Drug Benefit Cost Trend Starts to Rise

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Drug Benefit Cost Trend Starts to Rise
Calendar08 December 2014

This article from Kaiser Health News breaks some troubling but not unexpected news: American spending on medications has increased 12% in 2014, after five years of increases averaging 3.6% annually. While there a few reasons for this spike in cost -- innovative new cancer therapies, the expansion of coverage due to the ACA and a slowdown in brand-name medications becoming generics -- a “bubble of innovation around hepatitis C” is the primary cause. The new hepatitis C drug Sovaldi costs $1,000 a pill and another, Harvoni, costs $1,125 a pill, or $94,500 for a 12-week course. These drugs have such an impact on drug costs because so many Americans -- 3 to 4 million -- are infected and eligible for this treatment. Many employers and other payers have been caught by surprise by the cost impact of these drugs. In Mercer’s recent survey, employers did predict that drug benefit cost would grow at a faster rate at their next renewal than at their last, reversing the downward trend of the past several years. However, large employers predicted an increase of just 6%, which may fall short of their actual increase. About two-fifths of large employers (42%) attempt to steer employees to a specialty medications at a specialty pharmacy, either with lower cost-sharing or by excluding certain drugs from non-specialty pharmacies. While experts predict cost growth will normalize by 2016, higher drug costs are the new reality and employers need a long-term strategy to prevent more surprises.

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