Druggists and industry experts told MNI that traditional brand-name and generic drugs prices are also firming. Right alongside that, healthcare cost-sharing for prescription drugs continues to shift toward employees and others insured, by way of deductibles, co-payments, drug coverage exclusions and percentage coverage, also known as co-insurance.

The moderating impact on costs in recent years from a wave of blockbuster brand-name drugs going generic, from Lipitor to Lexapro, has faded, they said. A pharmacy benefit management company forecasted accelerating prescription-drug cost increases in 2014 for both consumers and insurers.

“It’s growing substantially this year because of the introduction of the new products in the hepatitis-C market. It’s very exciting but extremely dynamic in terms of its impact on cost this year on many of our plans,” said Peter Wickersham, senior vice president of integrated care and specialty at Prime Therapeutics, a PBM that helps control costs for 23 Blue Cross Blue Shield companies and other insurers that cover a combined 25 million members.

Total prescription drug costs, borne by consumers and Prime Therapeutics’ insurers, rose an average of 3.3% in 2013 from 2012, compared to 2.1% inflation the year before, in part due to increased utilization, Wickersham said.

“That’s about to change greatly,” Wickersham told MNI, and added that aggregate drug cost inflation should come in “north of 10%” this year, thanks in great part to Solvaldi, the hepatitis-C medication.

Specialty drugs cost insured consumers an average of $142 per prescription per month in 2013, up 15% from 2012, Wickersham said. The average specialty drug itself cost insurers $3,150 per month in 2013. Sovaldi comes in at a whopping $85,000 for a 12-week course, or about $1,000 per pill, he said.

Specialty drugs, Wickersham said, treat a relatively narrow population and comprise just 1% of total prescriptions filled. Yet by 2018, they could account for 50% of total drug costs, he said. And they aren’t the only medicine outlays on the rise.

“Starting toward the end of last year, we saw some price inflation on generic products, as well,” Wickersham said. While most generic prices are by and large stable, some “individual products are taking large price increases,” he said.

Read more here:  https://mninews.marketnews.com/index.php/reality-check-us-consumer-drug-costs-climb-ever-higher?q=content/reality-check-us-consumer-drug-costs-climb-ever-higher

In cases with three, four or five competing brands in a therapeutic class, the PBMs would alter the current practice in which most of them are covered. Instead the PBMs and their insurance company clients would cover only one or, at most, two brands.  The idea is that intense competition among pharmas to obtain one of these preferred coverage positions would oblige them to abandon their smug, cartel-like approach in which the prices of various brands differ only marginally.

Pharmas will immediately fight these more restrictive formularies by designing prospective clinical studies in an effort to differentiate their brands and, thereby, make the case that insurers should cover all competing brands in every therapeutic category.  Payers can stymie this pharma effort to keep drug prices high if the insurers use their own coverage data to create and pay for retrospective outcomes studies and then insist that those results form the basis of formulary inclusion/exclusion decisions. By using that approach, payers in most cases can treat the brands competing for first-line use among the majority of patients as commodity products.  That would allow insurers to select the low-priced brand as the preferred medication.

Pharmas with excluded brands will doubtlessly combat that effort by putting forth their own outcomes data to justify the use of those products, but the PBMs can restrict the non-preferred brands to small, niched segments of patients.  Certain brands are more appropriate for outlier patient groups and payers can approve the more expensive products for such use without substantially increasing total drug costs.

If payers succeed in this effort, it means that market share distributions of branded drugs in the various therapeutic categories will change from the classic 50%-25%-12½%-6¼%-3⅛% to something more closely resembling an 80%-5%-3%-1% split.  Pharma companies know if this practice takes hold, most products at most companies will obtain market shares in that 1-5% range. That explains their rush to create product lines of expensive specialty products, thereby making more money despite selling fewer pills and injections.

The approach of managing prescription drug use with outcomes analysis is far more rational than the exorbitant pricing that currently exists in the U.S. under the fiction of a free market.  In fact the economics of health care resources would come closer to an actual market if payers took some initiative by aggressively creating and using their own in-house data to stratify the patients they cover.

That would allow them to reserve the expensive brands for the limited segment of patients, in defined circumstances, who need those medications instead of less costly treatments.  Payers to this point have not made this effort, preferring instead to rely on their traditionally passive, live-on-the-float methods.

Read more at http://www.philly.com/philly/blogs/healthcare/Restrictive-formularies-The-path-to-more-affordable-drug-prices.html#rZDhX6HzwRtrro9f.99