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Specialty drugs helping to drive up overall pharmacy costs

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Employees and retirees will see U.S. pharmacy cost increases reach the low double-digits by 2016 due in part to rising specialty drug costs, according to an analysis by Aon Hewitt released Monday.

Pharmacy costs before plan design changes are expected to increase 9.5% in 2015, and will reach 10% in 2016, the benefits consultant said. By 2017, pharmacy cost increases are projected to reach 10.5% according to the analysis.

The rise in pharmacy costs can be traced to high price inflation for brand and specialty drugs, a slowdown in blockbuster drugs losing patent protection, decreasing generic dispensing rates and an influx of specialty drugs, such as Hepatitis C treatments, Aon Hewitt said.

Lower medical costs are expected to offset some of the high pharmacy costs, as medical costs for active employees and pre-65 retirees before cost sharing are projected to increase 4.5% in 2015 and another 5% in 2016, according to the analysis.

That said, the combined medical and pharmacy cost will increase 5.4% in 2015, and will rise to 5.9% in 2016, Aon Hewitt said.

Employers can further mitigate the rising pharmacy costs by adjusting plans to encourage the use of generic drugs by implementing mandatory generic and step therapy programs, as well as using coinsurance rather than co-pays for generic drugs, Aon Hewitt said.

Employers can also implement compound drug management strategies, conduct site of care analyses, conduct regular rebate reporting, and ensure medical vendors and pharmacy benefit managers have cost-management programs in place, Aon Hewitt said.

Finally, employers can better control spending by designing and monitoring specialty drug benefits to ensure employees will receive the right specialty medication in the appropriate setting, according to the statement.

“On the specialty side, PBMs have been aggressively negotiating rebate contracts with manufacturers to keep the total cost of these medications in a range employers can reasonably absorb,” John Malley, St. Louis-based leader of Aon Hewitt's innovation pharmacy team, said in the statement. “Employers should continuously monitor their pharmacy pricing, either through discussions with their current PBM or a competitive bid process, to ensure they are receiving the full value of these improved rebate contracts.”