This year’s report includes both Express Scripts and legacy-Medco covered lives, so it’s the most comprehensive look at pricing and utilization. Once again, specialty drug trend of 18.4% dominated traditional drug trend of -1.5%.
Yes, you read that right. Spending on traditional drugs declined, for the first time ever. Below, I look at the factors behind these figures and provide some historical context.
Tune in tomorrow, when I look at these trends’ impact on the pharmacy industry.
Per the Methodology page, drug trend measures “the rate of change in plan costs, which include ingredient costs, taxes, dispensing fees and administrative fees.”
Mathematically, trend reflects two primary components:
- Change in Utilization (the total quantity of drugs obtained by plan members)—Utilization varies with changes in the number of plan members on drug therapy, the degree to which plan members are adherent to their drug therapy, and a change in the average number of days of treatment.
- Change in Unit Costs—Unit costs vary with: 1) the rate of inflation in brand-name drugs prices, 2) shifts to different drug options within a therapeutic class, 3) a shift in mix of therapeutic classes utilized by plan members, or 4) the substitution of generic drugs for brand-name drugs.
THE BIG PICTURE
Here’s the summary of the components underlying 2012 commercial drug trend. (Medicare and Medicaid trends are reported separately.)
- Drug trend for traditional drugs fell to a record-low -1.5%, due largely to the growing substitution of less-expensive generic drugs. Utilization increased by 0.6%, but costs decreased by 2.2%.
- Drug trend for specialty drugs was 18.4%, consistent with its high growth rate over the past six years. Utilization decreased by 0.4%, while costs increased by 18.7%. I presume that the decline in utilization reflects payer strategies, as I discuss in How Health Plans Manage Specialty Drugs.
- Specialty spending is concentrated in a few conditions. For traditional drugs, treatments for the top three conditions—diabetes, high blood cholesterol, and high blood pressure—accounted for 30% of total per-member, per year (PMPY) spend. For specialty drugs, treatments for the top three conditions—inflammatory conditions, multiple sclerosis, and cancer—accounted for 58% of total PMPY spend.
For fun, take a trip down memory lane on the new Timeline page. Remember 1997? Pfizer’s Lipitor launched, the Titanic sunk, and generics were a mere 42% of the market. The good ol’ days!