Driven by the developmental and retail costs of specialty drugs and a less-than-robust generic drug market, pharmaceutical price increases will move into the double-digit range by 2016.
That’s what an analysis of cost factors by Aon Hewitt forecasts. The results emerged from an actuarial analysis of medical trend cost information from various sources, from client experience, government sources and carriers to third-party sources, Aon Hewitt said.
Without plan design changes to counter pharmacy cost increases, Aon Hewitt predicts a 9.5 percent in 2015, a 10 percent increase in 2016, and a 10.5 percent in 2017.
“Medical cost increases over the past few years have offset some of the higher pharmacy costs in the short-term, but for 2015 and 2016, there will be more pressure than relief on pharmacy cost,” said Tim Nimmer, global chief actuary for Aon Health. “This is primarily due to high price inflation for brand and specialty drugs, a slowdown in blockbuster drugs losing patent protection, generic dispensing rates leveling off, and the robust pipeline of specialty drugs including the new Hepatitis C treatments. If left unmanaged, these issues could have a significant impact in pushing these increases even higher.”
Aon Hewitt said companies can consider some of the following actions to address this scenario:
- Adjust pharmacy design components to encourage the use of generic drugs, including the use of coinsurance rather than copays for brand drugs and the introduction of mandatory generic and step therapy programs.
- Ensure medical vendors and/or pharmacy benefits managers (PBM) have programs in place to manage costs, such as prior authorization and care management.
- Implement effective compound drug management strategies.
- Have a specific budget for the specialty drug spend and design specialty benefits to ensure that members will receive the right specialty medication through the most appropriate setting and that appropriate measurement criteria are in place to measure the effectiveness of the benefit and better control spend.
- As alternative therapies enter the market, work closely with PBMs to develop strategies for managing associated costs.
- Because pharmacy rebates have increased significantly, companies should conduct regular rebate reporting and evaluate market competitive pricing to ensure current pricing terms remain competitive.
“The dramatic increase in specialty costs means that implementing strategies to promote generic utilization, 90-day prescriptions and member adherence in non-specialty categories is more important than ever,” said John Malley, leader of Aon Hewitt’s Innovation Pharmacy Team. “On the specialty side, PBMs have been aggressively negotiating rebate contracts with manufacturers to keep the total cost of these medications in a range employers can reasonably absorb. Employers should continuously monitor their pharmacy pricing, either through discussions with their current PBM or a competitive bid process, to ensure they are receiving the full value of these improved rebate contracts.”