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Report: Hepatitis C and Compounded Medications Drive Increase in Drug Spending

Annual specialty drug spending jumps 46% for Medicare plans

New hepatitis C therapies with high price tags and the exploitation of loopholes for compounded medications drove a 13.1% increase in U.S. drug spending in 2014 –– a rate not seen in more than a decade –– according to new data released March 10 in the 2014 Express Scripts Drug Trend Report.

Hepatitis C and compounded medications are responsible for more than half of the increase in overall spending. Excluding those two therapy classes, the 2014 drug trend (i.e., the year-over-year increase in per-capita drug spending) was 6.4%.

Specialty medications –– biologic and other high-cost treatments for complex conditions, such as multiple sclerosis and cancer –– accounted for more than 31% of total drug spending in 2014. As Express Scripts predicted last year, specialty drug trend more than doubled in 2014, to 30.9%. Hepatitis C medications accounted for 45% of the total increase in specialty spend despite having the second lowest prescription volume among the top 10 specialty conditions. Medicare plans –– required to follow Medicare Part D formulary guidelines –– were the hardest hit, as their annual specialty drug spend increased by 45.9%.

“For the past several years, annual drug spending increases have been below the annual rate of overall health care 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, Senior Vice President of Clinical Research and New Solutions at Express Scripts. “Now, more than ever, plans need to tightly manage the pharmacy benefit, implement smarter formularies, control compounded medication use, and offer the right clinical support to ensure all patients are able to achieve the best possible health outcomes at a price our country can afford.”

The U.S. spent nearly eight times more on hepatitis C medications in 2014 than it did in 2013, according to the Express Scripts data.

New treatments for hepatitis C are just one example of non-orphan drugs with orphan-drug price tags, the company says. Future pharmaceutical innovations, such as new cancer drugs and PCSK9 inhibitors for high blood cholesterol, will continue to challenge payers. Potentially reaching a patient population eventually as large as 10 million Americans, PCSK9 inhibitors alone could one day cost the U.S. health care system an estimated $100 billion per year, Express Scripts warns.

A sub-analysis in the Drug Trend Report found that, compared with payers with fewer managed pharmacy plans, payers that implemented four or more cost-management programs spent nearly 30% less per member on traditional (non-specialty) medications, those that treat common chronic conditions, such as diabetes.

A similar analysis showed that the annual increase in specialty spending was 32% less for employers with a tightly managed specialty pharmacy benefit compared with employers with an unmanaged benefit. The study –– which examined 851 clients, 20% of whom employed no utilization management programs for specialty drugs –– also showed that tightly managed programs resulted in higher average medication adherence rates in top specialty therapy classes, such as multiple sclerosis and pulmonary conditions.

Spending on traditional classes of medications continues to rise as a result of compounded drugs, which emerged in the top 10 traditional therapy classes for the first time, the report says. Despite having the lowest number of prescriptions among the top 10 classes, compounded medications accounted for 35% of the increase in spending, the most of any traditional-therapy class of drugs.

Additional key findings include the following:

  • Drug-maker consolidation and drug shortages led to increases in per-capita spending for traditional drugs, which rose to 6.4% in 2014.
  • Diabetes remains the leading traditional therapy class for a fourth straight year, based on total costs; Express Scripts expects double-digit increases in spending in this class during the next 3 years because of once-weekly oral and injectable drugs in the pipeline.
  • The cost for medications to treat pain increased 15.7% in 2014, partly because of new tamper-resistant formulations for opiates.
  • Treatments for inflammatory conditions, such as rheumatoid arthritis and psoriasis, maintained their position as the costliest specialty drug class because of expanded indications and the increased prevalence of treatment.

Source: Express Scripts; March 10, 2015.

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