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A Project of The Annenberg Public Policy Center

Clinton’s Misleading Ad on Drug Prices

A Hillary Clinton TV ad claims that “in the last seven years drug prices have doubled.” That’s inaccurate. A report, provided by her campaign, says brand-name drug prices on average have more than doubled. But more than 80 percent of filled prescriptions are generic drugs, and those prices have declined by nearly 63 percent, that same report says.

In fact, the Centers for Medicare & Medicaid Services says in its latest National Health Expenditure report that the shift to cheaper generic drugs has resulted in “historically low rates of prescription drug spending growth” in recent years.

The Clinton campaign has been running the ad, titled “Doubled,” for weeks in three Iowa markets in advance of the Feb. 1 Iowa caucuses, according to Kantar Media’s Campaign Media Analysis Group, an ad-tracking service. It is currently running in Davenport, Iowa, and Burlington, Vermont.

The ad begins by saying, “Heart disease. Asthma. Diabetes. Seven out of 10 Americans take prescription drugs. But in the last seven years drug prices have doubled.” The Clinton campaign provided us with a report published in the Mayo Clinic Proceedings that showed nearly 70 percent of Americans use prescription drugs, a figure that has been increasing in recent years. But it could not support the claim that “drug prices have doubled.”

The Clinton campaign referred us to a Wall Street Journal article from April 26, 2015, that said: “Since 2008, branded-drug prices have increased 127%, compared with an 11% rise in the consumer price index, according to drug-benefits manager Express Scripts Holding Co.” Express Scripts is one of the nation’s largest pharmacy benefits managers.

But the Express Scripts report also shows that average generic drug prices have gone down nearly 63 percent, and that the vast majority of filled prescriptions are generic products, not name brands.

Jennifer Luddy, a spokeswoman for Express Scripts, told us in an email that among Express Scripts members “brand medications – specialty and traditional – accounted for 17.1% of all prescriptions filled in 2014. Generics accounted for 82.9%.” That is consistent with the CMS’ latest National Health Expenditure report that said the “generic dispensing rate” was 82 percent in 2014.

The Express Scripts report does not say, and Luddy couldn’t tell us, how much overall drug prices have changed over the last seven years. “Unfortunately, we don’t have a figure that combines generics and brands,” she said.

The report does, however, include year-over-year price increases for the top 10 traditional therapy classes that combine both generic and brand-name drugs. Of the three medical conditions mentioned in the ad, diabetes was the only one that saw a price increase in 2014, according to the Express Scripts report. The unit cost for medications that treat diabetes increased 18 percent from 2013 to 2014, while those for asthma declined 14.9 percent and those for heart disease declined 12.6 percent.

Glen T. Schumock, director of the Center for Pharmacoepidemiology and Pharmacoeconomic Research at the University of Illinois at Chicago, who has written extensively about drug costs, told us in an interview that it is misleading to say drug prices have doubled in seven years. “Most drugs are generic and those have gone down,” Schumock said.

Of course, there have been some well-publicized cases of individual drug prices spiking, an issue that gained renewed attention after the arrest of Turing Pharma CEO Martin Shkreli. But even when individual drug prices rise, Schumock said consumers don’t necessarily pay that price because most have private or public insurance that covers most of the expense — minus a set copay or cost-sharing amount.

“The bottom line is it is misleading to say it is doubling,” he said. “Not only is it untrue based on the data that [Clinton officials] quoted, but it is not true from a consumers’ perspective, by the way we pay for drugs as patients.”

Schumock said he did not know of any available data that could conclusively answer the question of how much consumer drug prices have increased. “The whole question about pricing is complicated,” he said. “I don’t know that there is an answer to that.”

For example, he said the so-called Red Book tracks the Average Wholesale Price set by manufacturers. “But,” he added, “nobody really pays AWP. The actual cost to a payer is not AWP, so it is kind of a fictitious number. There is price and what actually people pay.”

He said the Centers for Medicare & Medicaid Services’ annual report on health care expenditures includes the total amount spent each year on prescription drugs. In 2014, that amount was $305.1 billion, a 12.6 percent increase from 2013, according to an article written by CMS researchers for the journal Health Affairs and published online July 28, 2015. The double-digit increase — the highest rate of growth since 2002 — was notable because the increases had been so modest in recent years. Prescription drug expenditures increased just 2.5 percent in 2013 and 2.3 percent in 2012, the article said.

“Recent historically low rates of prescription drug spending growth have been driven by the shift from brand-name medications to less expensive generic drugs,” CMS researchers wrote. “This shift to cheaper medications has offset annual price increases for brand-name drugs. With the generic dispensing rate already at 82 percent in 2014, there is an expectation of only a small increase in this rate over the next ten years.”

CMS researchers partly attributed the 12.6 percent increase in total prescription drug expenditures to “new treatments for hepatitis C.” But “prescription drug spending growth is projected to decelerate, as lower costs associated with expensive specialty treatments for hepatitis C are negotiated between payers and the drug industry,” the paper said.

Even the CMS data are not ideal for measuring consumer cost. Schumock said three factors affect the total expenditure on prescription drugs — usage, price and the availability of new drugs — and only one of those factors involves the cost.

In the end, we cannot provide a figure for how much drug prices overall have changed in seven years. But the Clinton campaign ad leaves the misleading impression that drug prices have doubled in the last seven years. The ad could have said that brand-name drugs have doubled. But those drugs account for less than 20 percent of filled prescriptions, and the shift to generic drugs has offset price increases for brand-name drugs.