Growth, Price Inflation Challenge Medicare

Mar 10, 2015
Brand medication inflation and sky rocketing specialty spend significantly impacted 2014 Medicare trend.
Tags
  • Medicare
  • Anticoagulants
  • Cancer
  • Depression
  • Diabetes
  • Hepatitis C
  • High Blood Cholesterol
  • High Blood Pressure/Heart Disease
  • Seniors

Findings from the 2014 Express Scripts Drug Trend Report reveal Medicare MA-PD and PDP plan sponsors confronted challenges from significantly increased spending and a growing population – two million additional beneficiaries enrolled in Medicare last year, bringing the total to 37 million – all while maintaining affordability, improving quality and remaining compliant with Centers for Medicare & Medicaid Services (CMS) requirements.  

Medicare plans spent $2,987.36 per member in 2014, a 13.8% increase from 2013. Medication costs are almost solely responsible for this accelerated trend: unit costs increased 13.3% in 2014 while utilization remained relatively flat at 0.5%.

But perhaps the greatest challenge for plans was specialty medications: Medicare’s annual specialty drug spend increased 45.9% in 2014 – significantly greater than the more modest 14.7% increase seen in 2013, or the unprecedented 30.9% annual increase experienced among Commercial plans.

In light of these findings and future guidance from CMS, what strategies should plan sponsors prioritize going into the 2016 bid season? First, let’s understand the factors driving these trends.

Hepatitis C Medications Drive Medicare Specialty Spending

Specialty medications represent only about 25% of total Medicare drug spend, but the record increase in spending greatly affected overall trend. The biggest specialty trend drivers were oncology, multiple sclerosis and hepatitis C; together they contributed 57.8% of total specialty spend.

The well-documented challenge brought on by new hepatitis C medications, a therapy class that was not even in the specialty top ten in 2013, resulted in Medicare plans experiencing a 1,067.5% annual increase in hepatitis C spending. 

Unable to swiftly employ utilization management programs, such as prior authorization or formulary placement prior to receiving CMS approval, Medicare plans were unable to manage the costs of these new medications as they entered the market as efficiently and aggressively.

As a result, plan sponsors spent an average of $102.83 per member per year (PMPY) on Sovaldi® (sofosbuvir), Olysio® (simeprevir) and Harvoni® (ledipasvir/ sofosbuvir) in 2014 – more than the per member per year (PMPY) cost for the entire class of inflammatory drugs that treat more common conditions such as rheumatoid arthritis and psoriasis. Sovaldi and Olysio together are responsible for 11.7% of total Medicare specialty drug spend in 2014.

Top 10 Medicare Specialty Therapy Drugs Ranked By 2014 PMPY Spend 

Spending on cancer medications increased 37.2%, driven by a substantial 24.6% increase in use and a 12.6% increase in unit cost. Expanded indications for several cancer drugs, continued development of new, more targeted therapies, and an increase in the survival rates of patients living with cancer who continue medication therapy, all contributed to the increase in utilization.

Components of Trend for the Top 10 Medicare Specialty Therapy Classes Ranked By 2014 PMPY Spend

Diabetes Drives Traditional Medication Spending

Spending on traditional medications – those which treat conditions such as high cholesterol, diabetes and depression – increased 6.4%, similar to the increase seen among commercial plans. Medications to treat diabetes, high blood cholesterol and pain/inflammation contributed 33.6% of total PMPY spend for all traditional medications used by Medicare beneficiaries in 2014.

Spending on diabetes medications increased 26.4% in 2014, largely due to popular medications that experienced double-digit increases in cost. Medicare plans spent more on diabetes ($358.93 PMPY) than any other traditional therapy class.

Traditional anticoagulant medications experienced a 60.2% increase in spending last year due to significant increases in cost and utilization for new therapies Xarelto® (rivaroxaban) and Eliquis® (apixaban), which offer greater convenience compared to warfarin and specialty injectable anticoagulants.

However, spending on traditional medications did benefit from significant generic fill rate (GFR) increases for high blood pressure/heart disease medications and depression treatments of 96.2% and 97.4%, respectively.

Components of Trend for the Top 10 Medicare Traditional Therapy Classes Ranked by 2014 PMPY

Planning For 2016

On top of these market pressures, Medicare plans must continue implementing new strategies to maintain Star Ratings success as CMS ends the Quality Bonus Payment demonstration. Applying smarter pharmacy strategies into plan designs and formularies can help plans reduce drug spending increases.

  • Proven utilization-management tools for hepatitis C, such as prior authorization criteria, can help manage high risk and/or high cost medications.
  • Aggressive formulary management strategies, such as continued movement from 3 tiers to 4 or 5-tier formularies and the use of closed formularies can also help mitigate the risk of these new therapies. Of course, all formulary strategies that we are counseling our Medicare plans on now must maximize value while continuing to protect access to care and remaining fully compliant with CMS expectations.
  • Leverage the benefits of Express Scripts and Accredo clinically specialized Therapeutic Resource Centers (TRCs), which deliver superior treatment outcomes and cost effectiveness by supporting patients through the challenges of complex and costly diseases. Compared to other specialty pharmacies, patients who fill these new hepatitis C therapies through Accredo have 50% greater therapy completion rates.

A full therapy class review, impact of drug trend by market (MAPD, PDP, EGWP), Star Ratings trends and other reflections on 2014 landscape shaping Medicare plan decisions are available in the 2014 Express Scripts Drug Trend Report.

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