Analysis Credits Expanded Use of Generics & Multi-Tier Formularies For 55 Percent Reduction in Rate of Growth of Rx Spending Since 1999

Washington, DC; 12.02.04 — A new analysis of health-care cost trends released today by the Center for Studying Health System Change suggests that an increased reliance on pharmacy benefit management tools â?? including expanded access to generic drugs and multi-tier pharmacy benefit structures â?? has helped to reduce the rate of growth in prescription-drug spending both in the first half of 2004 and more dramatically over the past five years, the Pharmaceutical Care Management Association (PCMA) said today. PCMA is the national association representing America’s pharmacy benefit managers (PBMs).

“While rising costs continue to challenge the entire health care system, one bright spot is the continued reduction in the rate of growth in prescription drug spending over the past five years. These data provide further evidence of the critical role that PBMs’ tools play in driving down prescription drug costs for consumers and purchasers,” said PCMA President Mark Merritt. “This analysis also has important implications for policymakers as they look to construct a workable Medicare drug benefit and rein in Medicaid spending on prescription drugs. The road to reducing prescription drug costs and expanding access goes through PBMs.”

The report released today by the Center for Studying Health System Change (HSC) and funded by the Employee Benefit Research Institute (EBRI) examines overall health spending in the first half of 2004 and its various components, including prescription drug spending trends. The report finds that while “prescription drugs continue to receive much of the blame for rising health care costs in the popular media,” “the reality is that prescription drug spending trends have slowed considerably from the high rates of growth in the late 1990s and early part of this decade.” These findings echo an earlier analysis conducted this year by researchers at the Centers for Medicare and Medicaid Services (CMS). Among the key findings from these data:

PBM cost-containment tools are effective at reducing the rate of growth in prescription drug spending. The analysis suggests that the reduction in the rate of growth in prescription-drug spending over the past five years reflects the increased use of generic drugs; three-tier pharmacy benefit structures; and employers’ and other purchasers’ use of increased copayments and coinsurance.
The rate of growth in prescription drug spending has declined by 55 percent over the past five years. From a peak growth rate of 19.5 percent in the latter half of 1999, the rate of growth in prescription drug spending has fallen dramatically over the past five years. In the first half of 2004, the rate of growth in prescription drug spending stood at 8.8 percent â?? a reduction of 55 percent since December 1999.
The rate of growth in prescription drug prices has been cut in half from a peak in July â?? December 2001. From a high of 6.0 percent in July â?? December 2001, the rate of growth in prescription drug prices has declined markedly over the past three years. For the first half of 2004, the rate of growth in prescription drug prices stands at 3.1 percent.
PBMs administer prescription drug plans for more than 200 million Americans with drug coverage provided through the nation’s small and large employers, Taft-Hartley union plans, health insurers, state and federal-employee benefit plans, Medicare Advantage health plans, and state Medicaid plans. PBMs help drive down the cost of prescription drugs for consumers and plan sponsors â?? on average by 25 percent â?? by negotiating discounts with drug manufacturers and retail pharmacies. These savings are, in turn, passed on to consumers. PBMs also provide consumers with important quality protections, such as disease management and physician and patient education. According to PricewaterhouseCoopers, PBMs are projected to save America’s working families, seniors, and employers $1.3 trillion dollars in prescription drug costs over the next decade.

The new analysis also examines the policy implications associated with rising health care costs. Noting that “little attention is being paid to the most important long-term driver of health care costs â?? new medical technology and its enthusiastic acceptance into mainstream medical practice,” the analysis suggests that a policy agenda focused on greater adherence to evidence-based medicine and increased research on medical effectiveness and technology assessments could help further address the challenge of rising health care costs.

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The Pharmaceutical Care Management Association (PCMA) is the national trade association representing America’s pharmaceutical benefit managers (PBMs). PCMA member companies provide pharmaceutical care management services to more than 200 million Americans.

Contact Information:
Phil Blando
202-207-3614