For the first time, spend decreased for 'traditional' drugs among the commercially insured in 2012, says Express Scripts

As the biggest PBM in the country, Express Scripts (St. Louis) is able to take a comprehensive look at overall pharmaceutical usage and economic trends, and in its 2012 report, finds that spending on “traditional” (i.e., non-specialty) drugs fell by 1.5% in 2012. Specialty pharmaceutical spending, however, grew by 18.4%, resulting in an overall drug trend of 2.7%, “consistent with 2011,” according to the company. The decline in traditional drug spending, among its commercially insured members, is the first that Express Scripts has recorded, since it began conducting its annual study in 1993. However, rumor has it that when the IMS Institute for Healthcare Informatics comes out with its definitive annual report, expected next month, it will show a 1.0% decline in real terms across all pharma sales.

Much of this is to be expected. Between the loss of exclusivity of Plavix (clopidogrel) last year, and Lipitor (atorvastatin) in late 2011, nearly $10 billion in drug sales alone was taken out of the mix; billions more came out of other drug expiries. What is surprising in the Express Scripts data is that generic pricing declined 24%--and this is in a market where prices have been at rock-bottom levels for years. Express Scripts has published a chart showing that since 2008, while the Consumer Price Index has gone from 100 to 108.8, the cost of an unchanged basket of generic drugs has gone from 100 to 57.8, while the cost of an unchanged basket of branded drugs rose from 100 to 165.4. Can generic drug prices possibly go lower, and if they do, will the problems with manufacturing quality that led to the ongoing drug shortages increase?

Adam Fein, industry analyst (and Pharmceutical Commerce editorial board member) notes in his blog that low generic pricing, by its very nature, will constrain future retail pharmacy sales across the board. The effects won’t show up until after 2016 (which, in diametric contrast to the branded patent “cliff” could be called the generic “mountain” to be worked through)—but unless a significant number of biosimilars become available—and can be successfully integrated into retail pharmacy sales—the outlook is grim.

Choice architecture

The Express Scripts report has another buried time bomb in it: limits on the ability of healthcare providers and the pharma industry to have an effective impact on patient wellness. In an outlook section, Express Scripts says that “Patient engagement increasingly is promoted as an effective way to improve quality and lower cost in health care. However, after delving into the science of patient engagement, skepticism is warranted.” The point is more fully developed in a paper, published in the current issue of Health Affairs, “Choice Architecture is a Better Strategy than Engaging Patients to Spur Behavior Change” (Health Aff., 32. No. 2 (2013): 242-249). By “choice architecture,” Express Scripts means a group of incentives, such as opt-out step therapy (rather than opting into it); “active choice” in filling prescriptions by mail (requiring full-price purchasing if mail is not used) and “precommitment” (forcing patients to opt out of lower-cost replacement therapy). The overall effect of these incentives are to compel patients to do what they ought to do, in some cases, to maintain therapy and to reduce costs—but the forced nature of them is obvious. This approach is a stark contrast to the many social-media and other techniques being offered today to engage patients, via mobile platforms especially, to remain on therapy or to better monitor their own health. And there are already signs that some patient-engagement initiatives have an overblown perceived value, such as mobile reminders for getting refills or taking daily dosages.

How this will all play out, especially given the negative economic impact on parts of the healthcare system like retail pharmacy, remains to be seen.