Retirement plan sponsors are the first, and most important, line of defense in providing employees with well-managed retirement savings plans.
It’s no secret that healthcare costs are on the rise. In fact, they have consistently risen over the last several years, with employee benefits comprising nearly 1/3 of total employee compensation-spending, according to the U.S. Department of Labor. In this blog post, we take a deep dive into the 2019 Drug Trend Report to offer insight into the cost of prescription drugs in today’s market.
The Express Scripts 2019 Drug Trend Report analyzed prescription drug data from 2019, including trend and various cost drivers. In 2019, drug spending increased by 2.3%—roughly half the growth witnessed in 2015. This was largely driven by the company’s collective actions to slow spending. Their clients also adopted solutions to manage their pharmacy benefits, which drove a decrease in drug spending for more than 1/3 of their commercial plans.
Overall drug trend reflects two factors—the changes in drug utilization and unit cost, per member per year (PMPY). Plan sponsors can analyze the leading contributors to overall drug trend, and use each factor to manage costs within their own plans.
Utilization
Utilization of traditional medications accounted for 52.3% of the total amount spent on prescription drugs in 2019, and the price for generic medications continued its downward trend, with prices for the most commonly used generic medications dropping by 40.9% since 2014. This is the result of programs that drove better discounts and shifted share to more cost-effective generics and plan-preferred medications. Utilization of specialty medications rose from 44.7% in 2018 to 47.7% in 2019, and accounted for nearly half of all spending on prescription drugs.
On an individual plan level, higher utilization—though it is a cost driver—can actually lead to long-term cost savings. Failing to follow physicians’ orders could result in more complicated and costly medical problems in the future. Therefore, employers should encourage plan members to fill prescriptions and take their medications as prescribed.
Related Reading: How Your Company Can Offset the Rising Cost of Employee Benefits
Therapy Class Trends
Inflammatory Conditions
Inflammatory conditions drove more than 40% of the trend in spending for commercial plans, making it the biggest driver of spending in 2019. Drugs used for inflammation include those that target rheumatoid arthritis and other auto-immune conditions. This trend was driven by a shift to newer, more expensive brand drugs, which are the only ones currently available on the market. New formulations for drugs targeting inflammatory conditions may impact the market in 2020.
Diabetes
Spending on diabetes medication rose by 5.2% from 2018, driven primarily by a 3.2% increase in utilization for commonly used generic medications. Diabetes is no longer the top driver of spending for commercial plans, but it is the second biggest driver of spending of the therapy classes. This utilization trend is expected to level off next year, as authorized generics will be allowed to enter the market. The total trend could increase slightly in 2020, the result of higher drug prices, as insulins will be considered biologics starting in March.
Oncology
The third biggest driver of spending for commercial plans was oncology, with drugs being used to treat multiple myeloma, lymphoma, and breast and lung cancers contributing to a 7.2% higher unit cost and a 3.6% higher utilization rate. In 2020, this trend is expected to rise slightly due to increased utilization and pricing of oral drugs. Some relief is forecast for 2021, when generic medications for two major brands become available.
HIV
Higher utilization and higher unit costs for recently approved brand-drugs and pre-exposure prophylaxis therapy resulted in an 8.1% spending increase on HIV medications in 2019. Generics for two brand-name medications are going to be made available next year, which is expected to lower the unit cost trend and raise the utilization rate.
Pain and Inflammation
2019 saw a 15.5% reduction in unit cost in prescription drugs associated with pain and inflammation, resulting in an 18.8% reduction in spending on these drugs. This reduction is partly attributed to lower utilization of medications in this therapy class due to concerns over opioid abuse. Multiple generic medications were made available for pain and inflammation in 2019, which is expected to further reduce unit cost of these drugs in 2020.
Today and into the future, employee benefits programs are helping employers manage their health benefits plans. So when you think about employer-sponsored benefit plans, consider re-thinking your approach to benefits compared to what has been traditionally offered. When you do, you’ll find many opportunities to attract and retain highly qualified and satisfied employees along the way.
Source: Adapted in part from Express Scripts 2019 Drug Trend Report.
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