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Prescription drug costs are rising more slowly. Employers will spend about 12% more this year than last, continuing a steady decline from 2001, when the hike was nearly 20%. The slowdown is likely to continue, with increases of 9% in 2008 and 8% in 2009. "But I don't expect the percentages will go lower than that," says Ed Kaplan, national health practice leader at The Segal Company, a benefits consulting firm.
More generic drugs and changes in plan design are the biggest reasons for the slowdown. Also, employers are getting a larger share of rebates from their pharmacy benefit managers, the firms that handle drug plans. In the past, benefit managers would get rebates from drug manufacturers of 8% to 9% and pass on only 1% to 2% to employers. Now it's about 5% to 6%.
But while the near-term future is promising, there's a long-term threat: expensive biotechnology drugs. Spending on these specialty medications
will continue to go up by about 15% a year, and their share of employer prescription spending will climb from 20% this year to 26% by decade's end. These drugs, which require special handling and close supervision and monitoring of patients, are used for more and more diseases, including some cancers, hepatitis C, rheumatoid arthritis and HIV/AIDS. The process for making these drugs, which involves using living cells, is much more expensive than that used to produce chemically based medicines.
These specialty drugs have no generic equivalents, though that may change soon. A provision allowing for generic biologics has a good chance of being included in a larger bill beefing up drug safety and funding for the Food and Drug Administration that will clear Congress in the fall. Generic biotech medicines could save $71 billion over 10 years, with $3.5 billion of the savings occurring the first year, according to a study by Express Scripts, a pharmacy benefit manager.
In the meantime, employers can hold down costs by requiring prior authorization of biotech drugs. Such close attention can help keep the price lower and produce better results. For example, if a growth hormone is prescribed, prior authorization can make sure it is not being prescribed for antiaging or weight reduction, but to treat retarded growth in children. Such authorization also can reduce patient complaints by having someone explain side effects and offer suggestions on how to avoid or minimize them.
In addition, employers can limit choice when there are multiple drugs in one therapeutic category. And they have better bargaining power with drug makers if they agree to a narrow offering in a certain class of drugs. Firms can back up these decisions by making the patient pay the difference if he or she chooses another medication over the preferred one. For example, seven growth hormones are now on the market.
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POSTED BY: Michael D. Miller, M (May 18, 2007 09:32 AM)
While payers will use prior authorization and formularies to control spending on all types of medicines, generic-type equivalents for biologic-based medicines will not achieve the type of savings promoted by Express Scripts – primarily because they will not be available as soon as many people estimate, nor will they be adopted as swiftly and widely. Other estimates for potential savings from so-called "bio-similars" are much lower and the relatively neutral Congressional Budget Office has not yet calculated any savings (or costs) for legislation to enable the FDA to actually approve these types of follow-on biologic type medicines. In addition, economists’ estimates are almost certainly overstating any potential savings because clinicians will likely be reluctant to freely switch patients from a proven biologic medicine to something that is supposed to be similar - but may have subtle differences. Thus, when scientific progress does enable the FDA to be convinced that follow-on, bio-similar biologic medicines are as safe and effective as the original biologic medicine, (something that cannot technically be done right now), and then Congress changes Federal Law to allow FDA to approve these bio-similar medicines, physicians (and patients) will likely be relatively slow to adopt these near-copies. This can only lead to the conclusion that any significant savings are not a few years away, but rather decades away.
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