Tuesday, April 12, 2011

Insights from the new Express Scripts Drug Trend Report

The 2010 Drug Trend Report from Express Scripts (NASDAQ:ESRX) just hit the streets.

I strongly recommend you download this must-read (and free) resource. PBM drug trend reports are invaluable resources for understanding patient behavior, pricing, utilization, and therapeutic competition.

Below, I pluck out a few key economic factoids from this 125-page report. Here's one shocker: Specialty drug trend was an eye-popping 19.6%, especially when compared to the mild 1.4% trend for traditional drugs.

Later this week, I’ll discuss what this latest trend report says about Express Scripts’ future strategy.


This report provides loads of data-based insight about changes in drug trend—the per-member, per-year (PMPY) change in prescription drug costs. Trend reflects both changes in average prices and changes in utilization. A plan sponsor expects a PBM to control trend without compromising the quality of healthcare.

Express Scripts computes trend based on “a random sample of approximately four million members who had prescription-drug coverage in both 2009 and 2010.” Thus, the results may not reflect the results of any individual plan. The 2010 sample is bigger than last year’s report, which used two random samples of three million people.

"Cost" includes ingredient costs, taxes and administrative fees minus rebates. This broad measure includes member costs, the plan sponsor’s costs to use a PBM, and the actual net pharmaceutical costs. It's a more accurate representation of how third-party payers see drug spending than simply looking at drug list prices.


Specialty trend was 19.6%—more than 14X the 1.4% trend for traditional drugs! Now you know why managing specialty trend has become such a hot topic.

Here’s how Express Scripts breaks down the factors behind drug trend:

Specialty drug trend grew because more people are taking specialty drugs (“Prevelance”) and prices keep rising for these drugs (“Cost/Unit”), which lack generic alternatives. See Exhibit 12 (page 28) for a look at the top 10 specialty drug therapeutic categories. Specialty trend is forecast to grow more than 25% per year (page 91), an increase from last year’s forecast.

Traditional drug trend was so low because of a low blended Cost/Unit increase due to generic substitution and a shift to lower-cost medicines within therapeutic classes (“Mix”). The report notes that traditional generic medications declined in price by 10.2% while traditional brand medications increased in cost by 9.7%—an absolute difference of nearly 20%. See Exhibit 11 (page 27) for a look at the top 15 traditional drug therapeutic categories.

Express Scripts forecasts that trend for traditional drugs will grow between 1% to 5% over the next three years (page 86). Trends for therapies related to high blood cholesterol or blood pressure will even have negative trend due to generic substitution.


Believing is seeing. Here’s the proof in these comments from around the web:

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