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Drug Costs for 2003 May Rise 20%

Kate Traynor

A recently released report predicts that price inflation will account for nearly half of the expected 20-percent increase in drug costs for next year.

The 2003 Segal Health Plan Cost Trend Survey report predicted that retail prescription-drug costs will increase by 19.5 percent next year and mail-order costs by 18.9 percent for people under age 65. For people age 65 or older, retail drug costs are expected to increase by 19 percent and mail-order costs by 19.3 percent.

Please note: The Segal Survey pertains only to drug prices outside the hospital setting. In an upcoming article in the American Journal of Health-System Pharmacy, projections for drug-cost increases in hospitals and health systems will be reported. The article will be published in early 2003.


Health Plans Embrace Multitiered Copayments

Multiple pricing tiers for prescription drugs are increasing in popularity among health plan sponsors, according to a report from Tempe, Ariz.-based Pharmacy Benefit Management Institute (PBMI).

In a survey of 461 employer-sponsored health plans conducted for the pharmacy benefit management industry, PBMI found that the use of formulary-based three-tier copayment systems has grown from 7 percent in 1998 to 46 percent last year. On average, people who purchased drugs at a community pharmacy paid approximately $55 for each third-tier product last year, compared with a $26 copayment for second-tier agents and $13 for items in the first tier.

PBMI reported that some employers have moved to a four-tier system, with generic products priced on the first tier, preferred brand-name products on the second tier, nonpreferred brand-name products on the third tier, and lifestyle or other high-cost agents on the fourth tier. Although patients typically pay the entire cost of fourth-tier products, PBMI noted that the prices are discounted through negotiations between the manufacturer and the insurer or pharmacy benefit manager.

According to PBMI, the employers that participated in the survey represent about 11.3 million health-plan beneficiaries.

According to the report, price inflation accounted for 48 percent of the projected total increase, and health plan members' drug-usage rates, which seem to be leveling off from past years, made up 52 percent. The report noted that the increased availability of generic versions of drug products whose patents are expiring should slow the upward trend in drug costs.

Projections in the report were based on data obtained from managed care organizations, insurance carriers, pharmacy benefit managers, and third-party administrators.

Although health plan members do not seem to obtain more prescription drugs overall than in past years, the use of certain drug classes—antidepressants, antihistamines, lipid-lowering agents, and gastrointestinal medications—increased recently, according to Segal. The report said that increases in the prescribing of lipid-lowering agents and antiulcer drugs as preventive health care and physicians' growing reliance of medications as treatments helped fuel the rise in drug costs.

Drug costs also increased, according to the report, because of the success of direct-to-consumer advertising and other marketing strategies that prompt patients to demand prescriptions. Other factors contributing to higher drug costs are the aging of the U.S. population, an increase in the number of people of all ages, and improvements in clinicians' ability to detect and diagnose diseases.