Investor Presentaiton
Per Capita Trend
Per capita spending on Retail Pharmacy remained high in 2021. In contrast to previous
years, however, spending growth for this service category increased only slightly.
Retail Pharmacy grew by only 1.0 percent in 2021, compared to 6.9 percent in 2019
and 8.3 percent in 2020.7 Pharmacy rebates, which totaled $420 million in 2021, had
a significant impact on lowering the annual growth in Retail Pharmacy spending (see
sidebar for more information on pharmacy rebates) Without accounting for rebates,
per capita growth in Retail Pharmacy spending was 3.9 percent.
Drivers of Statewide Spending Growth
Two factors determine a particular service category's contribution to overall spending
growth - the level of per capita spending for the service category, and its annual rate
of growth. At the state level, growth in Hospital Outpatient and Other Professional
spending drove overall spending growth in 2021 (see Exhibit 2.5). Per capita spending
on Hospital Outpatient services - which was already high - grew significantly in 2021,
making it the largest contributor to overall spending growth. Per capita spending
on Other Professional services was moderate, but increased significantly, making this
service category a second significant cost driver for 2021.
Drug Rebates
Health plans often negotiate
with drug manufacturers - either
directly or through pharmacy
benefit managers - to receive
discounts on prescription drugs.
These discounts or rebates are
paid to the plan after a drug
has been dispensed, effectively
reducing the cost of the drug.
Manufacturers use these rebates
as a negotiation tool to earn
favorable placement on the
insurer's preferred drug list or
formulary, which increases the
drug's market share.
Exhibit 2.5: State Level Service Category Contribution to Growth, 2020-2021
Other Professional
20.0%
13.1%
15.0%
Other Claims
Professional
Physician
7.9%
13.0%
10.0%
Hospital Outpatient
10.2%
5.0%
Hospital Inpatient
3.4%
0.0%
Long-Term Care
Retail Pharmacy
1.0%
-5.0%
Non-Claims
-6.1%
-1.9%
-10.0%
-15.0%
-20.0%
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
$1,800
$2,000
Per Member Per Year
Source: OHIC analysis of TME data from insurers, CMS, and the Rhode Island EOHHS.
Data are unadjusted. Retail and medical pharmacy rebates are accounted for in the reporting of Retail Pharmacy spending. Data do not include NCPHI. The
width of the bubbles represents contribution to growth.
7
For more information on 2019 spending growth performance see: OHIC, Rhode Island Cost Trends Steering Committee (slides 9-47), April 29, 2021.
https://ohic.ri.gov/sites/g/files/xkgbur736/files/documents/2021/April/Cost-Trends/steering-committee-meeting-2021-4-29-for-sharing.pdf. For more information on 2020 spending growth
performance, see: Office of the Health Insurance Commissioner, Performance Year 2020 Cost Trends Report.
8 The timing of rebate payments may be irregular, which may cause modest distortions in the total amount of rebates in a given year.
9 Contribution to overall spending growth was calculated by taking the absolute difference in per capita spending between 2020 and 2021 for each service category and dividing it by the sum
of the absolute differences in per capita spending between 2020 and 2021 for all service categories.
14
Annual Report: Health Care Spending and Quality in Rhode IslandView entire presentation