Monday, July 06, 2015

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

I’m taking a break from blogging this week and rerunning some popular posts from early 2015. Click here to see the original post and comments from March 2015.

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. RERUN NOTE: 2015 update here.


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.

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