Prescription Drug Spending Growth Rate Down by 68 Percent Since 1999, Lowest Level in Over a Decade

Merritt: Data are ‘Proof Positive’ PBM Efforts Are Working

(Washington, DC)—Increased use of pharmacy benefit management (PBM) tools â?? including formularies, rebates, generic drugs, and mail-service pharmacy â?? in private and public health programs helped reduce the rate of growth in prescription drug spending in 2005 to the lowest level in over a decade to just 5.8 percent, according to new data released today from researchers at the Centers for Medicare and Medicaid Services (CMS).

“PBMs have a played a huge role in helping to drive prescription drug trend to an historic low,” said PCMA President Mark Merritt. “These data are the result of a sustained effort by PBMs to help consumers, clinicians, and payors change the way they think about prescription drugs, particularly with formularies and increased use of generic drugs and mail-service pharmacies. This approach is proof-positive that the prescription-drug cost challenge can be addressed without sacrificing access to needed drugs.”

The Pharmaceutical Care Management Association (PCMA) is the national association representing America’s pharmacy benefit managers (PBMs). PBMs help drive prescription drugs cost lower for more than 200 million Americans with health coverage provided through large and small businesses, health insurers, labor unions, and Medicare.

The new prescription drug data are contained in a report, “National Health Spending in 2005: the Slowdown Continues,” authored by researchers from the Centers for Medicare & Medicaid Services and published in the new edition of Health Affairs. Among the key findings:

Prescription drug-spending growth rate in 2005 slowed to its lowest growth rate in over a decade, rising just 5.8 percent. The 5.8 percent prescription-drug growth rate in 2005 represents a 33 percent reduction from the 2004 growth rate of 8.6 percent and a dramatic decline from 1999 when drug trend was running at 18.2 percent.

The authors cite numerous reasons for the historic slowdown in prescription drug spending:
· Tiered copayment benefit plans and formularies;
· Decreased number of new drug introductions;
· Reduced consumption associated with drug withdrawals;
· A continued shift to use of generic drugs; and
· Continued strong growth in mail-service pharmacy, which helped increase the use of generics.
· The rate of growth of drugs in private health insurance spending fell to 5.8 percent in 2005, much lower than the annual average rate of 16.7 percent rate seen from 1994-2004.

Spending on prescription drugs in Medicaid slowed dramatically in 2005 to just 2.8 percent. As the researchers note, this slowdown in Medicaid prescription drug spending was driven as “states continued to undertake aggressive cost control initiatives, successfully secured higher rebates resulting from increased use of multistate purchasing pools, and changed their formularies to shift beneficiaries to drugs that offered higher rebates.” All of these tools have been pioneered by PBMs in private health plans.

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PCMA is the national association representing America’s pharmacy benefit managers (PBMs), which lower the cost of prescription drugs for more than 200 million Americans with coverage provided through Fortune 500 employers, health insurers, labor unions, and Medicare Part D

Contact Information:
Phil Blando, 202-207-3614
Charles Coté 202-207-3605