Wednesday, March 06, 2013

Insights from the 2012 Express Scripts Drug Trend Report

Express Scripts just released the latest iteration of its long-running Drug Trend Report. Instead of a convenient downloadable report, the report is now a confusing “interactive” web page. (3/20/13 UPDATE: Click here to download the full report.) You can also read the press release.

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.
Express Scripts will be releasing its trend forecasts in a few weeks.


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.
Last year, ESI used “a random sample of approximately four million members who had prescription-drug coverage in 2010 or 2011.” I can’t figure out the sample base for the new report, but I will assume that it’s comparable enough to create the following chart. See if you can spot the trend in the traditional medications data.

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!

1 comment:

  1. Actually, it is even better than this for trend in traditional drugs because this decline does not include rebates. The LOE of so many products drove ingredient costs down, but also gave ESI a lot of negotiating leverage on the "last brands standing" in each therapeutic class. By the same token, increases in specialty trend are overstated as there is clearly an upward trend in the cost of access as well. If there were price protection in any contracts, this wouldn't show up in the drug trend either.