The Public Employee Benefit Board vendors continued to show extreme inflation in the cost of pharmaceutical drugs in reports released Tuesday, a development that could stymie efforts to make healthcare costs sustainable.
Kaiser Permanente representative Dr. Keith Bachman said that pharmacy drug costs for PEBB went up 7.1 percent, and speciality medicines increased 27 percent from last year. Speciality meds account for less than 1 percent of all prescriptions, but 28 percent of all drug costs.
The number of specialty drug prescriptions for Kaiser PEBB members increased 21 percent while the cost of each prescription increased 10 percent, from $3,500 to $3,900. But put into perspective, speciality drugs cost $16 per member per month, or about 3.7 percent of total costs.
“It’s a really small piece of the pie now,” said board member Shaun Parkman. “But down the road, it’s unsustainable.”
Nine drugs accounted for 19 percent of all pharmaceutical spending. Just two drugs -- Enbrel and Humira -- anti-inflammatory medications that treat rheumatoid arthritis, accounted for 8 percent of all pharmacy claims.
Because of a decrease in competition as brand-name and generic drug manufacturers merge, Bachman said some drugs such as prednisone have gone up 500 percent in price while tetracycline, an antibiotic used to treat urinary tract infections, has gone up 7,000 percent.
Notably, the prescription drug costs for PEBB were 19 percent higher than other Kaiser members, a discrepancy Bachman attributed in part to low drug copayments at PEBB. “Cost share is important,” he said. “If cost-sharing is very low, it’s why not?”
The increased costs are buffered by a decrease in inpatient healthcare spending of 13 percent, and over the long run, drug treatments help patients avoid and reduce much more intensive and costly care.
For Providence PEBB members, the cost of inpatient drugs and pharmacy prescriptions increased 13 percent, from $102 per member per month in 2014 to $115 per member per month last year, which represents 23 percent of total medical costs, up from 21 percent the year before.
Pharmacist Wisam Younis, representing Providence, said those cost increases came despite rebates negotiated with pharmaceutical companies and deals that have allowed the health plan to lock in the rates of some drugs for two years, even as their cost rapidly increases.
Younis said costs for speciality biologic drugs would continue to escalate, but does expect modest relief of about 15 percent from the introduction of biosimilar, or generic, biologics onto the market in the next few years. In the European Union, biosimilars cost 30 percent less than brand-name biological drugs, according to economist Joseph Fuhr, writing for Forbes.
The Congressional Budget Office has estimated that some generic biologics could save consumers and insurers as much as 40 percent over brand-name biologics, perhaps because Europe had imposed price controls on its brand-name drugs, while the United States has allowed them to be sold with unfettered monopolies, a dynamic competition would upend.
This new class of drugs has been in use for 10 years in Europe and has more recently become available in Canada. But a regulatory framework for biosimilars did not exist in the United States until the Affordable Care Act, and the first such drug was approved by the U.S. Food and Drug Administration only last year.
A biosimilar for Enbrel was approved just this week for use in Europe.
Fairbanks Named Vice-Chair
In other PEBB business, the board appointed Mark R. Fairbanks, the chief financial officer at the Oregon Health Authority, as its vice chairman for 2016. This position alternates between a labor and a management board representative.
Fairbanks started his work for the health authority in May and soon was called upon to defend the agency’s unpopular decision to call back money it had already given to several of the state’s coordinated care organizations, in a mixed attempt at more accurately setting rates.
He came to the state after 12 years of private sector work in Oregon’s healthcare industry, most recently at St. Charles Health System in Bend.
The vice-chair position often ascends to the chair of the PEBB board, a post now held by Paul McKenna, a longtime member of the board who represents labor interests and works for the Service Employees International Union Local 503.
Chris can be reached at [email protected].
