although I suspect they have much better and more timely information. It should not be used by policymakers to change policy or they risk making very large, potentially costly mistakes affecting patients’ access to medications.