Drug Trend vs. Drug Spend While many health care costs are decreasing—for example, hospital stays and outpatient surgery—there continue to be significant increases, both in the total dollars spent annually on prescriptions (drug spend) and the rate of the increase (drug trend). Americans are spending more money on health care than ever before—despite having access to the finest and most sophisticated medical care in the world. Pharmaceuticals and prescription drugs are driving those costs, accounting for 12–20 percent of each dollar spent by an employer on health care. High spending and rapid increases can be attributed to several causes: Direct-to-consumer advertising is placing the burden on the provider to prescribe requested medications, despite cost or efficacy. An accelerated FDA approval process is resulting in numerous new and expensive treatment options. More than a third of drugs approved during the past decade offer significant therapeutic and quality of life advances, with modest side effects. As a result, physicians are quick to prescribe them and consumers quick to try them. The advent of drug therapy/intensive disease management programs is increasing utilization and cost. Many of the newly approved drugs prolong lives, therefore extending the amount of time consumers use costly drugs. For example, many conditions previously thought untreatable, like AIDS, leukemia and some types of cancer, are responding well to prescription therapy. And drugs have also been developed to stunt the progression of diseases that formerly advanced swiftly—like multiple sclerosis, cystic fibrosis and heart disease. An increasing elderly population is requiring more frequent and expensive drugs to treat chronic and acute health conditions. Some 33% of prescription drug expenditures are for people over 65. While many employers are concerned about the rising cost of prescriptions, the costs can be justified compared to the alternatives. The development of new drugs, although expensive, saves employers and providers millions of dollars in hospitalization and other more expensive treatments. Consider the following: When new drugs ended the building of iron-lung centers for polio sufferers, the indirect cost savings were $31 billion. Before antibiotics, tuberculosis patients spent three to four years in a sanitarium—which would cost more than $70,000 a year today—with a 30–50 percent likelihood of death. Since 1965, innovative medications have helped cut deaths from emphysema by 57 percent and deaths from ulcers by 72 percent. Drug "cocktails" used to treat HIV and AIDS average about $16,000 a year per patient, but the cost of treating advanced AIDS in the hospital can be as much as $100,000 annually. While prescription drugs can work wonders, they become concerns when they are overused, underused or misused. For example, antibiotics are prescribed often for ailments ranging from allergies to the common cold—and are ineffective in treating either. The consumer would receive greater benefit from over-the-counter medications and traditional R&R in these instances, instead of a prescription. On the flipside, patients who take their prescriptions haphazardly, skipping doses or combining drug regimens without their doctor's supervision, can render their treatment ineffective or deadly. Estimates claim that only half of prescriptions are taken as prescribed, and the cost of drug misuse has been as high as $76 billion a year. The bottom line is prescription drug costs can be managed without sacrificing quality or patient health. Careful planning and benefit design, data and trend analysis and good communication—with providers, physicians and members—is the key. Prescription drug costs will continue to rise as new medications and treatments are approved and placed on the market, and prescription benefits will become increasingly important as part of a managed care plan. Arxcel can work with your organization to analyze and improve your existing pharmacy benefit program or create and design a custom benefit that stays above the bottom line.
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