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Prescription drugs to lead trend of health care price increases

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Prescription drug cost trends, driven largely by price inflation and expensive specialty drugs, are expected to reach their highest point since 2004 next year, according to a new survey.

Cost trends for prescription drug coverage are projected to increase by 8.6% in 2015 and by 11.3% in 2016 for active plan and retiree plan members under 65, according to a survey released Thursday by benefits, compensation and human resources consulting firm The Segal Group Inc. That compares with an increase of 10.7% in 2014.

New York-based Segal predicts the cost trend rate for specialty and biotechnology drugs, which treat conditions like cancer, rheumatoid arthritis and diabetes, will hit 19.4% in 2015 and 18.9% in 2016, the survey showed.

Segal also predicted cost trends for the two most common health plans — health maintenance organizations and open-access preferred provider organization/point-of-service plans — to increase 6.2% in 2015 and 6.8% in 2016 for HMOs, and increase 7.8% in 2015 and remain flat for 2016 for PPO/POS plans.

Price inflation for hospital stays and brand-name medications are the greatest driver of increasing health plan cost trends, according to survey.

In 2016, the price inflation for prescription drugs is expected to increase 9.8%, while price inflation for hospital services is expected to increase 6.8%, Segal said.

“Whether it is new high-tech surgical or diagnostic procedures replacing lower-cost options, or extremely high-cost specialty biotech drugs growing in popularity, plan sponsors still face significant challenges to manage medical plan cost trends to more sustainable long-term levels,” Edward Kaplan, Segal's national health practice leader, said in a statement accompanying the survey. “Plan sponsors have already put cost-management strategies, such as adding narrower provider networks and using specialty pharmacy management, into place.”

Segal surveyed 100 managed care organizations, health insurers, pharmacy benefit managers and third-party administrators from mid-May to mid-June, according to a company spokesman.