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Special feature  Future drug expenditures

special feature

Projecting future drug expenditures—2010

A

James M. Hoffman, Fred Doloresco, Lee C. Vermeulen, Nilay D. Shah, Linda Matusiak, Robert J. Hunkler, and Glen T. Schumock

lthough the rate of prescription drug expenditure growth has moderated over the past decade, attention remains focused on prescription drug expenditure trends. The increasing specialization of new therapies, introduction of new generics, current economic recession, and future influence of health reform have focused attention on medication expenditure patterns. In health plans, hospitals, and other health care organizations, drug costs continue to be a substantial operating expense and a frequent target for cost containment. Out-of-pocket drug costs for patients, including those with prescription drug benefits, have consistently increased over the past decade. Therefore, prescription drug expenditure trends remain a focus for patients, pharmacists, administrators, and policymakers. Total prescription drug expenditures in the United States increased

Purpose. Drug expenditure trends in 2008 and 2009, projected drug expenditures for 2010, and factors likely to influence drug expenditures are discussed. Summary. Various factors are likely to influence drug expenditures in 2010, including drugs in development, the diffusion of new drugs, generic drugs, health care reform, drug safety concerns, and comparative effectiveness research. The increasing availability of important generic drugs continues to moderate growth in drug expenditures. Health care reform initiatives, including the potential for biosimilars legislation, will influence drug expenditures in all settings. From 2007 to 2008, total U.S. drug expenditures increased by 1.8%, with total spending rising from $279.6

from $279.6 billion in 2007 to $284.7 billion in 2008, a 1.8% change.1 This compares with a 4.0% increase from 2006 to 2007. This recent trend continues the decline in the growth

James M. Hoffman, Pharm.D., M.S., BCPS, is Medication Outcomes and Safety Officer, Pharmaceutical Department, St. Jude Children’s Research Hospital, Memphis, TN, and Assistant Professor, Department of Clinical Pharmacy, College of Pharmacy, University of Tennessee Health Science Center, Memphis. Fred Doloresco, Pharm.D., M.S., is Clinical Assistant Professor, Department of Pharmacy Practice, School of Pharmacy, and Research Assistant Professor HS, Department of Social and Preventive Medicine, School of Public Health and Health Professions, University of Buffalo, Buffalo, NY. Lee C. Vermeulen, B.S.Pharm., M.S., FCCP, is Director, Center for Drug Policy, University of Wisconsin Hospital and Clinics, Madison, and Clinical Professor, School of Pharmacy, University of Wisconsin— Madison, Madison. Nilay D. Shah, B.S.Pharm., Ph.D., is Assistant Professor of Health Services Research, Division of Health Care Policy and Research, Mayo Clinic College of Medicine, Rochester, MN, and Associate Consultant, Mayo Clinic, Rochester. Linda Matusiak, B.A., is Senior Data Analyst; and Robert J. Hunkler, M.B.A., is Director, Professional Relations, IMS Health, Plymouth Meeting, PA. Glen T. Schumock, Pharm.D., M.B.A., FCCP, is Professor, Department

billion to $284.7 billion. Growth in drug expenditures in clinics declined to the lowest level in a decade, a 1.0% increase from 2007 to 2008. Hospital drug expenditures increased at a moderate rate of only 2.1% from 2007 to 2008; through the first nine months of 2009, hospital drug expenditures increased by 3.0% compared with the same period in 2008. Conclusion. In 2010, we project a 3–5% increase in drug expenditures in outpatient settings, a 6–8% increase in expenditures for clinic-administered drugs, and a 2–4% increase in hospital drug expenditures. Index terms: Costs; Drugs; Economics; Health-benefit programs; Pharmacy, institutional, hospital; Product development Am J Health-Syst Pharm. 2010; 67:919-28

of prescription drug expenditures, compared with the 8.9% growth rate observed in 2006. The continued decrease in the rate of growth of prescription drug expenditures

of Pharmacy Practice, and Director, Center for Pharmacoeconomic Research, College of Pharmacy, University of Illinois—Chicago, Chicago. Address correspondence to Mr. Vermeulen at the Center for Drug Policy, University of Wisconsin Hospital and Clinics, 600 Highland Avenue, M/C 9475, Madison, WI 53792 (lc.vermeulen@ hosp.wisc.edu). Sarah Bland, B.S.Pharm., and David Chen, M.B.A., are acknowledged for their contributions to this article. Dr. Hoffman’s contributions to this article were supported in part by the American Lebanese Syrian Associated Charities. Dr. Schumock has consulted for or received research funding from Abbott, Takeda, and Novartis. The ASHP Section of Pharmacy Practice Managers provided support for the development of this article. The authors have declared no other potential conflicts of interest. Copyright © 2010, American Society of Health-System Pharmacists, Inc. All rights reserved. 1079-2082/10/0601-0919$06.00. DOI 10.2146/ajhp100068

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was driven by a number of factors, including increased utilization of generic drugs, a lower-than-expected cost of the Medicare drug benefit, and continued attenuation of the number of new and innovative drugs coming to the U.S. market. This article projects drug expenditures by sector (outpatient, clinics, and hospitals) for calendar year 2010. Factors related to drug utilization and drug costs, such as drugs in development, the diffusion of approved drugs, and factors influencing generic drug availability, are discussed. Other trends in health care likely to affect drug expenditures, including developments that will influence drug expenditures after 2010, are briefly reviewed. The authors’ intent is that this information will aid health care professionals in determining how future changes will affect drug-related expenditures in their practice. Some data in this article may not fully reflect events that have occurred after December 2009, when the article was finalized for publication. General prescription drug expenditure trends Figure 1 illustrates the growth of total prescription drug expenditures and drug expenditures in the hospital and clinic settings in the United States from 1998 to 2009.1 Overall, growth in prescription drug expenditures has moderated over the past decade. This decrease in growth of prescription drug expenditures continued through 2008 for the overall market and clinics. Over the first nine months of 2009, total expenditures as well as expenditures in nonfederal hospitals and clinics increased. This reversal of trend is notable. One important driver of this moderating trend in prescription drug expenditures over the past two years has been the increase in prescription copayments. 2 The average copayments for employer-sponsored plans in 2008 and 2009 were similar ($10 for generics in 2008 and 2009, $26 920

for preferred drugs in 2008 and 2009, $46 for nonpreferred drugs in 2008 and 2009, and $75 in 2008 versus $85 in 2009 for fourth-tier drugs).3 These copayments were substantially higher than those paid earlier in the decade. In 2000, average copayments were $8 for generics, $15 for preferred drugs, and $29 for nonpreferred drugs, and plans with fourth-tier drugs were uncommon. Summary of 2009 forecast In our 2009 drug expenditure forecast, we predicted growth rates of 1–3% for hospital drug expenditures, 1–3% for clinic-administered drug expenditures, and 0–2% for retail drug expenditures.4 Expenditures in the hospital setting increased by 3.0% during the first nine months of 2009 compared with the same period of 2008.1 This increase is within the amount projected by the previous forecast.4 This rate of growth was driven by an increase in drug prices coupled with a decrease in utilization and mix, with a smaller contribution from new products. Reasons for these trends are further discussed in detail in the hospital and clinic drug expenditure trend sections of this article. A 4.7% growth rate was observed in clinics.1 This rate was greater than projected and can be attributed to an increase in utilization as well as the introduction of new products, coupled with marginal price deflation. Reasons for these trends are further discussed in detail in the hospital and clinic drug expenditure trend sections of this article. The economic recession, including increasing unemployment, was expected to exert a larger downward effect on overall drug utilization than has been witnessed. Drug expenditures for outpatient and ambulatory care settings (including mail order) increased by 4.9% in the first nine months of 2009 compared with the same period in 2008 ($186.6 billion versus $177.8 billion,

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respectively).1 Again, this growth was higher than our forecast of 0–2% for this setting and was largely driven by significant price inflation in the retail setting, as well as the introduction of new products. The trend was moderated by a marked decrease in utilization in the retail setting. While establishing a direct causal relationship is not possible, this significant decrease in utilization may be a result of consumer behavior due to the economic recession, as posited in the previous forecast.4 Based on the total number of prescriptions filled, total drug utilization showed moderate growth. There was a 2.3% increase in the number of prescriptions filled in 2009 compared with 2008. The moderate growth in drug utilization may be attributed to the overall weakness of the economy. Drugs in development To understand and plan for drug expenditures, it is important to monitor and evaluate medications in development. New drug development continues to focus on morepersonalized and more-specialized drugs, which has important implications for pharmacists and other health care professionals responsible for managing drug expenditures.5,6 Planning for the fiscal influence of new drug costs must continue to shift from planning for a relatively small number of widely used drugs to planning for unique and expensive therapies that may be applicable only to specific patient populations. Further, the use of these specialized and unique therapies will often be unpredictable, which will present additional challenges for drug cost management. Recent approvals. When considering the influence of drugs in development on drug expenditures, it is useful to consider the number of new drugs recently approved by the Food and Drug Administration (FDA) for marketing and the new drugs that may be approved in 2010. The num-


Special feature  Future drug expenditures

Figure 1. Annual growth in drug expenditures, 1998–2009. Diamonds = total expenditures, squares = expenditures for nonfederal hospitals, triangles = expenditures for clinics.

30 26.8% 26.3% 24.6%

25

23.0%

22.5% 21.4%

% Increase

20

15

20.9%

19.7%

14.8%

15.3%

18.1% 13.5% 12.4%

12.8%

12.6% 9.9%

9.3%

10

8.9%

9.7% 6.2% 4.9%

5.9% 6.4%

5

4.7% 5.9%

3.8%

4.0%

4.5% 2.1%

1.6%

0 1998– 1999

1999– 2000

2000– 2001

2001– 2002

2002– 2003

2003– 2004

2004– 2005

2005– 2006

2006– 2007

1.0%

3.0%

1.8%

2007– 2008

2008–September 2009

Year

ber of novel drugs approved by FDA for marketing was similar from 2008 to 2009. In 2008, 25 novel drugs were approved (21 chemical entities and 4 biologicals)7; in 2009, 26 novel drugs were approved (19 chemical entities and 7 biologicals).8 The influence of new drugs on 2010 drug expenditures will remain limited, since many innovative drugs recently approved are specialized and will only be used in a small number of patients. Potential future approvals. Selected drugs expected to receive FDAapproved labeling by the end of 2010 are listed in Table 1. A previously published article provides further guidance on how to incorporate the potential influence of new drugs on an organization’s financial planning for drug expenditures.9 Briefly, before considering the cost impact of a new drug, it is important to de-

termine if the new drug is relevant to the organization’s patient population and services. While it is impossible to know the exact cost of a drug before it is marketed, available information on clinical characteristics of the drug should be evaluated, which will provide insight on the cost impact of the new drug. For example, innovative therapies to treat diseases untreatable with existing therapies universally translate into higher drug costs, but these therapies often result in substantial improvement in patient outcomes. Further, a new drug that replaces an existing therapy may increase, decrease, or have no effect on drug expenditures, depending on the clinical and economic characteristics of the drug. Finally, new drugs that are similar to existing drugs (i.e., “me too” drugs) should not be overlooked since, in some situations, these can be

priced significantly lower than existing drugs.10 Diffusion of recently approved and other important drugs Diffusion is the process by which innovations, including new drugs, become used in the marketplace. The diffusion of new drugs and other innovations that become widely accepted typically follows a sigmoidshaped curve.11 As discussed in previous forecasts in this series, the initial use of a new drug is often slow, but as familiarity and experience with the drug expand, use increases rapidly until the drug is widely used, and then growth stabilizes.12 Eventually, use of the drug reaches a plateau, and prescribing remains relatively stable unless affected by a specific event, such as a new indication, an acquisition cost change, or a safety concern.

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Therefore, in the first several years that a drug is available, it may not necessarily have an appreciable influence on drug expenditures, but as the drug’s use increases, the new drug could have important implications for expenditures. Below we discuss the diffusion of several recently approved and important drugs. H1N1 influenza. Due to the large amount of media coverage related to H1N1 (swine) influenza, 13-15 a significant increase in spending on influenza vaccinations may still be seen during late 2009 and early 2010. It is feasible that individuals seeking the H1N1 influenza vaccine may be more likely to receive the seasonal influenza vaccine or additional health care services, though no evidence exists to support or refute this supposition. Due to the timing of the release of the H1N1 influenza vaccine and the initial distribution through the Centers for Disease Control and Prevention,16 which is not available for public access, an analysis of H1N1 influenza-related expenditures cannot be provided in this report. Antineoplastic agents. Medications for cancer treatment are an important and growing area of drug expenditures, particularly in

the clinic setting. The cost of cancer care, including the cost of cancer drugs, was the focus of a recent guidance statement from the American Society of Clinical Oncology.17 For 2008, antineoplastics remained the top expenditure in clinics (data not shown) and were the second highest in nonfederal hospitals (Table 2).1 Growth exceeding the national average was again observed, with clinic and nonfederal hospital expenditures increasing 8.2% and 5.0%, respectively, in 2008. Table 3 displays the top 20 individual antineoplastic agents by expenditures in clinics. Monoclonal antibody antineoplastics account for 5 of the agents on this list, including all of the top 3 agents (bevacizumab, rituximab, and trastuzumab). Expenditures on these 3 agents continued to increase at a rate greater than the overall or clinic average (19.2%, 8.2%, and 7.1%, respectively, for the first nine months of 2009 compared with the same period in 2008). When considering expenditure trends, agents that account for significant changes in expenditures over time must also be considered. Pemetrexed, bortezomib, and azacitadine all showed significant increases in

expenditures during the first nine months of 2009. A relatively new agent, bendamustine, which has been studied in non-Hodgkin’s lymphoma and chronic lymyphocytic leukemia,18 appears to be rapidly gaining acceptance, with expenditures exceeding $120 million during the same time period.1 Antineoplastics expenditures in the nonfederal hospital setting are significantly lower than in the clinic setting. While this class accounted for the second highest expenditures for 2008, the trend through September of 2009 shows that this class may have been the top expenditure class in hospitals for 2009 (Table 2). Rituximab, bevacizumab, and oxaliplatin were the only agents that exceeded $250 million in this setting during 2008. Significant increases (>20%) for the first nine months of 2009 compared with the same period in 2008 were noted for bevacizumab, pemetrexed, bortezomib, azacitadine, and bendamustine. Generic drugs The growing availability and subsequent rapid use of generic drugs continue to have an important moderating influence on prescription

Table 1.

Selected Drugs and Biologicals Expected To Receive FDA-Approved Labeling in 2010a Drug Belimumab Boceprevir Canakinumab Cladribine Dabigatran Denosumab Ipilimumab Laquinimod Liraglutide Motavizumab Rivaroxaban Ticagrelor Vicriviroc

Manufacturer

Indication

GlaxoSmithKline/Human Genome Sciences Schering-Plough Novartis EMD Serono Boehringer Ingelheim Amgen Bristol-Myers Squibb Teva Novo Nordisk Medimmune Bayer/Johnson & Johnson AstraZeneca Schering-Plough

Lupus erythematosus

Injectable

Route

Hepatitis C CAPS Multiple sclerosis Anticoagulant Osteoporosis Melanoma Multiple sclerosis Diabetes RSV Anticoagulant Antiplatelet for ACS HIV

Oral Injectable Oral Oral Injectable Injectable Oral Oral Injectable Oral Oral Oral

a Source: Medications in Development Database, University of Wisconsin Hospital and Clinics. FDA = Food and Drug Administration, CAPS = cryopyrin-associated periodic syndromes, RSV = respiratory syncytial virus, ACS = acute coronary syndrome, HIV = human immunodeficiency virus.

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drug expenditures. Key examples of first-time generic drugs in 2009 include lamotrigine, imipenem– cilastatin, and piperacillin–tazobactam.

Table 4 lists selected drugs expected to lose patent protection in 2010 and 2011. Estimating a patent expiration date is complex, and these

dates are subject to potential rapid and unforeseeable changes due to litigation, additional patents, exclusivities, and other factors. Important

Table 2.

Top 10 Therapeutic Classes by Expenditures for Nonfederal Hospitals1 Drug Class

2008 Total Expenditure ($ Thousands)

Antineoplastic agents Hemostatic modifiers Antiinfectives, systemic Blood growth factors Hospital solutions Diagnostic aids Gastrointestinal Psychotherapeutics Respiratory therapy Biologicals Total

3,344,742 3,459,980 3,188,596 2,196,040 1,697,024 1,451,388 1,138,236 1,116,037 992,315 1,041,297 26,915,577

a

5.0 6.6 7.3 –9.6 17.5 –1.0 10.4 3.1 5.0 –30.7 2.1

Percent Changeb

2009 Expenditure ($ Thousands) (% Total)a

Percent Change From 2007

2,758,485 (13.3) 2,732,285 (13.1) 2,396,384 (11.5) 1,546,527 (7.4) 1,351,909 (6.5) 1,084,089 (5.2) 902,450 (4.3) 810,178 (3.9) 782,175 (3.8) 699,832 (3.4) 20,803,931 (100.0)

10.3 5.4 –0.1 –7.0 5.1 –0.2 5.9 –5.3 4.7 –16.0 3.0

Through September 2009. Year-to-date 2009 versus year-to-date 2008.

b

Table 3.

Clinic Expenditures for Select Antineoplastic Drugs Drug Bevacizumab (Avastin) Rituximab (Rituxan) Trastuzumab (Herceptin) Oxaliplatin (Eloxatin) Docetaxel (Taxotere) Pemetrexed (Alimta) Gemcitabine (Gemzar) Cetuximab (Erbitux) Bortezomib (Velcade) Leuprolide acetate (Lupron,c Eligard) Paclitaxel–albumin (Abraxane) Azacitadine (Vidaza) Liposomal doxorubicin (Doxil) Bendamustine (Treanda) Topotecan (Hycamtin) Decitabine (Dacogen) Fulvestrant (Faslodex) Ixabepilone (Ixempra) Panitumumab (Vectibix) Temsirolimus (Torisel) All others Total

2008 Total Expenditure ($ Thousands)

Percent Change From 2007

2009 Expenditure ($ Thousands) (% Total)a

Percent Changeb

2,009,474 1,768,036 1,083,281 1,061,772 874,282 436,434 550,298 481,499 286,903

17.1 9.9 7.0 5.1 14.3 24.5 7.9 12.4 38.4

1,763,761 (20.0) 1,427,852 (16.2) 863,132 (9.8) 712,924 (8.1) 712,005 (8.1) 465,536 (5.3) 434,122 (4.9) 338,410 (3.8) 273,892 (3.1)

19.2 8.2 7.1 –10.5 8.7 47.7 4.6 –8.7 33.5

319,677 249,079 125,038 151,892 47,716 108,103 98,275 88,407 75,074 88,517 62,851 841,298 10,807,906

–10.0 9.6 30.8 9.0 . . .d 5.6 22.2 3.4 936.1 –35.0 262.9 –25.9 8.2

227,961 (2.6) 193,324 (2.2) 122,531 (1.4) 121,209 (1.4) 121,109 (1.4) 84,837 (1.0) 80,735 (0.9) 69,077 (0.8) 58,950 (0.7) 54,381 (0.6) 51,993 (0.6) 661,207 (7.5) 8,838,948 (100.0)

–5.4 3.1 35.1 6.4 397.6 3.9 9.7 3.9 2.9 –21.8 13.1 0.7 9.5

Through September 2009. Year-to-date 2009 versus year-to-date 2008. Lupron: Lupron, Lupron Depot, Lupron Depot-3 Mo., Lupron Depot-4 Mo., Lupron Depot-Ped. d Bendamustine was approved for marketing in late 2008. a

b c

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potential patent expirations for 2010 that may be particularly relevant to hospitals and clinics include anastrozole, docetaxel, and levofloxacin. Other factors that may influence drug expenditures A variety of other factors may influence drug expenditures and are briefly reviewed. The full effect of these forces is often difficult to gauge. In many cases, these forces will influence drug expenditures over the next several years instead of only in 2010. The recession and influence of health care reform. The economy and health care reform dominated the nation’s attention in 2009. The recession of 2008 and 2009 has acted to moderate health care spending, including prescription drug expenditures.19 The economic recession reduced medication utilization.20,21 The speed and extent of the economic recovery have the potential to influence drug expenditures. In addition to the more-direct effects on drug expenditures, the recession prompted new policies that may influence drug expenditures. For

example, the American Recovery and Reinvestment Act was passed because of the recession and includes provisions that may influence drug use and expenditures over the long term, as described below. At the time this article was completed, a final health care reform bill was not signed into law. Therefore, it is difficult to estimate the influence of the legislation on drug expenditure trends. However, drug expenditures could be influenced in a variety of ways, but it appears that most developments would moderate growth in prescription drug expenditures. For example, structural changes in health insurance, such as taxes on expensive plans, could change pharmacy benefits with eventual changes to outpatient prescription drug consumption and costs. In addition, the pharmaceutical industry’s agreement during health care reform may influence drug pricing in the future. Finally, new provisions, such as laws for biosimilars and the potential expansion of the 340B program, would moderate drug expenditures. Biosimilars. Biological therapies (e.g., drugs derived from living

sources, such as various therapeutic proteins) are frequently among the most expensive drugs for hospitals and clinics. Patents for biological therapies are expiring, but an abbreviated approval process to market copies of therapeutic biologicals does not exist in the United States. Since therapeutic biological products cannot be replicated in a precise manner as can chemical compounds, the term generic is not appropriate. Due to this complexity, a variety of terms aside from generic biologics is used, including follow-on protein products, follow-on biologicals, and biosimilars. Biosimilars is the primary term that is emerging in various legislation introduced in the U.S. Congress. Legislation to provide FDA the authority to approve labeling for biosimilars was included in the health care reform proposals of 2009.22 While legislation regarding biosimilars may be approved in 2010, it will take time to implement the new laws. Therefore, we do not expect biosimilar approvals in the United States in 2010. However, biosimilars remain a long-term trend that should be monitored by pharmacists and other

Table 4.

Selected Potential Patent Expirations in 2010 and 2011a Drug

Manufacturer

Indication

Current Patent Expiration Dateb

Anastrozole (Arimidex) Docetaxel (Taxotere) Losartan (Cozaar) Sirolimus (Rapamune) Tamsulosin (Flomax) Atorvastatin (Lipitor) Donepezil (Aricept) Latanoprost ophthalmic solution (Xalatan) Levofloxacin (Levaquin) Olanzapine (Zyprexa) Pioglitazone (Actos) Temozolomide (Temodar) Zafirlukast (Accolate)

AstraZeneca Sanofi-Aventis Merck Wyeth Boehringer Ingelheim Pfizer Eisai

Breast cancer Cancer Hypertension Transplant rejection Benign prostatic hyperplasia Hypercholesterolemia Alzheimer’s disease

2010 2010 2010 2010 2010 2011 2011

Pfizer Ortho-McNeil Lilly Takeda Schering AstraZeneca

Glaucoma Infections Schizophrenia Diabetes Brain cancer Asthma

2011 2011 2011 2011 2011 2011

Source: Medications in Development Database, University of Wisconsin Hospital and Clinics. Patent expirations listed above were verified from multiple sources at the time of publication. Drug patent expirations are subject to rapid change, and patent expiration does not guarantee drug availability. a

b

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health care professionals interested in managing drug expenditures. Comparative effectiveness. Over the past year there have been much discussion and new funding for comparative effectiveness research (CER) in the United States.23 Defined in a recent report from the Federal Coordinating Council for Comparative Effectiveness Research as the “conduct and synthesis of research comparing the benefits and harms of different interventions and strategies to prevent, diagnose, treat and monitor health conditions in ‘real world’ settings,” CER aims to “improve health outcomes by developing and disseminating evidence-based information to patients, clinicians, and other decision-makers, responding to their expressed needs, about which interventions are most effective for which patients under specific circumstances.”24 The reasons for increased interest in CER, along with a description of the kinds of research that are considered to constitute CER, have been previously published in this journal.25 In brief, rising health care expenditures in the United States combined with low international ranking on health-related quality and outcomes metrics have led to a growing consensus that more attention needs to be paid to the costs and benefits of alternative therapies for the same indication. With respect to pharmaceuticals, another motivating factor is the inability of the traditional randomized clinical trial conducted by a pharmaceutical manufacturer in the process of drug development to provide information needed to make decisions about competing therapies. By providing useful information to decision-makers, CER has been heralded as a way to help mitigate increases in health care spending. As a result, government funding for CER has increased exponentially. The American Recovery and Reinvestment Act signed by President

Barack Obama on February 17, 2009, provided $1.1 billion for CER. 26 Similarly, both the House and Senate health care reform legislations contained allocations to continue CER funding. The extent to which CER will actually affect health care spending is unknown. The only analysis of this conducted to date was done by the Congressional Budget Office (CBO), which estimated that CER could reduce direct spending by the federal government (Medicare and Medicaid) by $0.1 billion between 2008 and 2012 and by $1.3 billion between 2008 and 2017.27 However, these estimates occurred well before the influx of funding and likely underestimated the quantity of comparative effectiveness data that would come available to decision-makers. Nevertheless, it remains unclear to what degree CER may result in a change in pharmaceutical expenditures, and even more so with regard to pharmaceutical spending in hospitals. Clearly, any effect will be minimal for at least the next several years. However, it is worthwhile for hospital pharmacy managers to monitor the new findings of CER and, where appropriate, use those findings to inform formulary decisions and project future spending. Drug expenditure forecast Trends in clinics. Data for clinic drug purchases taken from the IMS Health National Sales Perspectives database were used to evaluate trends in clinic drug expenditures.1 Prescription drug expenditures for clinic-administered medications increased by 1.0% from 2007 ($32.7 billion) to 2008 ($33.0 billion). Expenditures in 2009 through September ($26.0 billion) indicate a larger increase (4.7%) compared with the same period in 2008 ($24.8 billion). The top 15 products based on expenditures in the clinic setting are listed in Table 5. Expenditures on epoetin alfa (–6.5%), darbepoetin alfa (–34.8%), and human papillo-

mavirus (HPV) vaccine (–15.8%) decreased significantly from 2007 to 2008, with evidence that continued reductions in expenditures will be seen for 2009 for darbepoetin alfa (–41.9%) and HPV vaccine (–36.9%) based on comparisons of the first nine months of 2008 and 2009. As discussed previously,4 oncology drugs account for a significant proportion of expenditures in the clinic setting. The top 20 clinicadministered agents are highlighted in Table 3 and are discussed above; however, it is worth noting that this class demonstrated an 8.2% increase from 2007 ($9.99 billion) to 2008 ($10.8 billion) and that a similarly elevated increase is expected in 2009 based on comparisons of the first nine months of 2009 to the same period in 2008, which show a 9.5% increase (from $8.1 billion to $8.8 billion). Trends in hospitals. Data for nonfederal hospital drug purchases were taken from the IMS Health National Sales Perspectives database to evaluate trends in hospital drug expenditures. These data are from 5794 hospitals in calendar year 2008. Drug expenditures increased by 2.1%, totaling $26.9 billion in expenditures in 2008. For the nine months ending September 2009, prescription drug expenditures in the hospital setting increased by 3.0%. For 2008, the factors affecting the trend in hospital drug expenditures included drug prices (3.6%), volume and therapeutic mix (–2.1%), and new drugs (1.0%). Injectable drugs accounted for 71.3% ($19.4 billion) of the total inpatient drug expenditure. Table 2 presents the hospital drug expenditures and change in expenditures for the top 10 therapeutic classes. These classes account for nearly 73% of expenditures in the hospital setting. Hemostatic modifiers passed antineoplastics for the top position on the list for 2008; however, data for 2009 through September indicate that antineoplastics may again

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be the highest expenditure class in 2009. Table 6 presents hospital drug expenditures for the top 15 agents (categorized by active ingredient). Enoxaparin remains the largest item in hospitals with total expenditures of $1.12 billion for 2008. Data through September indicate that enoxaparin will likely maintain the top position for 2009. Piperacillin– tazobactam, the third agent on the list with expenditures of $679 million for 2008, has demonstrated a 15% increase in expenditures through September 2009; however, this trend may be tempered by the recent availability of a generic product and is expected to show significant reduction should this drug become available as a multiple-source generic. Bevacizumab expenditures increased 26.5% during the first nine months of 2009 compared with the same period of 2008 as discussed previously. Significant decreases in expenditures were evident for both epoetin alfa (–16.2% year-to-year, –14.1% year-throughSeptember comparison) and darbepoetin alfa (–23.9% year-to-year,

–23.6% year-through-September comparison) and are likely related to safety concerns discussed in previous forecasts.4 Overall trends. Several annual reports examine trends in drug expenditures (Table 7). 28,29 It is important to note that two of these reports (Express Scripts and Medco Health) focus solely on prescription drug expenditures in the outpatient setting and only observe a managed care population. Specifically, the Express Scripts cohort uses a substantial sample of Express Scripts clients but excludes Medicaid recipients and Medicare beneficiaries enrolled in Medicare Plus Choice plans. In addition, the data reported for Express Scripts in Table 7 exclude specialty pharmaceuticals. IMS Health data contain prescription drug sales in both retail and nonretail settings drawn from the entire U.S. population. Overall drug expenditures were reported to have increased by 1.5% and 3.3% by Express Scripts and Medco, respectively, in 2009, similar

to the 1.8% increase reported in this analysis. Price and mix were the primary drivers of the increase in all three reports; however, the Medco report also described a 1.1% decrease in utilization not described in the Express Scripts analysis. Forecast of increased expenditures for 2010. There may be important new drug approvals in 2010 in anticoagulation and antiplatelet therapy, but we expect the diffusion of these drugs to be modest in 2010. No drugs in the pipeline are expected to have a major financial effect across all settings. Moderation in utilization is expected to continue in the outpatient setting, especially with the decreasing effect of the Medicare drug benefit. Increased availability and use of generic equivalents of blockbuster drugs will continue to moderate drug expenditure growth. Therefore, we project an increase of 3–5% for the outpatient setting. It is expected that expenditures for clinicadministered drugs will increase 6–8%. We project a 2–4% growth rate for hospital drug expenditures.

Table 5.

Top 15 Drug Expenditures in Clinics1 Drug

2008 Total Expenditure ($ Thousands)

Epoetin alfa (Procrit, Epogen) Bevacizumab (Avastin) Infliximab (Remicade) Pegfilgrastim (Neulasta) Rituximab (Rituxan) Trastuzumab (Herceptin) Oxilaplatin (Eloxatin) Docetaxel (Taxotere) Ranibizumab (Lucentis) Darbepoetin alfa (Aranesp) Varicella vaccine (Varivax) Zoledronic acid (Zometa, Reclast) Pemetrexed (Alimta) Gemcitabine (Gemzar) Paricalcitol (Zemplar) All others Total

2009 Expenditure ($ Thousands) (% Total)a

Percent Changeb

3,466,655 2,009,474 1,972,932 2,135,594 1,768,036 1,083,281 1,061,772 874,282 776,932 1,359,699 730,439

–6.5 17.1 7.6 1.7 9.9 7.0 5.1 14.3 5.4 –34.8 6.1

2,732,309 (10.5) 1,763,761 (6.8) 1,633,940 (6.3) 1,573,933 (6.1) 1,427,852 (5.5) 863,132 (3.3) 712,924 (2.7) 712,005 (2.7) 707,375 (2.7) 655,745 (2.5) 615,092 (2.4)

5.6 19.2 9.2 –4.3 8.2 7.1 –10.5 8.7 22.8 –41.9 8.5

622,961 436,434 550,298 539,082 13,590,159 32,978,030

18.7 24.5 7.9 20.9 0.2 1.0

567,476 (2.2) 465,536 (1.8) 434,122 (1.7) 419,408 (1.6) 10,698,881 (41.2) 25,983,491 (100.0)

23.7 47.7 4.6 9.7 4.9 4.7

Through September 2009. Year-to-date 2009 versus year-to-date 2008.

a

b

926

Percent Change From 2007

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Special feature  Future drug expenditures

It is important to note that these forecast numbers are not intended to be used as simple “multipliers” for calculating a health system’s

drug budget. Instead, organizations should use these forecast data as a guide to compare their performance to national trends. As we have de-

scribed in detail in previous articles, overall drug expenditure trend data are not adequate for an accurate drug budget, and institutional data must

Table 6.

Top 15 Drug Expenditures for Nonfederal Hospitals1 Drug

2008 Total Expenditure ($ Thousands)

Enoxaparin (Lovenox) Immune globulinc Piperacillin–tazobactam (Zosyn) Infliximab (Remicade) Pegfilgrastim (Neulasta) Rituximab (Rituxan) Bevacizumab (Avastin) Epoetin alfa (Procrit, Epogen) Darbepoetin alfa (Aranesp) Linezolid (Zyvox) Filgrastim (Neupogen) Bivalirudin (Angiomax) Iohexol (Omnipaque) Iodixanol (Visipaque) Daptomycin (Cubicin) All others Total

Percent Change From 2007

2009 Expenditure ($ Thousands) (% Total)a

Percent Changeb

1,115,979 868,810

9.4 14.4

840,455 (4.0) 674,707 (3.2)

–0.9 2.4

678,525 671,797 635,062 576,946 435,759 589,008 467,769 360,641 348,971 290,188 346,611 310,442 229,469 18,989,600 26,915,577

23.5 8.0 3.0 9.9 12.5 –16.2 –23.9 18.6 1.5 14.1 –6.2 –3.2 39.4 0.9 2.1

571,547 (2.7) 531,921 (2.6) 481,731 (2.3) 467,003 (2.2) 405,427 (1.9) 393,100 (1.9) 273,021 (1.3) 266,558 (1.3) 254,884 (1.2) 244,098 (1.2) 241,254 (1.2) 227,528 (1.1) 213,844 (1.0) 14,716,853 (70.7) 20,803,931 (100.0)

15.0 6.0 2.2 9.2 26.5 –14.1 –23.6 –2.2 –3.0 13.5 –4.2 –3.7 30.3 3.2 3.0

Through September 2009. Year-to-date 2009 versus year-to-date 2008. c Immune globulin: Baygam, Carimune NF, Flebogamma, Flebogamma DIF, Gamastan S/D, Gamimune N, Gammagard Liquid, Gammagard S.D., Gammar-P-IV, Gamunex, Panglobulin, Panglobulin NF, Polygam S/D, Vivaglobin. a

b

Table 7.

Prescription Drug Expenditure Trendsa Variable Data source Population

Population size Cost data Overall increase in prescription drug expenditures from 2007 to 2008 (%) Trend projection, 2010 (%) Trend projection, 2011 (%)

Express Scripts29

Medco Health28

IMS Health1

Express Scripts claims data Individuals in a sample of health plans served by Express Scripts (70% nonmanaged care and 30% managed care; excludes Medicaid and Medicare Plus Choice enrollees) 3 million Discounted AWP

Medco Health claims data Clients with integrated benefits (plans that include both retail and home delivery options)

National Sales Perspectives Total retail national pharmaceutical sales

Total U.S. population Invoice price

1.5b

NA Net of AWP discounts and rebates 3.3

2.7 3.0

4–6 5–7

3–5 NA

1.8

NA = not available, AWP = average wholesale price. Does not include specialty drugs.

a

b

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Special feature  Future drug expenditures

be carefully and systematically incorporated into an organization’s drug expenditure forecast.30 Conclusion Two distinct patterns of drug expenditures have developed in recent years. The first pattern is substantial moderation in expenditure growth for widely used drugs, primarily due to the ongoing introduction of generic medications for high-cost, frequently used medications. The other trend is substantial increases in expenditures for specialized medications, biologicals, and other specialty drugs, particularly in the outpatient setting. These trends continue to influence drug expenditures; however, factors such as the economy and health care reform may exert a greater influence in coming years and increase the unpredictability of drug expenditures. Pharmacy leaders must have both a complete and accurate understanding of the drug expenditure patterns at their institution and be familiar with emerging external trends relevant to drug expenditures. To be effective, these efforts should be planned and executed as a continual process, not just as a brief annual exercise when the budget is prepared and provided to hospital administration. While recognition and application of external trends are the focus of this article and important to an effective drug-cost-management plan, drugcost-management activities must be multifaceted. Effective budgeting and cost management are especially important during difficult economic times for the nation or individual health care organizations and payers. ASHP guidelines for drug cost management further describe the comprehensive approach necessary to effectively manage drug costs.31 That document describes the data-driven, systematic approach

928

needed for drug expenditure management and reviews purchasing and inventory control techniques that are a fundamental prerequisite for managing drug expenditures. The guidelines also define more complex approaches to control drug expenditures such as managing medication utilization. With a well-developed and multifaceted drug-cost-management plan implemented, drug expenditures can be managed with greater confidence and effectiveness. References 1. IMS Health National Sales Perspectives. Analysis conducted by the authors. Analysis conducted July–December 2009. 2. Claxton G, Gabel JR, Dijulio B et al. Health benefits in 2008: premiums moderately higher, while enrollment in consumer-directed plans rises in small firms. Health Aff. 2008; 27:w492-502. 3. Employer Health Benefits 2009 Annual Survey. Exhibit 9.4: among covered workers with three, four, or more tiers of prescription cost sharing, average copayments and average coinsurance, 2000–2009. http://ehbs.kff.org/?page= charts&id=2&sn=24&ch=1139 (accessed 2010 Jan 25). 4. Hoffman JM, Shah ND, Vermeulen LC et al. Projecting future drug expenditures— 2009. Am J Health-Syst Pharm. 2009; 66:237-57. 5. Cutler DM. The demise of the blockbuster? N Engl J Med. 2007; 356:1292-3. 6. Wadman M. When the party’s over. Nature. 2007; 445:13. 7. Hughes B. 2008 FDA drug approvals. Nat Rev Drug Discov. 2009; 8:93-6. 8. Goldstein J. FDA drug approvals in 2009: up (a little) from 2008. http://blogs. wsj.com/health/2010/01/05/fda-drugapprovals-in-2009-up-a-little-from2008/ (accessed 2010 Jan 26). 9. Hoffman JM, Shah ND, Vermeulen LC et al. Projecting future drug expenditures— 2004. Am J Health-Syst Pharm. 2004; 61:145-58. 10. Lee TH. “Me-too” products—friend or foe? N Engl J Med. 2004; 350:211-2. 11. Rogers EM. Diffusion of innovations. 4th ed. New York: Free Press; 1995. 12. Hoffman JM, Shah ND, Vermeulen LC et al. Projecting future drug expenditures— 2006. Am J Health-Syst Pharm. 2006; 63:123-38. 13. Centers for Disease Control and Prevention. 2009 H1N1 flu. www.cdc.gov/ H1N1FLU/ (accessed 2009 Dec 17). 14. World Health Organization. Pandemic (H1N1) 2009. www.who.int/csr/disease/ swineflu/en/ (accessed 2009 Dec 17).

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15. Hellerman C. Swine flu ‘not stoppable,’ World Health Organization says. www. cnn.com/2009/HEALTH/06/11/swine. flu.who/ (accessed 2009 Dec 17). 16. Centers for Disease Control and Prevention. Novel H1N1 influenza vaccine. www.cdc.gov/h1n1flu/vaccination/ public/vaccination_qa_pub.htm (accessed 2010 Jan 16). 17. Meropol NJ, Schrag D, Smith TJ et al. American Society of Clinical Oncology guidance statement: the cost of cancer care. J Clin Oncol. 2009; 27:3868-74. 18. Cheson BD, Rummel MJ. Bendamustine: rebirth of an old drug. J Clin Oncol. 2009; 27:1492-501. 19. Hartman M, Martin A, Nuccio O et al. Health spending growth at a historic low in 2008. Health Aff. 2010; 29:147-55. 20. Saul S. In sour economy, some scale back on medications. N Y Times. 2008 (Oct 21):A1. 21. Economic forecast for pharma: winter advisory ahead. FDC Rep Pink Sheet. 2008; 70(Nov 3):3. 22. Hodgson J. WHO guidelines presage US biosimilars legislation? Nat Biotechnol. 2009; 27:963-5. 23. Mushlin AI, Ghomrawi H. Health care reform and the need for comparativeeffectiveness research. N Engl J Med. 2010; 362:e6. 24. Federal Coordinating Council for Comparative Effectiveness Research. Report to the President and the Congress on comparative effectiveness research. www.hhs.gov/recovery/programs/cer/ cerannualrpt.pdf (accessed 2010 Feb 22). 25. Schumock GT, Pickard AS. Comparative effectiveness research: relevance and applications to pharmacy. Am J Health-Syst Pharm. 2009; 66:1278-86. 26. Steinbrook R. Health care and the American Recovery and Reinvestment Act. N Engl J Med. 2009; 360:1057-60. 27. Congressional Budget Office. Research on the comparative effectiveness of medical treatments, December 2007. www.cbo.gov/ftpdocs/88xx/doc8891/ 12-18-ComparativeEffectivness.pdf (accessed 2010 Feb 22). 28. Medco. Drug trend report. http://insider. ontrackevents.com/portal/DT_2009_ Drug_Trend_Report.pdf (accessed 2010 Jan 25). 29. Express Scripts. 2008 Drug trend report. www.expressscripts.com/industry research/industryreports/drugtrend report/2008/ (accessed 2010 Jan 25). 30. Hoffman JM, Shah ND, Vermeulen LC et al. Projecting future drug expenditures— 2005. Am J Health-Syst Pharm. 2005; 62:149-67. 31. American Society of Health-System Pharmacists. ASHP guidelines on medication cost management strategies for hospitals and health systems. Am J Health-Syst Pharm. 2008; 65:1368-84.

Drug_Expenditure_Forecast_2010  

of prescription drug expenditures, compared with the 8.9% growth rate observed in 2006. The contin- ued decrease in the rate of growth of pr...

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