Double digit drug price increases exceeding the rate of inflation have become the norm. According to the OneRx National Drug Index released earlier this year, in 2015 the cost of branded drugs was up by 14.77%; specialty drug prices jumped 9.21% and even generic drugs cost 2.93% more than the previous year.

However, pharmacy benefit managers are negotiating with suppliers and developing other strategies to help employers deliver more affordable drug benefits. EBN talked to Steve Miller, chief medical officer at Express Scripts to discuss the key drivers of growing drug costs and how the PBM is helping employers manage the escalating price of pharmaceuticals.

[Image credit: Bloomberg]
[Image credit: Bloomberg]

EBN: What are the primary drivers of drug cost increase in 2016?

Miller: Traditional drugs will continue to have a very small contribution to the total increase in drug costs. It’s really all about the specialty drugs that drive the increase in drug cost year over year.

EBN: Why have traditional drug costs leveled off?

Miller: There are two main reasons. There have been very few introductions of new traditional drugs and many new drugs are specialty medications. Also, there continues to be a fair amount of competition between the traditional drugs that helps to keep prices under control.

EBN: What should employers keep their eye on in the traditional drug category this year?

Miller: In the traditional drug category, the biggest push is going to be around diabetes drugs. There are many new agents coming along, including longer acting forms of insulin and combination products. Also, the first biosimiliar for insulin is going to become available.

EBN: How do you define specialty drugs and why are they so expensive?

Miller: We look at these as high-cost items that usually require special handling, almost always require special education, and a higher level of patient monitoring These are the drugs that we use for cancer, rheumatoid arthritis, multiple sclerosis, transplantation and other diseases. This is where all the new drug development is taking place and prices can be extremely high. Also, year-over-year price inflation can be anywhere from 10% to 20%.

EBN: What impact has the introduction of new hepatitis products had on the employer drug spend over the last several years?

Miller: The introduction of new hepatitis products in 2014 and 2015 has obviously been an enormous benefit to society because for the first time we could effectively treat Hepatitis C. But as a result, on average, plan sponsors saw a 3% jump in their drug spend for this product alone.

EBN: Going forward, what do you think the biggest drug cost challenge will be for plan sponsors?

Miller: It’s probably going to be around the new cancer agents. If you look at 20 years ago when the average cancer agent came to the marketplace, it cost about $100 a month. The average now for a new cancer drug that comes to the market is $10,000 a month, or over $100,000 a year.

EBN: Your Safeguard Rx program currently addresses challenges related to hepatitis, cholesterol and oncology care. How does this program help to manage drug costs cost for plan sponsors?

Miller: Safeguard Rx has really been well-received by our clients. For example, a couple of years ago we first came up with the hepatitis care value program. We were able to negotiate dramatic manufacturer’s discounts for hepatitis drugs. In fact, we got the discount so low that we now recommend treating for all patients, regardless of the stage of the disease.

By using our own specialized pharmacy Accredo that has a therapeutic resource center with nurses, pharmacists and social workers specializing in hepatitis, we could also offer an adherence guarantee. So we were able to tell employers if the patient doesn’t take the drug for all 84 days as required, we'll refund anything they’ve paid up to that point in time. In addition, for those patients that need longer therapy, we have capped the cost of the drug.

I can tell you a year later we have had adherence rates over 95%. For those patients that have been adherent, we have cure rates over 96%, and in 2015 we’ve saved our patients and our plan sponsors a billion dollars. We took the success of that program and more recently added programs designed specifically for cost management of cholesterol and cancer drugs.

EBN: You noted the very high rate of inflation for specialty drugs – often from 10% to 20% a year. How are you helping plan sponsors manage these cost increases?

Miller: To address this portion of national drug spend that has continued to challenge payers, we launched our Inflation Protection Program. Beginning Jan. 1, 2016, Express Scripts will shield participating plans from the full cost impact of year-over-year price increases on brand drugs.

We look at a plan sponsor’s membership and guarantee that inflation for all drugs and all brand new products will stay under a certain level. If it goes above that level, we will cover the amount for the plan sponsor.

EBN: How have plan sponsors and manufacturers reacted to the Safeguard RX drug cost management programs you have developed?

Miller: Plan sponsors are really excited by the whole suite of Safeguard Rx programs including the inflation-protection component. It also sends a message to the pharmaceutical manufacturers that our plan sponsors will get behind us when we recommend something. So when we move market share like we did in hepatitis, that’s what brought the cost down.

The fact that we have now over 15 million members signed up for our oncology care value program also informs manufacturers that our plans are going to allow us to be more active in managing this category, and we think that that’s going to have a very important effect in the price of oncology products going forward.

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