Tuesday, March 17, 2015

Express Scripts New Trend O’ Drugs Report: Price Without Value

Last week, Express Scripts released its new 2014 Drug Trend Report. Click here to download the complete report. (Free download.)

As always, there are valuable data here on drug trend (the change in a third-party payer’s prescription drug expenditures). Below, I analyze the highlights for traditional and specialty drugs, including the impact of new hepatitis C therapies.

In one of his plays, clever Irishman Oscar Wilde defined a cynic as “a man who knows the price of everything and the value of nothing.” After reading this report, I wonder if Express Scripts has become a wee bit too cynical about the value of pharmaceutical innovation. Read on and see if you agree.


Drug trend—the gross change in prescription drug expenditures of commercial third-party payers—equals the sum of the following two components:
  • Unit costs: the payer’s cost per unit of therapy. Unit costs vary with: 1) the rate of inflation in brand-name drug prices, 2) shifts to different drug options within a therapeutic class, 3) a shift in mix of therapeutic classes utilized by plan members, and 4) the substitution of generic drugs for brand-name drugs.
  • Utilization: the total quantity of drugs obtained by plan members. Utilization varies with: 1) changes in the number of plan members on drug therapy, 2) the degree to which plan members adhere to their drug therapy, and 3) a change in the average number of days of treatment.
The Express Scripts drug trend figures exclude manufacturer rebates, so an individual plan sponsor could experience trend results that differ significantly from these published averages. Note that other PBMs measure trend differently, as I discuss in Which PBM Best Manages Drug Trend? Express Scripts vs. Caremark vs. Catamaran vs. Prime.


Here’s the report’s summary of 2014 commercial drug trend components. (Medicare and Medicaid trends are reported separately; PMPY = per member, per-year)

[Click to Enlarge]

My observations:

Compounded Drugs Drove Traditional Trend: Unit cost for traditional drugs jumped to 6.5% in 2014, compared with 1.9% in 2013. For the first time, Express Scripts included a separate Compounded Drug category. In 2014, unit cost for these products rose by an astounding 128.2%. Excluding compounded drugs, traditional drugs’ unit cost would have risen by only 2.4% and traditional trend would have been 2.3%.

Previous drug trend reports didn’t discuss these products. In fact, the words compounded drug didn’t even appear in last year’s report.

Diabetes Forecast Errors Continue: Diabetes was the single largest spend category, accounting for 10% of total pharmacy benefit spending. Diabetes trend was 18.0%, due primarily to a 16.3% increase in unit costs. In last year’s report, Express Scripts had projected that diabetes trend would be 11.2% in 2014, a forecast error of 61% [= (18.0-11.2%)/11.2%]. Last year’s forecast error was comparable, at 57.3%. See Weighing Express Scripts’ Drug Trend Forecast Errors, Sovaldi Pricing, and PBMs’ Pricing Control.

Note that these diabetes figures are gross, pre-rebate trends. Net payer trend was likely much lower for diabetes products.

Specialty Growth Accelerates: As the table above shows, specialty trend was a record 30.9%, far surpassing last year’s commercial specialty trend of 14.1%. Utilization growth more than doubled to 5.8%. Unit cost grew 25.2% in 2014 compared with 11.6% in 2013.

Hepatitis C Drove Specialty Trend: It’s not surprising that 2014’s blockbuster hepatitis C treatments—Sovaldi® (sofosbuvir), Olysio® (simeprevir) and Harvoni® (ledipasvir/sofosbuvir)—had a disproportionate impact on specialty trend. For this therapy class, total trend was 742.6%, with utilization up 76.1% and unit cost up by 666.6%. Despite this growth, I compute that hepatitis C drugs accounted for only 3.9% of total pharmacy benefit spending.

Express Scripts projects that hepatitis C trend will moderate to 66.5% in 2015. However, this gross, pre-rebate figure overstates actual trend growth. We already know that rebates will be as much as 50% off list. See What Gilead’s Big Hepatitis C Discounts Mean for Biosimilar Pricing.

Oddly, the Express Scripts report complains about the “staggering” cost of hepatitis C drugs, which page 5 states to be “more than $33,000 per 30-day prescription.” However, if you make it to page 31, you will discover that the average (pre-rebate) cost of a 30-day hepatitis C prescription was $16,373. Once rebates are included, payers’ costs will be even lower. Blimey!


This year’s drug trend report contains a lot of overheated rhetoric about the “exorbitant” cost of drugs, but omits any consideration of new therapies’ value to patients and the healthcare system. For example, Express Scripts complains about hepatitis C drug prices, but fails to acknowledge the value of avoiding a liver transplant or living without a deadly disease.

Here is Express Scripts’ half-hearted endorsement of breakthrough medications:
“Rewarding pharmaceutical breakthroughs is undeniably important to the discovery of future treatments and cures; however, payers and patients have limited resources and simply cannot afford these prices. Absent more fair drug pricing, payers will face half a trillion dollars in prescription drug costs as soon as 2020.”
I have no idea what Express Scripts considers to be “fair” drug pricing. But I do know that highly-effective specialty therapies reduce medical spending.

Indeed, the report doesn't even mention non-pharmacy costs, which do and will account for 90% of U.S. healthcare spending. See CMS Forecast: Big Drug Spending Growth, But Hospitals and Doctors Will Still Capture Most Healthcare Spending.

I wish this year’s drug trend report was more balanced and included patients’ perspectives, such as this February 4, 2015, story from The Kansas City Star:
Sallie Wickens’ life followed a death-defying narrative that traced the medical arc of hepatitis C:
A blood-transfusion infection after a car accident in 1959, when she was 5; a positive test for the virus when she was 30; 10 years of deteriorating health; a debilitating course of interferon drug treatments that didn't work; a liver so damaged she needed a transplant. And then…
Last month her doctor, hepatologist Laura Alba, walked into an exam room at St. Luke’s Hospital and gave Wickens, 60, a big smile.
Six months after she finished taking a new drug called Sovaldi, along with an old antiviral, ribavirin, Wickens remains free of the virus.
“You are cured,” Alba told her.
It wasn't the luck of the Irish that cured Ms. Wickens.


  1. Adam,
    The tone of the report is simply ESI playing to it's customer base. What segment of the health care marketplace creates the most value? I don;t think it's PBMs.

  2. All sort of excuses are being made by pharma companies and by PBMs to justify high prices. In a mutually subsidized and patent protected system pharma companies are charging the highest price they can get from the customers. Patients want to live and extend their life, no one wants to die. This sentiment is being exploited to the hilt and excuse given is high drug development costs which are inefficient. No one want to look at why costs are running away. They are like government contract "cost plus".

    Sovaldi for hepatitis C is being sold in Nepal for $7.00 per tablet, $3.57 in Egypt and for $10.00 in India in US with Gilead's blessing. US price is vs. $1000.00 per tablet. No one wants to challenge the pricing disparity. This is suggestive that even PBMs are playing along.

    It is time that reverse calculations be done to what is the reality and where the profits are. Patients in the developed countries are being extorted. Linked article shows how reverse calculation can be done.

    A Blueprint for Improved Pharma Competitiveness

    When is the extortion going to stop. Greed is the driver at every level.

  3. Adam- First, I believe you meant to point to page 31 as the source of the lower per prescription cost of Hep C treatments. However, I read the data to be for the entire year, while sovaldi, harvoni and olysio only accounted for 50% of the hep c market for 2014. Hence, the $16,373 figure per prescription included much cheaper therapies such as ribavirin and was also lowered by the absence of the three blockbuster drugs in the first half of the year. Is this reading of the data correct, or am I looking at it wrongly?

  4. Yes, it should have read page 31 (instead of 33). Now corrected. Thanks.

    Sovaldi launched in December 2013, so it would have been included throughout 2014. Since both figures are per prescription (not PMPY), the source of the discrepancy is unclear. I'll follow-up with Express Scripts and post any response.

  5. Silo mentality. As long as no one looks anywhere outside of their silo, no solutions will develop. re. Hep C, they did look outside their silo, saw how much it cost to have the disease and priced the cure at the same dollar value. Interesting way to price something.

  6. ESI initially stated they were going to build a broad coalition of payers and plans to fight evil Gilead on Sovaldi pricing. Yet, they look to have flown alone on the AbbVie contract. What happened there? Not to mention ESI's preferred coverage criteria for AbbVie's product throws open the door for all HCV patients to be treated immediately. How does that manage cost for its clients who could incur all of their HCV drug costs all at once? And antagonizing the market leader to the point where all of ESI's clients have and will pay full boat for Harvoni therapy seems another failure to serve its clients. Not ESI's finest moment....

  7. HI Dr. Fein,

    I agree with you that it is easy to see the perspective of Express Scripts in their Drug Trend forecast. They are definitely taking the perspective of the payer. However, it is disappointing to me that you seem to discount that perspective totally as sour grapes. I appreciate your story at the end about a patient being cured of their hepatitis C. You are right: the hepatitis C drugs are a major advance. However, you could also tell the story of the patient who had a 25% increase in their insurance rates, largely due to break the bank type drugs like Sovaldi. Their insurance goes to a plan with a 50% co-insurance for specialty medications. The patient develops cancer and ends up declaring bankruptcy over the cost of their medications while dying of cancer. Sovaldi and Harvoni are major breakthroughs. They are also egregiously overpriced. Maybe they bring value but most of that value is 20-30 years from now and the insurance premium increases are happening now – to everybody. I think blame can be shared by everyone in the US healthcare system – the government, payers, PBMs, and providers. However, the drug companies seem to be the ones with the most predictable and bankable margins – so I know who I find most at fault!

    Galen Goertzen, PharmD, BCACP

  8. Agree with your recent piece on Express Scripts. You could argue that one of the reasons they fixate on pricing is that for them "value" as represented by the absence of a liver transplant in Hepatitis C patients is not something easily monetized.

  9. Adam, solid overview as usually. I'd like to amplify your last point. PBMs only focus on drug spend, not the medical benefit of a drug. This is a broken and irresponsible view of the PBM in my opinion. Even the MCOs that operate their own PBMs allow the PBM to manage cost, not care. The Pharmacy and Medical directors do not speak and and not aligned with the exception of HMO and VA models. I have hope that this trend will start to reverse as Health Systems get into the MCO and PBM space as many of them are starting to do and replace the ineffective PBM model as it relates to broader healthcare. Thanks again for your analysis.