Rx Plan Cost Trend Projections Decrease, but Remain in Double-Digits

New York (10/3/17) —  The projected cost trend for prescription drugs in 2018 is still high, but not as high as last year.

According to the 2018 Segal Health Plan Cost Trend Survey, trend rates for both actives/early retirees and specialty drugs are projected to decline by 1 percentage point next year. Dampening that good news, however, is the fact that both of these trends are once again projected to be in the double-digits. 

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“The high prescription drug trend rate continues to put financial strains on all plan sponsors,” said Ed Kaplan, Senior Vice President and National Health Practice Leader for The Segal Group. “Managing these costs continues to a high priority for plan sponsors. Over the past two years, many have implemented specialty pharmacy management programs while others have intensified their pharmacy management programs already in place.”

In recent years, increased utilization of generic drugs as alternatives to more expensive non-specialty drugs helped mitigate Rx cost increases, but not enough to quell concern for plan sponsors. Recent examples of soaring drug prices include the highly publicized Epipen, an allergy-reaction injector, and dermatological drugs like Alcortin A®, Aloquin® and Novacort®, combination medications used to treat a variety of skin conditions such as eczema and atopic dermatitis.

While high-cost specialty drugs are a small portion of the all drugs dispensed, they represent a growing share of total drug spending. “Significant increases in drug spending were due to specialty pharmaceuticals to treat rheumatoid arthritis, cancer, Hepatitis C and multiple sclerosis,” said Eileen Pincay, vice president and senior pharmacy consultant at Segal. “The market is now beginning to see increased competition from specialty generics and biosimilars, but those typically do not offer the same level of savings opportunities as generic drug versions.”

Another factor driving prescription drug trends is the increase in drug manufacturer coupon and copayment assistance programs that promote utilization of higher-cost, brand-name medications over lower-cost alternatives by lowering patients’ out-of-pocket costs for those drugs. Plan sponsors and their pharmacy benefit managers have attempted to stop the impact of couponing by increasing the number of prior authorizations on drugs and even excluding certain drugs from their formularies.

Going forward, Pincay says plan sponsors should continue to focus on cost management strategies that steer the consumer to lower cost drugs. “A few good places to start include modifying participant cost sharing to encourage use of generics, customizing drug formularies or moving to formularies with exclusions and putting in tighter controls on Rx prior authorization, quantity limits and step therapy,” she said.

To speak with a Segal expert on the current trends and outlook for prescription drug plans, please contact me.   

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The Segal Group (www.segalgroup.net) is a private, employee-owned consulting firm headquartered in New York and with more than 1,000 employees throughout the U.S. and Canada. Members of The Segal Group include Segal ConsultingSibson ConsultingSegal Select Insurance Services, Inc. and Segal Marco Advisors.

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