Specialty Drug Costs Continue to Drive Overall Medication Trends

Magellan Health’s Medical Pharmacy Trend Report has gathered and analyzed information from across the United States to determine spending trends and current issues of interest to pharmacy benefit managers.

Their methodology was two-fold. First, they surveyed medical, pharmacy, and network directors from 59 commercial payers providing coverage for about 130 million individuals.

Second, they conducted an in-depth analysis of commercial and Medicare medical paid claims data across all outpatient sites of service, including physician offices, home infusion providers, specialty pharmacies, and hospital outpatient facilities.

The report found that approximately 50% of the $124 billion annual specialty drug spend falls on the medical benefit.

“As specialty drug costs continue to be a leading driver of overall drug trends, it is critical for payors to stay current with the evolving management strategies and marketplace conditions impacting medical pharmacy utilization and spend,” the authors wrote.

Compared with the previous year, this 2015 report brings several enhancements, including:

• Payers share their processes to forecast spending shifts due to biosimilars and other emerging and breakthrough therapies.
• A medical benefit drug forecast projects the impact of newly approved drugs.
• Payers share how they are monitoring oncology treatment quality metrics, soon to be required by the Center for Medicare & Medicaid Innovation Oncology Care Model.

Key findings of the report include:

• Commercial per member per month (PMPM) allowed amounts increased 11% to $23.60, and Medicare PMPM allowed amounts increased 5% to $44.84. Increases were driven by inflation, utilization, drug mix, and shifts in site of service.
• For commercial payers, the top 25 drugs by health plan spend cost $22,423 per patient per year (PPPY) and accounted for 64% of spend. For Medicare, the top 25 drugs by health spend cost $10,551 PPPY and accounted for 69% of spend.
• The top 10 most expensive drugs were not necessarily included in the top 25 by spend. Although they averaged an annual cost per patient of $353,000 for commercial and $271,000 for Medicare, those patients only represented .02% and .04% of covered individuals, respectively.
• Commercial medical benefit drug costs in the hospital outpatient setting often were double those in physician offices. Administrative code reimbursement was often four times more expensive in the hospital than in the physician office.
• Medicare experienced even bigger shifts from physician office settings to hospital outpatient facilities since 2010, especially for oncology drugs and biologic drugs for autoimmune disorders. Medical benefit drug costs under Medicare were often twice as expensive in a hospital setting.

“It’s no surprise that the trends we’ve seen for more than 5 years now are continuing,” said Casandra Stockman, PharmD, vice president of medical pharmacy strategy at Magellan Rx Management. “Fifty provider-administered agents are driving 80% of medical pharmacy drug spend. This trend has been exacerbated by manufacturer price increases and site of service shifts from the physician’s office to hospital outpatient settings, particularly as hospital systems purchase office-based practices. Going forward, we expect to see newer, costly oncology drugs enter the top 25 drug listing, particularly programmed cell death 1 (PD1) and programmed death-ligand 1 (PD-L1) inhibitors.”

The full 100-page report is available for download at www.MagellanRx.com.