The emergence of a pair of "wonder drugs" that cure Hepatitis C are driving up drug spending costs for employer sponsored health plans. But because of the effectiveness of the drugs, they are reducing overall spending in the long run.
This quid-pro-quo situation was identified by Truven Health Analytics when it reviewed private sector claims data. Truven, in producing its Healthcare Spending Index, reviewed a decade's worth of data to determine trends in health care spending. The big pop from the study came from the Hep C drug information.
"While prescription drug costs are a relatively small part of private insurance spending and showed relatively slower growth in recent years, the latest data show that prescription drug spending is now growing faster than hospital and professional spending," Truven reported. "For the four quarters ending in second quarter 2014 prescription drug spending grew 9.6 percent for the year, compared to 1.5 percent growth for the prior year. This is a direct result of the introduction of two drugs — Sovaldi and Olysio — that offer effective treatment of Hepatitis C. Together, these two drugs comprised 3.3 percent of total prescription drug spending between the fourth quarter of 2013 and the second quarter of 2014."
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Truven noted that in the case of these two drugs, the higher spending represents a sound investment in patients who would otherwise need long-term treatment for a chronic disorder.
"For the first time we have quantified the immediate cost impact of the new Hepatitis-C drugs that recently reached the market," said William Marder, senior vice president at Truven Health Analytics. "These drugs cure Hep-C, so although payment systems will be stressed in the short run, they will benefit in the long run due to the avoided downstream liver transplants."
Among other findings of the analysis:
- Over the decade, per capita spending on health care for individuals with employer-sponsored insurance grew at an average rate of 5.2 percent per year;
- Employee out-of-pocket expenses for deductibles and copays grew 5.7 percent per year during that period;
- Outpatient spending grew most rapidly 6 percent annually, followed by inpatient spending at 4.5 percent annually;
- Prescription drug spending experienced the slowest growth at 4 percent annually.
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Dan Cook
Dan Cook is a journalist and communications consultant based in Portland, OR. During his journalism career he has been a reporter and editor for a variety of media companies, including American Lawyer Media, BusinessWeek, Newhouse Newspapers, Knight-Ridder, Time Inc., and Reuters. He specializes in health care and insurance related coverage for BenefitsPRO.
