- Programs & Services
Drugs with triple-digit inflation – an avoidable hazard
When thinking about price volatility – or inflation – most people think of gasoline. Not surprising, considering gas prices rose nearly 250 percent in the 13-year span from 1998 to 2011. Compare that with the fact that several prescription drugs have seen price inflation of more than 200 percent in just a single year – from the first quarter of 2015 to the first quarter of this year. In fact, prices for more than 25 of the most hyperinflationary drugs rose more than 200 percent. A total of 85 drugs, including the 25, saw hyperinflationary price increases of more than 100 percent.
To be clear, the impact of hyperinflationary drugs on cost and trend has been minimal so far. But left unchecked, they could have significant cost impact for payors in the years to come. It isn’t just about cost for payors either. The high cost of prescription drugs hurts everyone. Every day, millions of people depend on them to stay healthy, and drug price increases affect them deeply. Our research has shown that one in three people already don’t fill a prescription due to price and higher costs may exacerbate the situation.
Drug inflation in the 12 months ending March 2016
Data source: CVS Health Enterprise Analytics, 2016. Multiple strengths and formulations of the same drug were grouped together in this analysis.
A Need for Real Change
When gas prices hit their peak in the early part of this decade, there was widespread consumer outcry, calls of investigations into “price gouging” by the oil industry from Congress and sales of more fuel-efficient cars soared, while those of "gas guzzlers" plummeted. What if other consumer goods had similarly high – more than 100 percent – inflation overnight or from one week to the next? Would we be willing to pay $3 for a gallon of milk one week and $6 the next? What if a bottle of orange juice cost $2.75 and the same store charged more than $5 for the same juice the next day or the next week? Would you find a different brand of milk or juice?
Yet, aside from pharmacy benefit managers (PBMs) like CVS Health taking action on clients’ behalf, very little of substance is being done to challenge the high cost of hyperinflationary drugs. And our health care system continues to bear the burden of drugs like Daraprim, an anti-parasitic, whose manufacturer hiked the price by 5,000 percent overnight – from $13.50 to $750 per pill. Hyperinflationary drugs have garnered plenty of media attention, and are getting the attention of lawmakers. But payors are not powerless, and working together, we can take a stand for real change.
Taking Action on Behalf of Clients
Last year, we took action against some of the most egregious cases of hyperinflationary drugs. When Turing increased the price for Daraprim, we secured access to a much lower-cost alternative (~$1 per pill). We recognized the potential trend impact from brand inflation for Glumetza and proactively removed it from our Standard Formulary in favor of clinically equivalent, lower-cost alternatives, as early as 2012 – long before Valeant Pharmaceuticals acquired it and increased its price by 800 percent. Per-member-per-month (PMPM) costs for Glumetza were nearly $0.60 less for clients aligned with our Standard Formulary.
Our “foundational approaches” offer clients a broad range of protection against rising drug prices. For instance, 90 percent of Valeant’s drugs are either not covered or are non-preferred under several CVS Caremark formularies including Standard Formulary, Advanced Control Formulary and Value Formulary. We recently added the toenail fungus treatment, Jublia, to the excluded products formularies for clients adopting either Advanced Control Formulary or Value Formulary.
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Formulary Strategies Can Help Reduce Impact of Hyperinflation
Many payors may wonder if choosing a narrow formulary, or limiting or removing coverage for the small number of hyperinflationary drugs, is worth the trouble and the member disruption. After all, as we discussed at the 2016 CVS Health Forum, the net impact of hyperinflation on drug prices was less than one percent across 87 unique drugs. That may seem small in comparison to brand inflation of 10.4 percent across other specialty and nonspecialty drugs.
However, it is important to note that the impact from hyperinflationary drugs can be easily avoided. Nearly every drug that falls into the hyperinflationary category has clinically equivalent, more cost-effective alternatives available, meaning that payors can usually mitigate the cost impact of these drugs with very little disruption. In addition, many hyperinflationary drugs also have significant year-over-year trend and therefore represent risk for future trend contribution.
Dynamic Trend Manager: Hyperinflation Update
While hyperinflationary drugs haven’t been a key trend driver to date, CVS Health is taking a stand against substantial price increases that unnecessarily add costs to clients and their members. Hyperinflation Management is the latest offering of our Dynamic Trend Manager program. Introduced in an earlier issue of Insights Feature, the Dynamic Trend Manager program uses real-time surveillance and monitoring tools to help identify potential trend drivers and offer opt-in solutions or enhancements to existing cost-management strategies.
The Hyperinflation Management program will target specific drugs that have egregious year-over-year price increases and have readily available, clinically appropriate, more cost-effective alternatives. For clients aligned with our Value Formulary, Advanced Control Formulary or Standard Formulary with removals, the Hyperinflation Management program will be incorporated in their formularies as of January 1, 2017. For clients not aligned to one of our standard formularies with removals, Hyperinflation Management will be available as an opt-in program. Targeted drugs will be updated quarterly.
Continuing to Evolve Formulary Management Strategies
Our template formularies offer payors a broad range of protection against inflationary drugs by either limiting coverage or removing such drugs altogether. However, we relentlessly seek out additional opportunities to help minimize costs for clients. The Hyperinflation Management program is designed to offer payors real-time cost management options to respond to the rapidly shifting landscape of prescription drug pricing and supplements our formulary management strategies.
Pharmaceutical companies are constantly looking for new ways to increase profit and bypass PBM tools. That’s why ongoing, aggressive formulary management through innovative tools like the Hyperinflation Management program are important to help manage drug costs while helping ensure access and healthier outcomes for members.
A comprehensive formulary strategy is foundational to mitigating the impact of escalating drug prices, and the introduction of new high-cost therapies.
Dynamic Trend Management
CVS Health is a leader in providing innovative, proactive solutions that help to cost-effectively manage trend while still ensuring member satisfaction.
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This document contains references to brand-name prescription drugs that are trademarks or registered trademarks of pharmaceutical manufacturers not affiliated with CVS Health.