Managing the Use of Prescription Drugs
Stanley Wallack, Director
Schneider Institute for Health Policy
Brandeis University
January 16, 2002
Factors Influencing Demand for More Drug Management
Detailing to Physicians
More Insurance
New Pharmaceuticals
Prescription Drug Management
Patent Protection
Aging of the Population
Direct Consumer Marketing
Insurance Pays for a Higher Proportion of Prescription Drug Spending
Out of Pocket
Private Health Insurance
Public Funds
100%
Percent of Total
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
1960
1970
1980
1990
1996
Percentage of U.S. Drug Cost by Funding Source
1997
1998
Medications are Being Approved at an Increasing Rate
Avg. # of New
Chemical Entities/Yr.
40
33.0
30
20
21.8
18.5
13.6
13.7
1963-1969
1970-1979
10
0
1980-1989
1990-1994
Period of Approval
1995-1999
Total Expenditures Rise With Age, But Costs for Individuals Over 55 are Increasing More
Mean Total Drug Expenditures
Per Year
$1,600
2000
$1,400
$1,200
$1,000
1997
$800
$600
$400
$200
$0
30
35
40
45
50
55
Age
60
65
70
75
80
Spending for Prescription Drugs Continues to Grow the Fastest
All Benefits
Physician
Hospital Inpatient
Prescription Drug
Hospital Outpatient
Percentage Change
19
14
9
4
-1
-6
1993
1994
1995
1996
1997
Source: Strunk, Gabel and Ginsburg, Health Affairs 2001.
1998
1999
2000
2001
Drop in Death Rates for Diseases Treated With Pharmaceuticals, 1965-1996
DISEASE TREATMENT
Rheumatic Fever and
Antibiotics
Rheumatic Heart Disease
83%
74%
Atherosclerosis ACE Inhibitors, beta blockers, nitrates
72%
Ulcer of Stomach and Duodenum H2 blockers, proton pump inhibitors
62%
Ishemic Heart Disease ACE Inhibitors, beta blockers, nitrates
Emphysema Anti-Inflammatories, bronchodilators
Anti-hypertensives
Hypertension diuretics
0
10
20
57%
21%
30
40
50
60
70
80
Percent Drop in Age-Adjusted Death Rate
Source: PhRMA, 1998, based on Boston Consulting Group, 1993, and U.S. National Center for Health Statistics, 1998.
90
100
Contribution of Components to Growth in Cost Per Enrollee Age <65: 1997-2000, All Drugs
Annual Growth
Due to This Factor
Share of Growth
New drugs: higher cost/day
2.2%
15.0%
Common drugs: inflation
2.6%
17.6%
Common drugs: changes in mix
2.5%
16.7%
Cost per daily dose
7.4%
49.3%
Days per prescription
2.8%
18.9%
Prescriptions per user
4.3%
28.8%
Users per enrollee
0.4%
3.0%
Days per enrollee
7.6%
Cost per enrollee
1
Does not sum due to interactions between factors.
50.7%
15.6%1
100.0%
Distribution of Therapeutic Classes in the AdvancePCS Population, Age 65+, 1997 and 2000
Proportion of Users
70
60
1997
59.8
51.6
50
40
31.7
35.7
30
20
12.7
8.5
10
0
1 to 4
5 to 7
Number of Therapeutic Classes
8+
2000
Evolution of Prescription Drug Management
•
Improved Transactions Processing
•
Discount on Brand Drug Prices
•
More Restrictive Benefit Design
•
Greater Emphasis on Prescribing Rules
Strategies for Managing Prescription Drugs
•
Incentives/Payment Methods
•
Restriction on Availability
•
Information
•
Rules on Prescribing
Incentives/Payment Methods
• Consumer Risk Sharing
• Provider Capitation or Financial Penalties/Rewards
• Pharmacy Financial Penalties/Rewards
Restriction on Availability
• Restricted Formulary
• Restrictions on New Drugs
• Mail Order Pharmacies
• Pharmacy Networks
• Physician Networks
Information
• Physician Education
• Information Technology
• Member Education
Prescribing Rules
• Generic Substitution
• Therapeutic Interchange
• Prior Authorization
• Concurrent Review
• Retrospective Review
• Case Management
• Disease Management