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February 2, 2017

Specialty drugs driving up health care costs

Bunte, farbenfrohe Medikamente - Tabletten, Pillen, Kapseln


Prescription costs for Pitt members of UPMC Health Plan will be “far below national trends” again next year, John Kozar, assistant vice chancellor for Benefits, told the Jan. 25 meeting of the Senate benefits and welfare committee.

Pharmacy costs for Pitt employees have increased less than 4 percent for each of the last 10 years, Kozar said, which has been below inflation rates across the past decade. Inflation in the drug industry is projected to be 8 percent next year.

In fact, medication prices have grown tremendously in recent years, explained Chronis Manolis, vice president of pharmacy and chief pharmacy officer for UPMC Health Plan, and are expected to continue to rise.

In a presentation to the committee, Manolis said the UPMC Health Plan covers 17.3 million prescriptions a year for its 1.3 million members.

At Pitt, 22 percent of the University’s health care costs are pharmacy expenses.

Pharmacy costs are growing twice as fast as other medical spending, “driven a lot by specialty drugs,” Manolis noted. He expects a 7-9 percent growth in 2016-17, three times overall inflation and higher than for other medical expenses.

“I can’t think of another industry where this is happening, and there is no alternative” to purchasing some of these drugs, especially the more costly, one-of-a-kind new specialty medications.

Among traditional drugs, those for diabetes are far and away costing consumers and health plans nationally the most money, he said, but traditional drugs account for only 20 percent of pharmacy spending overall. Specialty drugs are responsible for the remaining 80 percent of prescription spending, based on pharmacy industry data.

Tops in this category are drugs for inflammatory conditions, from eczema to Crohn’s disease. Second are medications to treat multiple sclerosis (MS), which is Pitt’s and UPMC’s overall top drug category. Third nationally are oral oncology agents, followed by drugs to treat hepatitis C and HIV/AIDS.

Even generic drugs are increasing their prices, Manolis said. From 2008 to 2015, 42 percent of generics went up 10 percent or more while 17 percent of generics doubled or more in price.

And generics’ usage has peaked, he says. While 87 percent of all prescriptions filled today are generics, nearly 70 percent of the dollars earned in the pharmacy industry come from brand-name drugs. And by 2018, half of all pharmacy costs will be driven by specialty drugs.

Thus, specialty drugs are driving all our pharmacy costs as consumers and insurers, he noted, even though, for instance, only 2-3 percent of UPMC Health Plan members use specialty medications.

This situation has caused drug manufacturers to put much of their research dollars into specialty drugs, trying to develop medications for diseases where there are many patients but few or no treatments, or where there are only less-than-optimally effective treatments. These include Alzheimer’s disease (5.4 million patients nationally); cancer (14 million); high cholesterol (71 million); and hepatitis C (3.2 million).

“We don’t want to stifle innovation,” he said. “But how do we afford it?”

He labeled some drug prices “irrational,” and said such pricing is unfortunately a trend, begun three years ago by the drug Sovaldi, developed for hepatitis C, which costs users $1,000 a day.

“It’s really unsustainable,” Manolis said of such pricing. While Sovaldi has a 95 percent cure rate, it must be taken every day for three months, at a total $100,000 cost.

“These drugs are fantastic, but they can break the bank if we treat everyone,” he said.

The fourth cause of drug cost rises is simply price gouging, led most recently, and infamously, by Mylan’s EpiPen, which went from $100 a dose in 2009 to $600 in 2016. Manolis predicts diabetes drugs may be “the next EpiPen.”

While such hyperinflation among specialty drugs is bad, Manolis blames inflation among nonspecialty drugs as the main driver of increased cost burdens for Pitt and other UPMC Health Plan members. Nationally, the average nonspecialty drug wholesale cost is $522 today versus $116 in 2005. Generics on average cost $37 today versus $19 in 2005.

“There’s not a lot we can do” about such pricing, Manolis allowed. “We have to have those drugs.” Manufacturers “are able to get away with it. No one’s really watching. They raise prices together as a group.”

“The good news in all of this?” he added: “We used to have three MS drugs, now we have 10. We can really use the competition to lower our prices.”

Good news also may come in the form of biosimilar drugs currently being developed, which have gained FDA approval. They are biologically similar but not exact, or generic, copies of existing medications. Insurers and physicians still need to understand how patients might manage to switch to biosimilars without affecting their health, since they may act differently than current medications, and how co-pays will be priced.

Manolis noted that UPMC Health Plan is switching from an emphasis on volume, in which pharmacists are paid per prescription filled, and instead seeking the most valuable prescription for each patient.

He also expects massive chain pharmacy mergers in the offing, such as Rite Aid with Walgreens, will give pharmacies more power to negotiate better prices with manufacturers.

“Any time drug costs are up, people want to push it back on the members,” he said. Instead, “let’s go attack the clinical and quality side … because there are a lot of cost savings in there.”

In fact, he added, a surprising driver of increased pharmacy costs is inappropriate use or even wasting of drugs. “This is the one that drives me crazy,” he said, citing national estimates that over-use of medications costs $70 billion a year and under-use costs $100 billion.

“We are not going to fix this in a day,” he concluded. “But this is what we need to fix.”

He said that UPMC increasingly is consulting physicians and pharmacists on what might improve this situation, and that among its college and university members Pitt’s pharmacy costs are lower than average: Pitt’s UPMC Health Plan members spend 13.5 cents of every health care dollar on 8.4 prescriptions per year, both numbers lower than the average institution of higher education that UPMC handles.

Manolis credits Pitt’s lower numbers to “the health of the population, access to specialists and access to care,” as well as increased use of wellness programs.

Kozar noted that even a $5 increase in employee co-pays for prescriptions would not help Pitt tackle increased pharmacy costs that much because it would not amount to a large-enough offset of Pitt’s health care expenditures.

Instead, Pitt’s new emphasis on wellness programs could be the solution: “You keep someone who is pre-diabetic from becoming insulin-dependent, you’ve got a win,” he said. Giving employees incentives to be healthier “is the only way we’re going to curb costs anymore.”
—Marty Levine

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