Tuesday, June 24, 2014

Drug Trend Forecasts, 2014 to 2016: Express Scripts vs. Caremark vs. Catamaran vs. Prime

In Which PBM Best Manages Drug Trend?, I analyze and compare the 2013 drug trend figures from four of the largest pharmacy benefit managers (PBMs)—Catamaran, CVS Caremark, Express Scripts, and Prime Therapeutics.

Today, let’s look at each company’s drug trend projections for 2014 through 2016. As you can see in the charts below, the PBMs' forecasts are surprisingly different, especially for traditional drug trend. Despite specialty trend methodology disparities, the four PBMs have roughly comparable specialty projections.

Check back next year, and we'll see whose crystal ball was most accurate. In the meantime, remember that even a blind pig finds a truffle sometimes.


As a reminder, here are the data sources:

Despite subtle methodological discrepancies between each PBM’s drug trend computations, I still believe that we can compare the projections.

Drug trend reflects the interaction of cost per drug and total utilization of drugs by the beneficiaries of a PBM-managed plan. Thus, these figures are not directly comparable with the Center for Medicaid and Medicare Services (CMS) total drug expenditure forecasts, which I discuss in The Outlook for Pharmaceutical Spending Through 2022. Notably, CMS includes rebates in its projections, while drug trend represents a gross (pre-rebate) figure.


As you can see in the chart below, there is massive disagreement about the traditional drug spending outlook. CVS Caremark and Prime Therapeutics project increasing trend. Express Scripts predicts a stable, positive trend. Catamaran predicts a stable, but negative trend.

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Here is Prime’s logic for increasing traditional drug trend:
“Prime views 85 – 90 percent as the probable maximum generic rate. At this point, most of the brand name drugs still in use will be under patent protection…Traditional brand-name drugs under patent are likely to cost more as manufacturers try to make the most from them. Heavy competition and small profits could prompt some generic drug makers to drop products or leave the market altogether. This could lead to higher generic drug prices.”
The other PBMs don’t provide much explanation. CVS Caremark doesn’t enlighten us about the factors behind its high traditional forecast. Catamaran implies that its traditional drug trend projections are based on generic dispensing rate of 86.7% to 90.0% by 2016.

Express Scripts expects that “traditional trend will remain relatively stable for the next few years.” Of course, their previous forecasts weren’t so hot, as I note in Weighing Express Scripts’ Drug Trend Forecast Errors, Sovaldi Pricing, and PBMs’ Pricing Control. http://www.drugchannels.net/2014/04/weighing-express-scripts-drug-trend.html


There’s much more consensus on drug trend for specialty drugs, which is expected to remain in the 15% to 20% range.

[Click to Enlarge]

The factors driving this projected increase are price inflation, greater utilization of existing therapies, and the launch of newly approved products. The specialty drug trend outlook is remarkably consistent for Catamaran, CVS Caremark, and Express Scripts. For example, CVS Caremark projects specialty trend to range from 14% to 19.5% in 2016, while Express Scripts forecasts 18.2% trend and Catamaran’s forecast range is 16.0% to 23.6%.

Prime’s 2016 forecast range is 17% to 19%. Notably, its 2014 forecast is much higher than its peers, perhaps due to greater consideration of such new hepatitis treatments as Sovaldi and Olysio.


So, are these forecasts scientific projection, wishful thinking, or random guessing?

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