I strongly recommend you download this must-read (and free) resource. (Tip: If you want to download the report to your computer, go to www.drugtrendreport.com, click “Launch Report,” and look for the PDF icon on the menu floating at the top of the screen.) For a comparison with another PBM, see Insights from the new Express Scripts Drug Trend Report.
For Medco's book of business, traditional drug trend was a mild 1.1%, while specialty drug trend jumped 17.4%. Medco does a nice job explaining the data behind these figures. Medco's report also provides all sorts of interesting details, such as Average Wholesale Price (AWP) increases for major brand-name drugs in individual therapeutic areas.
Tune in tomorrow when I look at Medco’s strategy and what it tells us about the future of PBMs. On Thursday, I dig into the differences in reported drug trend among the big 3 PBMs.
Medco defines drug trend to be the percent change in plan pharmaceutical spending from 2009 to 2010 as measured on a per-eligible household, per-month (PEPM) basis. Note that a household could include multiple members who are covered under the same plan.
The sample comprises clients for whom “Medco manages the entire pharmacy benefit,” which translates into 248 clients representing approximately 56% of consolidated drug spending. There is no mention of how many plan members or households are included in the sample. Oddly, the sample used in the previous year’s drug trend report included 201 Medco clients representing approximately 65% of consolidated drug spending.
Plan spending comprises the net cost to plan sponsors less discounts, rebates, subsidies, and member cost share. I interpret this disclosure to mean that cost includes the plan sponsor’s costs to use a PBM.
THE BIG PICTURE
One of a PBM’s primary services for plan sponsors is managing drug trend—the change in prescription drug expenditures of their clients. Plan sponsors want PBMs to help them minimize trend while maximizing the quality of healthcare. After all, plan sponsors are on the hook for the medical costs that result from improper or underutilized drug therapy.
I like the straightforward way that Medco lays out the two key factors that add up to drug trend:
- Change in Unit Costs per Day of Therapy, which is most strongly influenced by the rate of inflation in brand-name drugs prices, the rate of deflation in generic drug prices, and the substitution of generic drugs for brand-name drugs.
- Change in Utilization, which measures the total quantity of drugs obtained by plan members. Utilization varies with changes in number of plan members on drug therapy, the degree to which plan members are more (or less) adherent to their drug therapy, and a change in the average days of treatment.
As you can see, specialty drugs led in both costs and utilization. Medco forecasts that specialty drugs will be about one-fifth of plan drug spending by 2013 and 40% by 2020. Now you know why plan sponsors are interested in trying new strategies.
Here’s a nice summary of the change in costs and utilization by therapeutic category. It shows how the two factors interact for a plan sponsor across a portfolio. Click to enlarge the chart (or see page 14 of the report).
All in all, a nice report with lots of useful data. More to come…