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Prescription drugs to lead trend of health care price increases

Prescription drugs to lead trend of health care price increases

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.

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