Healthcare Payments Data (HPD): Fee-For-Service Drug Costs in the Commercial Market

In 2021, pharmacies in California billed commercial plans for more than 101 million fee-for-service prescriptions for nearly 9.8 million individuals, costing more than $13.1 billion in total.

Introduction#

The Fee-for-Service Drug Costs in the Commercial Market report allows users to explore various aspects of the cost of pharmaceuticals covered by commercial plans in the state of California in 2021. These visualizations are made possible by data collected as part of HCAI’s Healthcare Payments Data (HPD) program.

• Visit the HPD Public Reporting Webpage
• Visit the HPD Program Overview Webpage

The visualizations cover three topics for 2021:

• The Top 25 costliest drug products in terms of total annual statewide spending, which is a sum of the total amount paid by commercial insurance plans and the total amount paid by consumers (i.e., out-of-pocket costs) for that drug product,
• The Top 25 most frequently prescribed drugs covered by commercial plans, and
• The Top 25 drugs with the largest monthly median out-of-pocket cost for members of commercial plans, which is the median amount paid by the consumer for a month’s supply of a drug product.

These visualizations present data from fee-for-service retail pharmaceutical claims paid by commercial plans. All analyses were conducted at the level of the National Drug Code (NDC). The analyses of total costs and out-of-pocket costs do not include rebates, coupons, or other discounts (see the Notes and Glossary sections for definitions and more details).   

Each visualization displays the total number of retail prescriptions statewide, the number of unique individuals with at least one prescription, the total statewide spending, the cost per prescription, and the median monthly out-of-pocket cost across all prescriptions. Below the statewide totals, each visualization also displays the same figures based only on the Top 25 Drugs shown in the list. Hovering over specific data elements within the visualizations will display additional information in the tooltip. For example:

• Hovering over any number in the visualization tables will provide additional information about the associated drug product including its NDC, its generic name, and a description of the drug. Some drug names appear multiple times because each represents a distinct variant of the same drug product, identified by a unique NDC. Variants can differ based on strength, dosage form, or number of units, and more.
• Hovering over any number under “Monthly Median Out-Of-Pocket Cost” will also provide the 25-percentile and 75-percentile.

All visualizations have a filter for drug source type (i.e., brand vs. generic). Using this filter will alter the list of drugs shown and change the statewide totals and the Top 25 totals. With these filtering options, the visualizations can answer a range of questions such as:

• What are the Top 25 costliest drugs for commercial insurance members?
• What are the Top 25 most frequently prescribed generic drugs and the average cost per prescription?
• What are the 25 drugs having the largest monthly median out-of-pocket cost?

Key Findings#

• Top 25 Costliest Prescription Drugs: The 25 costliest drugs account for just 3.2 percent of all prescriptions in the commercial market but account for nearly 30 percent of total costs at more than $3.9 billion in 2021.
  
• Top 25 Most Frequent Prescriptions: The four most frequent prescriptions in the commercial market in 2021 were all COVID-19 vaccines and had zero out-of-pocket costs. The 25 most frequent prescriptions account for 12 percent of all prescriptions and 2.3 percent of total costs at $297 million.
  
• Top 25 Out of Pocket Costs: The monthly median out-of-pocket cost for the 25 prescription drugs with the highest monthly median out-of-pocket cost ranged from $150 to $250 in the commercial insurance market. State policy limits the maximum out-of-pocket cost for the commercial market.

Notes:

• These visualizations display fee-for-service (FFS) retail pharmaceutical costs (billed on a pharmacy claim) paid by a commercial insurance plan only; medical pharmaceutical costs (billed on a medical/institutional claim), non-FFS (e.g., capitated) pharmaceutical costs, and costs paid by a Medicare or Medi-Cal plan are not included in these numbers.
• Each row in the visualizations represent a unique drug product, identified by a unique National Drug Code (NDC). Drug names could be present multiple times because different variants of the same drug product can have the same name despite having distinct NDCs. Two drug products with the same name can have different NDCs because of differences in strength, dosage form, number of units or packaging. For example, the Pfizer-BioNTech COVID-19 Vaccine appears twice due to differences in the number of vials per package between the two products. The Moderna COVID-19 Vaccine appears three times due to differences in vial volume and the number of vials per package.
• Hovering over the numbers in any row will display the NDC of the associated drug product in the tooltip. For more information about NDCs, see the glossary.
• The cost data do not reflect rebates, coupons, or other discounts, as these are not reported to HCAI.
• The number of dispensed units can vary among prescriptions having the same NDC, which in turn will affect the value of each prescription. For instance, one prescription may be filled for a 30-day supply while another may represent a 14-day supply even though both have the same NDC. The “Cost per Prescription” calculation did not take the number of dispensed units into account and should therefore be interpreted with caution.

Glossary#

Record Types

HPD uses fee-for-service (FFS) retail pharmaceutical claims (billed on a pharmacy claim) records to calculate drug costs. Each row in the visualizations represent a unique National Drug Code (NDC), so drug names can appear multiple times.

National Drug Code (NDC)

• The pharmaceuticals industry assigns a unique three-segment number, called the NDC, to each drug product manufactured and sold. NDCs must be provided to the federal Food and Drug Administration (FDA), and are used for ordering, billing, inventory management, and recalls.
• HCAI requires that relevant reporting uses the 11-digit format of the NDC. The three-segments of the format can be broken into the following:

The labeler code, also known as the manufacturer code, identifies who manufactures, repacks, or distributes a given drug product. The product code identifies the drug, its strength, dosage form, and formulation specific to the firm that manufactures the given drug product. The packaging code typically identifies the number of product units in the given product (package size), but also may indicate the type of packaging used.

Cost Figures

Cost data are reported to HCAI using the All-Payer Claims Database Common Data Layout (APCD-CDLTM). The following data elements are used for cost calculations. Note that the cost data do not take rebates, coupons, or other discounts into account, as these are not reported to HCAI.

Total Cost (Statewide Spending) is the following:
Allowed Amount (CDLPC038)	The maximum amount contractually allowed
Out-of-Pocket Cost is a sum of the following:
Copay Amount (CDLPC043)	Actual co-payment dollar amount paid for which the individual is responsible
Coinsurance Amount (CDLPC044)	The dollar amount of coinsurance for this claim line for which an individual is responsible, not the percentage
Deductible Amount (CDLPC045)	The dollar amount for this claim line applied to the deductible
Member Self-Pay Amount (CDLPC048)	The amount that the member has paid beyond the other patient obligations

Payer Types

Payers are the companies, programs, and organizations that oversee insurance plans and reimburse healthcare providers. Three main types of payers make up the majority of the insurance market: Medicare, Medi-Cal and commercial. This report exclusively focuses on pharmacy claims paid by commercial plans, which refers to insurance products for which the coverage premium is paid by a private party, such as an employer, individual, or other entity.

How HCAI Created This Product#

This product was developed using pharmacy claims data submitted to HCAI’s Healthcare Payments Data (HPD) program, California’s All-Payer Claims Database (APCD).

• Only pharmacy claims paid by a commercial plan under a fee-for-service arrangement for prescriptions filled during 2021 were used for these visualizations.
• Drug products that were prescribed to less than 100 individuals during the year were excluded from the analysis.
• If more than one payer was involved in paying for a claim, the claim is assigned to a primary payer type based on the payer that paid the highest amount. In these cases, a claim was only included if the primary payer was a commercial plan. Pharmacy records, and the count of prescriptions filled, refer only to medications filled at a pharmacy with a prescription and billed to the payer. These counts do not include physician administered drugs (PADs) received during a visit like anesthesia, analgesics, or IVs. Self-pay prescriptions (no coverage, or coverage not used) are also not included. 
• The HPD Program identifies and tracks the unique identity of individuals across different payers over time. The approach is continually refined to ensure an accurate count of unique individuals. As these methods improve, the HPD Program expects to identify more linkages – cases in which two or more records are determined to belong to a single individual. Therefore, the count of unique individuals is likely to decrease over time as linkages are incorporated. 
• To protect patient personal information, the California Health and Human Services Agency has adopted a policy of statistically masking or de-identifying sensitive data (CalHHS Data De-identification Guidelines). 
• Additional information on how HCAI created this product is available in the report’s Technical Note. 

Additional Information#

Topic: Cost Transparency
Source Link: Cost Transparency – Healthcare Payments Database
Citation: HCAI – Healthcare Payments Database – Healthcare Payments Data (HPD) Fee-For-Service Drug Costs in the Commercial Market, 2021
Temporal Coverage: 2021
Spatial/Geographic Coverage: Statewide
Frequency: Annually