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TheStreet Open House

Third Annual Medical Pharmacy Trend Report Illuminates Hidden Healthcare Costs

Stocks in this article: MGLN

Today, Magellan Pharmacy Solutions, a division of Magellan Health Services (NASDAQ: MGLN) released its third annual Medical Pharmacy Trend Report. The report is the only industry benchmark of its kind to analyze medical drug data, explaining the trends surrounding specialty medications such as those used to treat complex chronic conditions like cancer, rheumatoid arthritis and multiple sclerosis.

“No other source exists that directly measures the trends for injectables that are paid under a payor’s medical benefit, where top drugs, such as Neulasta, Remicade, Avastin, Rituxan, and Tysabri are almost entirely paid,” said Michael Waterbury, President of ICORE Healthcare (a subsidiary of Magellan Pharmacy Solutions).

As much as 50 percent of specialty pharmaceuticals are managed and paid for under the medical plan benefit today, a significant increase compared to previous years. This is driven by several factors, most notably the ability of manufacturers to maintain patent protection for the top 25 specialty drugs. Increases in price and utilization are also key drivers of increased trend. The year-over-year cost increase for specialty drugs was 16 percent for the top 25 therapies.

“Site of service continues to be a threat to cost containment with almost half of all specialty injectables spend being administered in hospitals where their costs can almost double,” said Waterbury. “The trend of larger health networks buying up smaller physician practices will compound this issue. Commercial plans spent more than $251 million in medical benefit injectable costs for every million lives covered across all sites of service in 2011, and there was a 22 percent cost increase from 2010 to 2011 for the top 25 therapies.”

Key findings of the trend report

This report demonstrates increased activity and awareness by payors across the country to manage medical pharmacy spend. Due to the complexity, the payors that were surveyed experienced continued challenges to ensure these programs improve quality and reduce costs.

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