Drug Costs Buoyant but Should Sink

June 4, 2002 (PLANSPONSOR.com) - The bad news from a national survey of prescription drug benefits was that 2002 drug spending is expected to jump 15.9% due both to higher prices and stepped-up usage.

But the good news is the survey released by Express Scripts, a pharmacy benefits manager, is that that rate represents a decline from last year’s 16.9% hike. Still better news, Express Scripts predicts drug spending should continue falling in years ahead, according to a Reuters news report.

The prescription drug cost growth rate should be down to 13.5% by 2005 due to increased use of less expensive generic equivalents and slow introduction of new products from drug companies. 

Never miss a story — sign up for PLANSPONSOR newsletters to keep up on the latest retirement plan benefits news.

Wholesale Prices Jump

The average wholesale price of prescription drug spending per member per year is expected to reach $686.19 in 2002, up $94.14 from the $592.05 reported in 2001, said Express Scripts, which manages prescription plans for more than 50 million members.

In this year’s first quarter, drug spending surged by 19.3% from higher prices and use of more expensive new drugs, but the gains decelerated from a 19.8% rise a year ago, Express Scripts said.

In the 2001 Express Scripts Drug Trend Report, about 56.8% of the increase in total spending came from higher prices and use of more expensive medications.

Increased utilization accounted for 37.3% of the 2001 increase, while the introduction of new drugs in 2001 accounted for 5.9% of the increase, Express Scripts said.

As patents expire on drugs, generic competition will lead to prices falling for some drugs. However, an aging population is expected to increase utilization over the long-term, driving the average wholesale price increases to about 13.5 % by 2005 and 2006.

In 2001, prescription drug spending was focused on a limited number of drug classes.

Top Ten

More than 50 cents of every dollar spent on prescriptions went for drugs in just ten of 99 therapeutic categories:

  • antihypertensives
  • antidepressants
  • cholesterol reducers
  • astrointestinal drugs
  • antidiabetics,
  • antirheumetics
  • antiasthmatics
  • antihistamines
  • calcium channel blockers
  • dermatologicals

Medicines used to treat ulcers, depression and high cholesterol levels accounted for 25% of all prescription drug spending in 2001 and also 28% of last year’s total spending increase, Express Scripts said.