Second drug spending report predicts double-digit increases coming

CVS Caremark

In case anyone missed the latest forecast, drug prices were up last year and are going to continue to grow, perhaps at double-digit rates in some cases. The outlook comes from the second pharmacy benefits management report to be released in three days, this one from CVS Caremark ($CVS) following Express Scripts' ($ESRX) missive on Tuesday.

The CVS Caremark report describes a "prescription drug trend," which factors in drug price, drug utilization and brand/generic drug mix. In 2013, the trend was up only 0.8% for "traditional" drugs but grew 3.8% when specialty drugs were factored in. It projects much greater growth over the next four years.

Of course, there is a mirror image for pharma in the trends that benefit managers warn of in dire terms so that clients might appreciate their services more. In fact, the CVS Caremark study reads more like a sales tool for its services than a report on the state of the industry. Even so, its forecast is similar to that which Express Scripts projects. Pushing the drug trend is the fact that the generic pipeline is dwindling over the next few years and that prices and utilization are up. That means more cost for the nation's healthcare payers but higher sales, and presumably more profits, for drugmakers.

One reason that spending grew last year, the report suggests, is that an improving economy is leading more people to buy more drugs. The report also points to both greater use and higher prices. While the numbers in the two reports differ, they agree that one of the main reasons spending will be up is because of more spending on specialty drugs. It gives very wide spreads for its trend projections, forecasting that the overall trend will increase 6.5% to 12% this year and then 7% to 13% the next three years, propelled by specialty drugs. It projects spending on specialty drugs being up roughly 15% to 20% over all four years.

The Express Scripts report, which looks at the trends on a per patient spending basis, said specialty spending rose 14% to $240.57 last year and accounted for more than a quarter of total drug spending. It pointed out that since specialty drugs accounted for just 1% of all U.S. prescriptions, that's a big chunk of the drug spending bill in this country.

Like the Express Scripts report, the CVS report says that spending on hepatitis C treatments will be the big factor in growing specialty drug use. Express Scripts suggested that spending on the new interferon free hepatitis C treatments, like Gilead Sciences' ($GILD) Sovaldi, will grow by as much as 1,800% between 2014 and 2016, as it and other disease-curing new hep C treatments get wide use in the large population of Americans with the chronic disease.

Express Scripts is even trying to put together a force of resistance to use of Gilead Sciences' Sovaldi among payers, claiming this week that Sovaldi's $84,000 cost for a 12-week course will overwhelm the nation's ability to pay. But doctors who treat these patients are pushing back. Physicians attending the annual PhRMA meeting agreed with with Gilead's argument that by curing patients, and so eliminating the need for many of them to get liver transplants, the drug will save payers in the long run, not to mention cure people of a horrible disease.

- here's the announcement
- read the CVS report (PDF)
- and the Express Scripts report