HHS Issues RxDC Report on Prescription Drug Spending

December 17, 2024

In November 2024, HHS issued its inaugural report on prescription drug spending and trends, as required under Section 204 of the CAA 2021, which directs the agency to report on “prescription drug reimbursements under group health plans and group and individual health insurance coverage, prescription drug pricing trends, and the role of prescription drug costs in contributing to premium increases or decreases under such plans or coverage.”

The report is an analysis of data for the years 2020 and 2021 regarding premiums, enrollments, nondrug medical spending, spending on prescription drugs, and prescription drug rebates provided by group health plans and health insurance issuers through the Prescription Drug Data Collection program (RxDC).

Highlights of the report include information regarding:

• Number of Covered Persons: In 2020, an estimated 143 million Americans had prescription drug coverage from private group health insurance plans (mostly employer-sponsored), and an estimated 11 million had prescription drug coverage from individual market health insurance plans.
• Breadth of Coverage: Most private health insurance coverage includes prescription drug benefits. Most individual (non-group) market and small group market plans are statutorily required to provide prescription drug coverage. Nearly all large group market plans provide prescription drug coverage, though they are not required to.
• Cost-Sharing: Average deductibles and out-of-pocket maximums in employer-sponsored coverage have generally increased since 2014, with employer-sponsored health insurance plans making greater use of coinsurance formulas rather than fixed copayments. Employer-sponsored health insurance plans have also adopted benefit designs with a larger number of cost-sharing tiers, allowing them to set higher cost-sharing for more expensive brand drugs.
• Prescription Drug Pricing Trends: Gross drug prices have generally been growing more rapidly than prices net of rebates paid by manufacturers to PBMs. Ratios of total spending net of rebates to gross spending, including rebates were 0.80 in 2020 and 0.78 in 2021, with variation across therapeutic class, market segment, and state. Rebates therefore accounted for 20-22 percent of gross drug spending in employer-sponsored and individual market plans, which is a smaller share than the 31 percent in Medicare Part D or the 53 percent in Medicaid.
• Relationship Between Prescription Drug Costs and Premiums: Research indicates that consumers are highly sensitive to premiums and consider premiums more than expected out-of-pocket costs when choosing health insurance plans, which is why plans and issuers are often more inclined to respond to increases in prescription drug costs with changes to formularies or utilization management rather than premium increases.

• RxDC Data Collection Issues: The report makes suggestions for improvements in the RXDC program with particular emphasis on two significant limitations with the current data collection process.

  • First, the “nondrug data” reported on Data Templates D1 and D2 (specifically, average and total premiums, member life-years, and medical spending and cost-sharing other than retail prescription drugs) was often aggregated to the plan or issuer level and usually submitted by the private health insurance plan or issuer, while the “drug data” reported on Templates D3 through D8 (e.g., “Top 50” drug data, total drug spending, etc.), was often submitted by the plan or issuer’s PBM with the data aggregated with those of other plans that the PBM served. It was therefore not possible in these cases for researchers to directly link data from the same underlying health plan across all eight templates to conduct certain analyses. Furthermore, the RxDC data could not be used to address the role of prescription drug costs in contributing to changes in premium levels.

  • Second, in many cases the reported spending aggregated at the PBM level in templates D3 through D8 was spending by the PBM, rather than spending only by the plan or issuer, as the RxDC instructions require. This limited researchers’ ability to use the data to understand what portion of rebates is retained by PBMs since PBMs often retain a portion of negotiated rebates and do not pass them on to the plan sponsor or issuer, and so the data reported via RxDC could include those amounts.

    Because of these issues, HHS, together with the DOL, IRS, and Office of Personnel Management, will be investigating different ways to address these limitations, such as allowing for estimations in future reports of rebates and prescription drug spending per member per month by market segment and by state, while also taking into account any additional data submission burdens on submitting entities and implementation costs to the government.

Employers should be aware of the contents of this report, which provides detailed information about nationwide trends in prescription drug coverage, costs, and pricing as reflected in reported group and individual health insurance coverage data. Employers should also take note of potential future adjustments to the RxDC process, particularly with regard to PBM reporting.

Report to Congress: Prescription Drug Spending, Pricing Trends, and Premiums in Private Health Insurance Plans