Employers with prescription drug benefits should take notice that more American children are taking prescription drugs, according to the research by Medco.
In its 2010 Drug Trend Report, Medco researchers found that growth in prescription drug use among children was almost four times higher than the increase seen in the general population. The use of antipsychotic, diabetes and asthma drugs over the past nine years drove the spike.
Pharmaceutical experts point out that prescription drugs for children tend to cost more than drugs used by the elderly. "This could change the face of chronic and complex disease in the United States, significantly affecting future health care costs as these children enter adulthood," Medco analysts explain.
Analyzing 2009 data on pediatric medication use, researchers found that more than one in four insured children in the United States, and nearly 30% of adolescents (10-19 year olds), took at least one prescription medication to treat a chronic condition.
"Plan sponsors need to have comprehensive wellness and prevention programs that help identify children with those chronic conditions. The obesity epidemic is no longer just an adult problem. As a result, we are seeing more adult diseases in the 10-to-19 age group that require drug therapy," says Susan O' Connor, senior director of medical initiatives at Medco Health Solutions.
According to the research, the drug trend among children 0-19 surged 10.8% last year, more than triple the trend for senior citizens. Utilization rose 5%, far greater than the 0.2% growth among seniors.
About 13.2% of the prescription drug benefit dollars spent on children went to ADHD treatments. Still, the biggest jump in growth occurred in adults aged 20-34, where use of ADHD drugs rose 21.2%.
"We are not sure whether the continuation of ADHD treatments reflects children staying on the drugs as they get older and/or older individuals starting new drug therapy," says O'Connor.
When it comes to ADHD drugs and older individuals, plan sponsors should be mindful of their coverage management rules. "It's important for plan sponsors to be assured that ADHD drugs are properly used, because the drugs do have some recreational impact as well," she adds.
Specialty pharmacy
Meanwhile, specialty drug spending continues to hit double-digit growth, at 14.7%, sparked by a 2.6% increase in utilization and a 12.1% jump in unit costs. Overall, drug trend increased 3.7% in 2009 because of specialty drugs.
Still, generic drugs aided in the offset of spending on high-cost, specialty drugs for rheumatoid arthritis, multiple sclerosis, cancer and other conditions.
Additionally, inflation for branded drugs was 9.2% in 2009, up about a full percentage point from 2008, according to the report. Prescription drug utilization, however, rose modestly at 1.3%.
Plan sponsors should try to maximize the use of generics, because it's their best opportunity to control cost and to help manage inflation. Brand inflation was a very significant story in 2009, coming in at 9.24%, says O'Connor.
"This is the highest level of inflation we have seen, so the ability to promote generics, which were pretty much flat in terms of inflation, is really the best way for plans to manage pharmacy spending," she adds.
Diabetes topped the list as the largest driver of drug trend, representing 16.7% of all growth in drug spending. For example, costs in the category rose by 11.1%, driven by unit-cost inflation and increased utilization.
Medco analysts also project pharmacy spending to increase up to 18% through 2012, with diabetes, oncology and rheumatology treatments serving as the leading cost drivers.
Prescription drug spending is estimated to grow 3% to 5% in 2010, eventually jumping to a rate increase of 4% to 6% the next two years - a period in which pharmacy spending for diabetes/endocrine, oncology and musculoskeletal/rheumatology treatments are expected to increase 31% to 38%, 40% to 48%, and 37% to 44%, respectively, the report notes. By the end of 2012, about $46 billion in brand drug sales will fall to generic competition.
The wave of first-time generics that will become available over the next three-to-five years represents over $100 billion in brand-name drug sales today.
This will be a huge cost savings for plan sponsors, says Keith Bradbury, executive director of drug information at Medco Health Solutions. About a third of those brand-name drugs go off patent in 2012.
"It's going to be important for plan sponsors to take advantage those saving opportunities, because they are going to need that money to fund the expenses on the specialty pharmacy side," explains Bradbury. Keep in mind, "about 40% of the overall tread could be attributed to specialty drugs alone," he adds.
Reform sparks alternative approach
Medco officials also believe that health care reform will spark more employers to rethink their retiree prescription benefit strategies.
Employers embraced the Retiree Drug Subsidy program because of its tax advantages, but the new health care law requires the government to eliminate, in 2013, the tax advantage on the RDS.
Although the RDS, which generally represents 28% of an organization's eligible retiree prescription costs, will continue under the health law, the tax-free status of the subsidy will be eliminated.
This year, employers who received an RDS had to record an accounting charge in their first quarter 2010 financial results to reflect the impact of the change in the RDS tax status. Industry experts projected the charges cumulatively at more than $14 billion.
Medco officials project "the incremental tax liability for an average taxable RDS plan sponsor to be in the range of $14 to $21 per member per month (assuming a 35% tax rate)," which for a typical plan means millions to tens of millions of dollars of lost value annually.
Analysts at the pharmaceutical company believe that the change in RDS tax status will prompt more employers to consider other Medicare Part D solutions, such as the employer group waiver plan (also known as an EGWP or "egg whip").
Under an EGWP contract, an employer enters into an agreement with a Medicare-contracted prescription drug plan to provide group benefits under Medicare Part D.
The federal subsidy available under an EGWP is projected to increase over time, outpacing the RDS subsidy, due to the gradual elimination of the coverage gap under Medicare Part D.
"The direct subsidy under the EGWP will be greater then under a RDS, which means additional financial savings to the employers," says Steve Wogen, a senior vice president in the retiree solution group at Medco Health Solutions.
For employers that are sponsoring benefits, in general, many are up against actuarial equivalence thresholds under the RDS program, so over time they may no longer qualify for the program, explains Wogen.
The EGWP platform can facilitate flexible benefit designs and help an employer retain sponsorship of their retiree benefit plan at a lower cost, according to Medco. An employer can save up to 50% or more of their current retiree prescription drug costs by moving into an EGWP platform.
Additionally, an EGWP system allows for limited member disruption and provides employers with options for member cost sharing and premium contributions, notes Wogen.
Peds prescriptions: Other key findings from Medco's 2010 Drug Trend Report
* Type 2 diabetes medication use by juveniles increased 5.3% in 2009, the largest increase across all age groups, and higher than overall utilization growth of 2.3%.
* The obesity epidemic may be contributing to the higher prevalence of hypertension and gastroesophageal reflux disease (GERD) in youngsters. From 2001 to 2009, there was a 17% increase in the use of antihypertensives in children, with the greatest growth (29%) seen in boys ages 10-19.
* The number of children on proton pump inhibitors, which are used to treat heartburn and GERD, and in some cases are prescribed for colic in infants, rose by 147% from 2001 to 2009.
* Among the drugs that have experienced substantial gains in the pediatric population are atypical antipsychotics. Traditionally used to treat schizophrenia, the drugs have more recently been prescribed for a variety of psychiatric disorders. The nine-year analysis revealed that the use of these treatments in children has doubled over that time period.
* Respiratory drug use increased 5% for children in 2009 and was up 42% since 2001. Rising asthma rates accounted for much of the increase, as well as greater awareness of the disease and the importance of early intervention in controlling disease progression.
Source: Medco
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