CVS Health Drug Trends

Drugs have been the bad boy category of health spending for the last few years, driven by high specialty drug prices.  According to CVS Health, it cut the rate of growth in drug spending for its pharmacy benefit management clients in 2015 dramatically, to 5%, compared to 2014’s growth rate of 11.8%.  (CVS Report)   Price inflation was the primary driver of spending growth, as opposed to utilization.  Those price increases were predominantly found in traditional medications as opposed to specialty ones.  According to CVS’ calculations, which might be constructed in a manner to promote its own value, non-specialty brand prices rose 7.6%,  specialty drug prices rose 2.8%, generic prices rose .7% and utilization grew 1.3%; but the magic of “PBM management” contributed at 7.4% spending decrease, leading to the net 5% growth.  Hyperinflation, or price increases of more that 100% affected a few products and led to .7% of total inflation contribution to trend.

Generic dispensing was over 80% of all prescriptions.   Per member per month costs were $110.87 for a formulary in which patients could opt out of requirements, $94 for the standard formulary, and $74.35 for the value formulary, which limits network and product access.  Careful management is critical for drug spending containment and some of these techniques are under assault by regulators, who appear not to understand that you can either spend less on drugs or have much higher premiums, but you can’t remove cost management techniques in regard to medications and have lower premiums.  It is encouraging that a well-managed PBM program appears to be able to keep drug spending growth at a high but more tolerable level.