Why do some patients pay so much for drugs?

The Affordable Care Act (ACA) prevents insurers from discriminating against patients with pre-existing conditions. However, insurance companies have adopted a new practice that achieves the same results: using specialty drug tiers to charge excessive amounts out‑of‑pocket (even for normally low-cost drugs) as a way to keep sick patients off their plans.

A pair of Harvard studies analyzed this trend and its effects for consumers. They reported that insurers sought to make some medications “disproportionately expensive” and the practice would have a “discriminatory effect of discouraging individuals in need of specific medications from enrolling in these plans or of shifting the burden of the cost back to these enrollees.”

In New York and Florida, insurers were the subjects of lawsuits and state investigations after allegations of discrimination were uncovered.

Looking at insurance companies’ own data for health plans sold in the ACA marketplace in 2016, for every $1 increase in premiums for medical spending, just 17.5 cents are caused by prescription drugs. In terms of overall health expenditures, prescription drugs account for only 14%.

Insurers won’t tell you that drugs are a tiny fraction of their own costs. In fact, private insurance companies spend almost as much on administrative costs as they do on prescription drugs.