Table of Contents

Foreword: Pharmacy as a Competitive Differentiator

Pre-COVID-19, 85% of self-funded employers cited rising drug costs as a considerable concern going into 20201. Prescription drug costs were increasing, the drug pipeline contained innovative brand and specialty drugs, and the high costs associated with those drugs were impacting peoples’ ability to afford their medications. One in five people reported they could not afford the cost of their medications2. Then COVID wreaked havoc.

Employee safety concerns, virtualizing the workforce, furloughs, and everything else took priority. Most companies lost an entire year addressing their benefits costs concerns. Meanwhile, the pharmaceutical industry did not sit still. Prescription drug trend continued (and continues) to rise, with specialty drug costs introducing a new level of financial risk. The looming question going into 2021 is, what is the new normal going to look like for employers?

One thing is certain; employers can’t afford to ignore rising pharmacy costs any longer. Clients of every size and across industries will be increasingly turning to you for consultative advice and recommendations. If you are well-equipped to address their concerns with a pharmacy solution that meets their unique needs, you will find it to be a powerful competitive differentiator.

Chapter 1: Prescription Drug Utilization Trends

In any given year, following prescription drug utilization trends has its challenges. Reflecting on how COVID-19 has changed things, there are several key considerations to keep in mind when evaluating your clients’ 2020 drug trend data.

Changes in Enrollment – As the virus wreaked havoc on businesses and industries across the country, we saw member enrollment numbers shift up and down. For those impacted companies, enrollment shifts could mean a higher per member per month (PMPM) pharmacy benefits cost. As you evaluate any PMPM spikes over the last year, dig in a little deeper to see if it’s because of membership fluctuations and the prescriptions they are using.

Changes in Drug Mix – The most significant shift in 2020 occurred in acute to chronic condition prescriptions. With people sheltering in place for much of the year, there was a clear reduction in prescriptions for temporary ailments like sinus infections, strep throat, and muscle strains. However, there were more prescriptions for chronic conditions, including diabetes, high blood pressure, and other conditions that require daily medication therapy.

Drug mix matters because acute condition prescriptions typically are inexpensive generics or lower-cost brand drugs. Without those drugs in the product mix, the change in the plan’s average PMPM cost may be substantial despite reducing the volume of drugs. This phenomenon is likely short-term, as we expect the number of acute condition prescriptions to tick back up over 2021.

Changes in Refill Rates – Most of the pharmacy benefits managers (PBMs) relaxed their refill-too-soon policies in the first and second quarters of 2020 to ensure people had adequate quantities of essential medications on-hand. This influx of prescription drug claims in the first quarter of the year led to unexpected pharmacy benefits spending for many employers. While we don’t see strong evidence of stockpiling, it’s appropriate to expect refill rates to shift back to 70%-80% in 2021. For example, with a 70% refill rate for a 90-day prescription, people will need to wait until day 63 to refill their medication, which is appropriate.

Changes in Quantities Dispensed – There was a notable shift from 30-day to 90-day maintenance medication fills and increased mail-order prescriptions. These trends likely will continue throughout 2021. Because of the convenience and potentially lower costs, once members make that shift, they are more likely to stay with it.

Changes in Progressive Trend Expectations – Looking at your clients’ trend from quarter to quarter, you usually see a natural trend progression throughout the year. It’s a natural part of how benefits are designed today, with deductibles and people paying more at the beginning of the year. In 2020, however, we saw a discernable difference in how drug trend progressed. By December, it was beginning to shift back to what we consider a more normal range for the year but not quite back to net-neutral of what we expected without COVID-19. This change is indicative – and encouraging – that we might be starting the year with a trend pattern more in line with what we would typically see.

Rx In-Focus: Drug Price Hikes Continue

With drug utilization slowed down significantly because of the virus, drug manufacturers saw no reason to slow down the chance to capitalize on the opportunity to raise prescription drug prices in 2020 and again to start 2021. Drug price increases are not uncommon practices taken by drug manufacturers over a year, usually occurring at the beginning of the year and mid-year. The size of the price increases is not out of line with previous years. What’s alarming is the higher number of drugs targeted for price hikes and that the increases were not related to any new clinical innovations.

Drug manufacturers raised drug list prices to start 2021 by an average of about 5.1%.4 While this is lower than the 5.8% average list price increases to start 2020, several are large and apply to some of the most commonly prescribed medications on the market.