Retirement Plans

Specialty Drugs to Fuel 10% Pharmacy Cost Hike in 2016

Aon Hewitt says the rise in costs is due primarily to price inflation for brand and specialty prescription drugs.
Matthew HellerApril 20, 2015
Specialty Drugs to Fuel 10% Pharmacy Cost Hike in 2016

U.S. employers could be facing a low double-digit increase in pharmacy costs by next year amid a sharp rise in the price of specialty drugs, according to an analysis by Aon Hewitt.

The consulting firm forecasts that pharmacy cost increases for active employees and retirees before plan design changes will be 9.5% in 2015 and will continue to rise to 10% in 2016. An increase of 10.5% is expected in 2017.

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pharmacy“For 2015 and 2016, there will be more pressure than relief on pharmacy cost,” Tim Nimmer, global chief actuary for Aon Health, said in a news release.

Medical cost increases are projected to be 4.5% in 2015 and 5.0% in 2016. Combined projected medical and pharmacy cost increases would be 5.4% in 2015 and 5.9% in 2016.

According to Aon Hewitt, pharmacy costs are rising primarily because of price inflation for brand and specialty drugs, a slowdown in blockbuster drugs losing patent protection, generic dispensing rates leveling off, and a “robust pipeline” of specialty drugs including the new Hepatitis C treatments.

“If left unmanaged, these issues could have a significant impact in pushing these increases even higher,” Nimmer warned.

Aon Hewitt recommends a number of steps that employers can take to implement competitive yet cost-effective pharmacy management programs. These include adjusting pharmacy plans to encourage the use of generic drugs and ensuring medical vendors and/or pharmacy benefits managers have programs in place to manage costs, such as prior authorization and care management.

“The dramatic increase in specialty costs means that implementing strategies to promote generic utilization, 90-day prescriptions, and member adherence in non-specialty categories is more important than ever,” said John Malley, leader of Aon Hewitt’s Innovation Pharmacy Team.

He also said employers should continuously monitor their pharmacy pricing, either through discussions with their current PBM or a competitive bid process, to ensure they are receiving the full value of improved rebate contracts with drug manufacturers.

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