Battle line sharpens with latest Express Scripts Drug Trend Report

For the past two years, Express Scripts has gone well beyond its traditional role in winning rebates from pharma manufacturers and actively managing drug regimens for the patients whose drug-benefit plans it oversees: In 2013 it announced that 48 branded drugs would be on a “formulary exclusion list” for cases where a roughly equivalent generic or lower-cost branded drug was available. Over much of last year it agitated very publicly for a lower cost for Gilead Sciences’ hepatitis C cure, Sovaldi (sofosbuvir), and at the end of the year said it would provide for the newly approved competitor to Sovaldi, AbbVie’s Viekira pack of three drugs in combination--and exclude Sovaldi and Harvoni, the Gilead products. (While the list price of both drugs is quite close, Express Scripts negotiated a more substantial discount from AbbVie, according to press reports.)

Sovaldi is the red flag for Express Scripts to derail the pharma industry’s direction toward high-cost specialty drugs for (mostly) smaller patient populations. On the basis of its cost and the need for following a 12-week regimen rigorously, Solvaldi is a specialty product; on the other hand, it is targeted at upwards of three million patients and garnered $10.3 billion in sales in 2014, rocketing to nearly the No. 1 drug, by sales revenue, in its first full year.

"For the past several years, annual drug spending increases have been below the annual rate of overall healthcare inflation in the U.S., but that paradigm is shifting dramatically as prices for medications increase at an unprecedented and unsustainable rate," said Glen Stettin, MD, a senior VP at Express Scripts, in a press statement for the release of the Drug Trend Report. In that report, Express Scripts states:

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.

(IMS Health, in its Global Use of Medicines study in November, projected US drug spending to rise 5-8% CAGR through 2018, when spending could hit $450-480 billion.)

Overall, Express Scripts found a 13.1% increase in average drug spending among its clients. Clients who used a multipronged benefit-management process from Express Scripts (including such items as the exclusionary list) had essentially zero cost increase during the year, according to the company.

Compounding costs more

A newly identified cost-escalation concern in the Report is the increasing use of compounded medications—those that are formulated for specific patients. “Compounded medications accounted for 35% of the increase in spending, the most of any traditional therapy class of drugs,” says Express Scripts. But it expects this spending to be reined in by the company’s “compound utilization management solution,” which more rigorously controls what ingredients get compounded, and the price of the finished dosage. High-volume compounding pharmacies began operating under a new regulatory regime in 2014, the result of the Drug Quality Security Act passed in late 2013.

PhRMA, the industry trade association, issued its own report on the same day as Express Scripts’. Just as Express Scripts dodged the main question of what mechanism could be produced to develop a “fair cost,” PhRMA dodged the central question of specialty drug pricing. But it reminds the public of “five essential truths” about drug spending:

• Even with the increases in spending, prescription medicines have been, and will remain, 10% of the US healthcare dollar;
• 2014 was an unusual year with 10 million newly insured patients (through the Affordable Care Act);
• Medicines help patients live longer, healthier lives; national life expectancy continues to go up;
• Medicines can play a crucial role in controlling healthcare costs.

A fifth “truth,” that Express Scripts’ analysis trend report focuses only on a subset of medicines and excludes rebates, is accurate in a sense—the forecast “half-trillion dollar” estimate is based on ex-manufacturer costs and not on rebated or negotiated pricing, which PhRMA itself agrees might have knocked $40 billion off the 2014 national pharmaceutical bill of around $377 billion. On the other hand, the Drug Trend Report contains actual expenditures of “trend,” which is a combination of drug pricing and drug utilization by plan members managed by Express Scripts, and which cover approximately one out of four prescriptions written in the US. The Drug Trend report says that the overall 13.1% increase is comprised of a 0.1% decrease in utilization of traditional (nonspecialty) drugs and a 5.8% increase in specialty drugs, plus a 6.4% increase in traditional drug pricing, and 30.9% in specialties. And Express Scripts does note that roughly half of specialty drug spending are billed as a medical benefit not covered by PBMs like itself. (Meanwhile on the other other hand, Express Scripts is aggressively marketing its services to payers to manage their medical-benefit drug coverage.)