Introduction
The pharmaceutical market has undergone significant changes in recent years, driven by various factors including advancements in technology, shifts in patient demographics, and evolving regulatory environments. This article delves into the market dynamics and financial trajectory of prescription drug spending, focusing on key trends, drivers, and management strategies.
Overall Prescription Drug Spending Trends
From 2016 to 2021, prescription drug spending in the U.S. exhibited a steady increase. Total expenditures on prescription drugs grew from $520 billion in 2016 to $603 billion in 2021, representing a 16% increase. This growth rate was consistent with the overall national health care spending growth, with prescription drugs maintaining approximately an 18% share of total health care expenditures[1].
Retail vs. Non-Retail Drug Spending
The market can be segmented into retail and non-retail drug spending. Retail drug expenditures accounted for roughly 70% of prescription drug spending, while non-retail drugs made up the remaining 30%. Between 2016 and 2021, retail prescription drug spending increased by 13%, while non-retail drug spending saw a more significant rise of 25%[1].
Retail Drug Spending
The increase in retail drug spending was primarily driven by a 7% rise in spending per prescription, rather than an increase in the number of prescriptions filled. This suggests that higher drug prices and changes in the drug mix were key factors contributing to the growth in retail drug expenditures[1].
Non-Retail Drug Spending
In contrast, non-retail drug spending was driven by a 19% increase in the number of prescriptions, along with a 5% increase in spending per prescription. This indicates that greater utilization of non-retail drugs was the primary driver of increased spending in this segment[1].
Specialty Drug Spending
Specialty drugs have become a significant component of prescription drug spending. Between 2016 and 2021, specialty drug spending increased by 43%, reaching $301 billion in 2021. Despite a minimal 0.5% increase in the number of specialty prescriptions, the spending on these drugs rose substantially due to higher prices and increased utilization in non-retail settings[1].
Retail Specialty Drugs
In the retail sector, the number of specialty prescriptions increased until 2019 but declined in 2020 and 2021. However, the share of retail drug spending on specialty drugs still increased by 22% over the five-year period[1].
Non-Retail Specialty Drugs
Non-retail specialty drug spending saw a 20% increase in the share of spending and a 40% increase in the number of prescriptions. This growth was driven by higher utilization and spending per prescription in non-retail settings[1].
Impact of COVID-19
Despite the COVID-19 pandemic, there was little impact observed on prescription drug spending trends. However, delayed care and diagnoses during the pandemic may lead to a rebound in specialty drug utilization and spending in the future[1].
Drug Utilization Review (DUR) Programs
Prospective DUR
Prospective DUR involves electronic monitoring of prescription drug claims to identify potential issues such as therapeutic duplication, drug-disease interactions, and incorrect dosages. These programs are crucial for ensuring patient safety and optimizing drug therapy[2][5].
Retrospective DUR
Retrospective DUR involves periodic reviews of claims data to identify patterns of inappropriate use, overuse, or underuse of medications. This helps in addressing issues like therapeutic appropriateness, adverse events, and misuse or abuse of drugs[2][5].
Educational Programs
Educational programs are an integral part of DUR, aimed at improving prescribing practices and patient medication compliance. These programs involve ongoing outreach to practitioners to address common drug therapy problems[2].
Managing Drug Trend and Costs
Drug Trend Calculation
Drug trend is calculated as the percentage change in total drug costs from one year to the next. It is broken down into unit cost trend and utilization trend. Unit cost trend reflects changes due to inflation, discounts, and drug mix, while utilization trend indicates changes in the total days’ supply of medication dispensed[4].
Specialty Drug Management
Specialty drugs, despite being used by less than 2% of the population, account for a significant 51% of total pharmacy spending. Managing specialty drug trend involves strategies such as formulary management, utilization management, value-based programs, and network optimization[4].
Strategies for Managing Pharmacy-Billed Specialty Drugs
- Formulary Management: Directing patients to clinically comparable, lower-cost alternatives.
- Utilization Management: Ensuring appropriate therapy and dosing.
- Value-Based Programs: Reimbursing for events like early discontinuation of therapy.
- Copay Solutions: Reducing patient out-of-pocket costs.
- Network Optimization: Routing therapies to the lowest-cost channel[4].
Economic Implications of Drug Development
The economics of drug development are influenced by scientific advancements and the focus on precision medicines. The development of drugs for small patient populations, such as orphan drugs, results in higher prices due to the significant value created for these patients. This shifts the optimal pricing strategy and research and development investments[3].
Key Takeaways
- Prescription drug spending increased by 16% from 2016 to 2021, driven by higher spending per prescription and increased utilization in non-retail settings.
- Specialty drugs saw a 43% increase in spending, with significant growth in non-retail settings.
- DUR programs are essential for ensuring the appropriate use of medications and improving patient safety.
- Managing drug trend involves addressing unit cost and utilization trends, with a focus on specialty drug management.
- Economic factors, including the development of precision medicines, impact pricing and innovation in the pharmaceutical market.
FAQs
What is the primary driver of increased retail drug spending?
The primary driver of increased retail drug spending is the 7% increase in spending per prescription, rather than an increase in the number of prescriptions filled[1].
How has the COVID-19 pandemic affected prescription drug spending?
Despite the pandemic, there was little observed impact on prescription drug spending trends. However, delayed care and diagnoses may lead to a future rebound in specialty drug utilization and spending[1].
What is the role of DUR programs in managing prescription drug use?
DUR programs ensure the effective and appropriate use of medicines by identifying issues such as therapeutic duplication, drug-disease interactions, and incorrect dosages. They also involve educational programs to improve prescribing practices and patient medication compliance[2][5].
Why are specialty drugs a significant component of pharmacy spending?
Specialty drugs account for a substantial portion of pharmacy spending due to their high costs, despite being used by less than 2% of the population. They are often life-sustaining or life-saving therapies, making their management crucial for balancing affordability with access to care[4].
How can plan sponsors manage pharmacy-billed specialty drug trend and costs?
Plan sponsors can manage specialty drug trend through strategies such as formulary management, utilization management, value-based programs, copay solutions, and network optimization. These strategies help in reducing costs while ensuring access to necessary medications[4].
Sources
- Trends in Prescription Drug Spending, 2016-2021 - ASPE
- Drug Utilization Review (DUR) - Medicaid
- The Economics of Drug Development: Pricing and Innovation in a Changing Market - NBER
- What Is Drug Trend and How to Manage it - Evernorth Health Services
- Drug Utilization Review | Treatment & Management | Point of Care - StatPearls
