Decomposition Analysis of Spending and Price Trends for Biologic Antirheumatic Drugs in Medicare and Medicaid

Objective Billions of public dollars are spent each year on biologic disease‐modifying antirheumatic drugs (DMARDs), but the drivers of recent increases in biologic DMARD spending are unclear. This study was undertaken to characterize changes in total spending and unit prices for biologic DMARDs in Medicare and Medicaid programs and quantified the major sources of these spending increases. Methods We accessed drug spending data from years 2012–2016, covering all Medicare Part B (fee‐for‐service), Medicare Part D, and Medicaid enrollees. After calculating 5‐year changes in total spending and unit prices for each biologic DMARD as well as in aggregate, we performed standard decomposition analyses to isolate 4 sources of spending growth: drug prices, uptake (number of recipients), treatment intensity (mean number of doses per claim), and treatment duration (annual number of claims per recipient), both excluding and including time‐varying rebates. Results From 2012 to 2016, annual spending on public‐payer claims for the 10 biologic DMARDs included in this study more than doubled ($3.8 billion to $8.6 billion), with median drug price increases of 51% in Medicare Part D (mean 54%) and 8% in Medicare Part B (mean 21%). With adjustment for general inflation, unit price increases alone accounted for 57% of the 5‐year, $3.0 billion spending increase in Part D, while 37% of the spending increase was from increased uptake. Accounting for time‐varying rebates, prices were still responsible for 54% of increased spending. Unit prices and spending were lower under Medicaid than under Medicare Part D, though temporal trends and contributors were similar. Conclusion Postmarket drug price changes alone account for the majority of the recent spending growth in biologic DMARDs. Policy interventions targeting price increases, particularly those under Medicare Part D plans, may help mitigate financial burdens for public payers and biologic DMARD recipients.