Tuesday, May 04, 2010

Insights from new ESRX Drug Trend Report

The 2009 Drug Trend Report from Express Scripts (NASDAQ:ESRX) is now available. Drug trend reports such as this one provide a unique window into the interactions of patient behavior, pricing, utilization, and competition. I strongly recommend you download this free resource.

This report provides lots of data-based insight about drug spending by Express Script’s clients, a.k.a. "drug trend":
  • Specialty trend was 19.5%—more than 4X the 4.8% trend of traditional drugs. By comparison, the non-specialty trend in 2008 was 1.5% while 2008 specialty trend was 15.4%. See Specialty Spending Soars (for now) for the 2008 numbers.

  • Express Scripts forecasts that trend for traditional drugs will grow between 2% to 5% over the next three years (page 89), while specialty trend is forecast to grow an eye-popping 20% to 23.5% (page 95).
I found the five Key Behavior Types to be an interesting tool for bringing the dry stats to life.

Drug trend reports are essential for understanding the dynamics within the pharmaceutical market. Reports from CVS Caremark (NYSE:CVS), Medco Health Solutions (NYSE:MHS), Walgreen (NYSE:WAG), and Prime Therapeutics should be released over the next two months.

2009 TREND

“Trend” takes into account both utilization and costs, so the information provides a much more realistic picture of the market than simplistic “list price” summaries like the misleading AARP/University of Minnesota reports. You even get market share by product for all major therapy classes. (See the therapy class reviews on pages 23-87.)

Here's a summary of the underlying components behind trend. The terms are defined at the bottom of page 10.

Thus, the overall trend for traditional (non-specialty) drugs was 4.8%. Cost/unit drove spending higher by 5.3% while the introduction of new generic drugs (“patent expirations”) reduced trend by -2.4%.

The contribution to trend varied significantly between different therapy classes (page 11). For example, the trend for high blood cholesterol drugs was only 0.8%, while the diabetes drug trend was 9.8%. Diabetes is now the second-most costly therapeutic category for Express Scripts’ clients.

The top three specialty therapy classes—inflammatory conditions, multiple sclerosis, and cancer—represented 67% of specialty drug spending. Drug trend in these three categories was 17.7%, 34.4%, and 23.1%, respectively (page 12).


There is a fascinating discussion buried at the back of the report (pages 106-107) about the Medical benefit vs. Pharmacy benefit challenge. Express Scripts claims to be “the first PBM to provide strategic solutions for complete Specialty drug management across both pharmacy and medical benefits.”

They estimate that specialty costs were split 55% Medical/45% Pharmacy in 2008. For more on this topic, see last month’s post The Medical vs. Pharmacy Benefit Muddle.


Other bloggers have also written about this report. I recommend George Antwerp’s Enabling Healthy Decisions blog. George helped put together this report from 2001-2006 when he worked at Express Scripts, so he’s got an (ex)insider’s perspective on the data.


  1. AnonymousMay 04, 2010

    Thanks for the mention Adam. It's nice to have a second blogger looking at the PBM space.

    My review of the new drug trend report is here. Your link is going to last year's report.


  2. Thanks, George. I updated the link above.

  3. AnonymousMay 04, 2010

    Very nice summary.

    I read the section on page 106/7 that you pointed out. Am I correct in assuming that Express Scripts plans to control the spend of buy-and-bill physicians? If so, how will they deal with the wholesalers who already control this business?

    Thank you.

  4. AnonymousMay 12, 2010

    Hi Adam

    I'm new to this post. Just a couple of questions to you.

    1)You mention that independent pharmacies are actually quite profitable. can you then explain why we are losing retail independents in our rural communities? Is there a different dynamic in these areas that just don't support the smaller business?

    2) Re: The ES Trend Report- what do you see as limitations to their assumptions that by changing behavior, if they only could, they will have their assumptions realized? Aren't there data that say as you increase medication utilization that you increase the risk of serious adverse drug events? Also, RAND Corp. has studied this quite well and their conclusions are that you can improve outcomes but not necessarily lower costs due to increase in treatment costs and increase in life expectancy. The actual target to control costs ins in the late-life stage of the Medicare beneficiary. I'd appreciate your insights.