2009 Medco Drug Trend Report: Specialty Medications Begin to Drive Spending

Pharmaceutical CommercePharmaceutical Commerce - May 2009

While drug spending by clients averaged 3.3% last year, higher spending growth is predicted for the next three years

Pharmacy benefit manager (PBM) Medco Health Solutions’ annual Drug Trend Report summarizes utilization, cost and product mix for the company’s 60 million consumes, who received 586 million prescriptions from the company, representing about a fifth of the national pharmaceutical market. Medco reported a unit cost of 0.4% in 2007—its lowest on record—but that jumped to 4.4% in 2008. (Unit cost is the average cost of drugs dispensed by Medco; together with the utilization rate and product mix, it equals the drug “trend,” or cost of a prescription drug benefit by the insurance plans that hire Medco.)Medco expects drug trend to increase by 3-5% in 2009, 4-6% in 2010 and 5-7% in 2010. This is occurring despite multiple cost-cutting trends:

Generic prescribing reached 64.1% in 2008 (up from 59.7% last year), and drugs with $34 billion in sales in 2008 potentially going generic during the next three years.

Drug utilization actually dropped by 1.1% for Medco clients in 2008—but the hardship caused by the economic downturn was only part of the reason, believes Medco. Other factors are conversions of prescription drugs to OTC (which would take them out of the pharmacy benefit system) and restrictions or withdrawals of some therapies, such as hormone replacement or anemia.

“Safety issues and a transition to over-the-counter medicines had more to do with lowering utilization than either an unhealthy economy or a healthy population,” says Dr. Robert S. Epstein, Medco’s chief medical officer. “An aging America, combined with an obesity epidemic, has led to a surge in chronic conditions such as diabetes, high cholesterol, hypertension and heart disease. Until we successfully tackle this public health crisis, patients and payors will continue to see rising health care costs.” Counterposed against these trends are growth in both cost and utilization of specialty pharmaceuticals, and the introduction of genetic testing (personalized medicine) for some therapeutics. Specialty drug spending rose at a rate of 15.8% in 2008, up from 2007’s 12.4%, and represented 12.8% of total pharmacy spending, up from 11.4% the year before.

Medco analysts took a stab at the potential effect of biosimilars, which they noted could moderate the cost of protein-based therapeutics (which tend to be specialty drugs). Legislation has already been introduced in the US Congress (the Waxman bill); if an approval pathway were created, “the first biosimilar product could come to market within a year or two after the pathway is approved.” Further: “This new wave of biosimilars will rise slowly after 2012 and continue to build to 2020.”

Specialty projections

Medco defines specialty drugs as those that are covered under both a pharmacy and a medical benefit (and thus could be billed to the health insurance plan or to the pharmacy benefit plan). Medco’s data pertain to billing under the pharmacy benefit; it also notes that the trend is for the benefit to be shifting from medical to pharmacy. Specialty drugs had both a double-digit increase in unit cost, and the utilization grew by 4.3% in 2008—far in excess of the 1.1% decline of overall utilization. Fig. 1 shows the top drivers of specialty drug trend; this is the “percent contribution to trend” column at the left. The trend growth for each therapeutic class is a multiple of utilization and unit cost (and thus is not a simple sum of the two), but the two factors influence the trend. Thus, unit-cost growth was a far more significant factor in 2008 for multiple sclerosis over utilization, unlike most of the other classes.

Another dimension of Fig. 1 is that the data are shown as in relation to 2007. Both unit costs and utilization declined for anemia—primarily due to the release of the FDA public health advisory on using drugs like Aranesp, Epogen or Procrit. The case for hepatitis represents something of a success story: the current best therapy, a combination of a pegylated interferon and ribavirin works very well for about half of patients, but for the other half, retreatment is not now recommended; thus, unit cost went up, but utilization was down, as was overall drug trend..

Medco also analyzed how specialty drugs affected the top trend-driving therapeutic classes in conjunction with non-specialty drugs (Fig. 2). The highest-growth class—diabetes—was driven exclusively by nonspecialties. By contrast, the second-fastest growing class—rheumatological—was primarily driven by specialties, particularly Enbrel and Humira; nonspecialties actually shrank the class by 0.1%. Other classes with significant specialty contribution were cancer & transplant, selected neurological (mostly multiple sclerosis drugs like Copaxone and Tysarbi), anticoagulant & antiplatelet, and respiratory (mostly drugs for pulmonary arterial hypertension, and asthma).

Protocol-driven care

Looking ahead, Medco expects that healthcare information technology (HIT), better care of chronic conditions, protocol-driven healthcare, e-prescribing and improved patient adherence will improve pharmacy operations for itself and for healthcare generally. All these trends come together in Medco’s Therapeutic Resource Centers, which are groupings of specially trained pharmacists that coordinate care with physicians by monitoring the patient’s treatment progression, raise warnings for possible drug interactions, and ensure that relevant protocols have been followed for diagnostics, exams and tests.

Medco has now developed 14 of these


• Diabetes

• Cardiovascular

• Pulmonary/immunology

• Neurology/psychiatry

• Gastroenterology

• Oncology

• Rare diseases and specialty

pharmacy medications (eight separate therapeutic areas)

Once a patient is entered into the program, a “health action plan” is devised, and gaps between recommended practices are defined and measured. Direct interventions with physicians and with patients then seek to close these gaps.

Medco claims significant success in improving patient care and, ultimately, lowering healthcare costs, through its interventions. A survey across several chronic diseases shows reductions in a number of gaps (Fig. 3). Significantly, some of these interventions result in higher drug use, such as treatment with statins for certain diabetes patients. An analysis of a 600,000-member cohort showed a reduction in overall costs of $700 per patient over a two-year period, mostly through improved adherence.

Sticking a finger in the eye of its primary channel competitor—retail chain pharmacy—Medco did a study of diabetes patient care through its Diabetes Therapeutic Resource Center and an average of five national chains. Across the board—including such criteria as getting scheduled blood sugar (A1C) testing, medication adherence, and reduced emergency room visits—Medco claims statistical advantages ranging from two or three to as many as 19.3 percentage points. “This real-time approach to the care of chronically ill patients is a significant step forward in improving clinical outcomes and reducing healthcare spending,” says Medco. PC

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