Segal Group Projects Double-Digit Prescription Drug Benefit Cost Trends in 2017

New York (10/3/16) —  Prescription drug benefit cost trends for active populations continue to increase at double-digit rates, according to forecasts in Segal’s 2017 Health Plan Cost Trend Survey.

The prescription drug cost trend for active employees and early retirees is projected to be 11.6 percent in 2017, up from 11.3 percent in 2016. For Medicare-eligible retirees, prescription drug trend is also projected to be high (9.9 percent), but lower than the 2016 projection (10.9 percent). However, the projected specialty drug/biotech trend rate for 2017 is an exceptionally high 18.7 percent, and while typically less than 1 percent of all medications are specialty drugs, survey respondents indicated those drugs now account for 35 percent of total projected prescription drug cost trends for 2017.

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“Given the increasing number of pharmaceutical products now available for conditions that require the use of specialty medications, plan sponsors should consider implementing strategies that manage patients who use these drugs and target their costs,” commented Edward Kaplan, National Health Practice Leader. “This can include utilization-management controls, formulary or preferred step-therapy; tiered copayment structure and aggressive specialty drug contracting terms that maximize client and patient value.”

Segal also found that health plan cost trends have gone down compared to 2016, but continue to significantly outpace inflation and average wage increases more than threefold. While prescription drug cost trend is projected to rise 11.3 percent in 2017 and the popular open access PPO/POS plan cost trend by 7.8 percent, wages are projected to increase by just 2.5 percent.

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“Plan sponsors will need to apply cost-management strategies to bring trends down to more sustainable levels,” added Kaplan. “Each plan sponsor has a unique set of goals and cost drivers, so strategies will vary. The best strategies will directly address plan design, aggressive vendor contracting and measurable population health improvement.”


This is Segal’s 20th annual survey of nearly 100 managed care organizations, health insurers, pharmacy benefit managers and third-party administrators.

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The Segal Group (www.segalgroup.net) is a private, employee-owned consulting firm headquartered in New York and with nearly 1,000 employees throughout the U.S. and Canada. Members of The Segal Group include: Segal Consulting, Sibson Consulting, Segal Select Insurance Services, Inc. and Segal Rogerscasey.

Prescription drug benefit cost trends for active populations continue to increase at double-digit rates, according to forecasts in Segal’s 2017 Health Plan Cost Trend Survey.

The prescription drug cost trend for active employees and early retirees is projected to be 11.6 percent in 2017, up from 11.3 percent in 2016. For Medicare-eligible retirees, prescription drug trend is also projected to be high (9.9 percent), but lower than the 2016 projection (10.9 percent). However, the projected specialty drug/biotech trend rate for 2017 is an exceptionally high 18.7 percent, and while typically less than 1 percent of all medications are specialty drugs, survey respondents indicated those drugs now account for 35 percent of total projected prescription drug cost trends for 2017.

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“Given the increasing number of pharmaceutical products now available for conditions that require the use of specialty medications, plan sponsors should consider implementing strategies that manage patients who use these drugs and target their costs,” commented Edward Kaplan, National Health Practice Leader. “This can include utilization-management controls, formulary or preferred step-therapy; tiered copayment structure and aggressive specialty drug contracting terms that maximize client and patient value.”

Segal also found that health plan cost trends have gone down compared to 2016, but continue to significantly outpace inflation and average wage increases more than threefold. While prescription drug cost trend is projected to rise 11.3 percent in 2017 and the popular open access PPO/POS plan cost trend by 7.8 percent, wages are projected to increase by just 2.5 percent.

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“Plan sponsors will need to apply cost-management strategies to bring trends down to more sustainable levels,” added Kaplan. “Each plan sponsor has a unique set of goals and cost drivers, so strategies will vary. The best strategies will directly address plan design, aggressive vendor contracting and measurable population health improvement.”


This is Segal’s 20th annual survey of nearly 100 managed care organizations, health insurers, pharmacy benefit managers and third-party administrators.

* * *

The Segal Group (www.segalgroup.net) is a private, employee-owned consulting firm headquartered in New York and with nearly 1,000 employees throughout the U.S. and Canada. Members of The Segal Group include: Segal Consulting, Sibson Consulting, Segal Select Insurance Services, Inc. and Segal Rogerscasey.

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