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Express Scripts Pharmacy Cost Trends Lowest in Over a Decade

$42 Billion Savings Opportunity Still Remains for Nation

ST. LOUIS, April 20 /PRNewswire-FirstCall/ -- In the midst of the financial crisis and skyrocketing healthcare costs, greater use of generic drugs and lower-cost brand drugs led to a record-low spending trend for 2008 according to data from Express Scripts (Nasdaq: ESRX), one of the nation's largest pharmacy benefit managers. Overall pharmacy cost trend for Express Scripts clients was 3.0 percent for 2008, down 2.5 percentage points from 5.5 percent for 2007. The findings were calculated by evaluating total prescription costs for traditional drugs and specialty drugs, including patient copayments and payments by plan sponsors, which include employers, health plans and labor unions.

"Using generic drugs that are safe and effective can help lower costs while still driving value for patients and employers," said Steven Miller, MD, senior vice president and chief medical officer at Express Scripts. "Our results indicate that cost control is achievable through careful management of appropriate use of drugs and delivery channels, without shifting costs to consumers. Although the trend is the lowest it has been in over a decade, significant opportunity to lower spending still exists."

The research shows that failure to make prescription drug choices that take full advantage of clinically appropriate, lower-cost alternatives to more expensive brand drugs cost Americans approximately $42 billion in 2008. This estimate is based upon potential savings for the total U.S. population in only 13 drug-therapy classes. Researchers calculated the $42 billion estimate by using a commercially insured group of 3,000,000 people to extrapolate savings for the U.S. commercially insured population (see Table 1 below). These figures were then applied to others insured by payers such as Medicare and Medicaid in proportion to the total insured population and the number of prescriptions.

"Finding ways to reduce spending without compromising health outcomes is the top priority for healthcare reform, as the Obama administration recognizes," said Alan Garber, MD, PhD, Henry J. Kaiser Professor and director of the Center for Health Policy at Stanford University. "We have long used financial incentives to try to eliminate waste. Now we're finding that tools that build upon the insights of behavioral economics and psychology can have powerful, positive effects." Garber is also an advisory board member at the Express Scripts Center for Cost-Effective Consumerism.

Express Scripts works with the Center's advisory board to advance Consumerology, a ground-breaking approach to helping consumers make better and more cost-effective healthcare decisions.

In addition to working with the Center, Express Scripts partners with clients to advance Consumerology. Employers from across the nation will be attending an Express Scripts meeting this week to discuss innovative approaches to reduce wasteful spending and advance health outcomes, including applications of behavioral economics principles to healthcare. Research findings being announced will include drug trend analysis as well as step therapy and formulary change programs that improve patient outcomes while producing cost savings.

"In today's economy, we are not only tracking wasteful spending across the country but developing strategies to reduce it," said George Paz, chief executive officer at Express Scripts. "By applying the principles of behavioral economics we are helping consumers make better and more cost-effective healthcare decisions. We understand we cannot eliminate waste alone and we are committed to working alongside likeminded organizations, such as the Federal Coordinating Council for Comparative Effectiveness Research, to continue to identify strategies to improve our healthcare system."

Significant Opportunities for Generic Drug Savings Potential

Considerable variation was seen in year-over-year state spending trends (Figure 1). In addition to differences in population size and prescribing patterns, possible explanations include differences in disease prevalence, differences in age of the population, baseline drug spend and varying use of drug-benefit programs that encourage greater use of generics.

Figure 1: 2008 Pharmacy Cost Trends and Wasteful Spending Per State (in Millions)

(Photo: )

On average, a generic drug is over $90 cheaper than a brand name drug. Express Scripts data indicates that generic drug usage from 2007 to 2008 increased by 7.5 percent, while utilization of brand name medications decreased 11 percent.

By the end of 2008, 67.3 percent of all prescriptions that Express Scripts filled were for generic drugs. In comparison, the national average for generics drugs was 63.7 percent for the 12 months ending September 2008, according to IMS Health.

Options to save more by using generics will continue to expand going forward. In 2009, at least 20 branded drugs are expected to become available generically. Over the next five years, more than $66 billion worth of branded drugs are expected to lose patent exclusivity.

2008 Drug Trend Report Highlights Savings Opportunity

Drug spending trends are based on the Express Scripts 2008 Drug Trend Report, which will be released this week. In 2008, Express Scripts managed prescription-drug benefits for tens of millions of Americans, representing thousands of plan sponsors throughout North America.

To profile prescription drug trends, researchers evaluated traditional drugs and specialty drugs separately using a common data set, which included a sample of plan sponsors that were with Express Scripts in 2007 and 2008. From this sample, researchers randomly selected approximately three million commercially insured members. Year-over-year prescription cost trends were evaluated on a per member per year (PMPY) basis.

The generic savings opportunity projections in Table 1 are extrapolated to the U.S. commercially insured population only, based on a sample of approximately three million plan members. These 13 therapy classes treat such conditions as stomach ulcers, inflammation, depression, high blood pressure and high cholesterol.

Table 1: 2008 Generic Savings Opportunity across Top 13 Therapy Classes*

      Drug Therapy Class                    2008            Missed Savings
                                            GFR(+)            Opportunity

    Antihyperlipidemics                      43.9%           $5.1 billion
    Gastrointestinal Medications             55.3%           $4.5 billion
    Antidepressants                          69.0%           $2.6 billion
    Anticonvulsants                          57.7%           $1.2 billion
    Antihypertensives                        64.5%           $935 million
    Hypnotics                                69.4%           $858 million
    Antidiabetics                            55.3%           $668 million
    Systemic/Topical Nasal Prod.             49.4%           $656 million
    Oral Contraceptives                      65.3%           $454 million
    Antipsychotics                           32.5%           $399 million
    Antihistamines                           79.2%           $260 million
    Narcotic Analgesics                      93.8%           $294 million
    Beta Blockers                            95.0%           $167 million
    Total                                                   $18.1 billion

    * Source: Express Scripts, Inc.
    + Actuals through end of 2008

Behavioral Economics Key to Unlocking Value

At the Center for Cost-Effective Consumerism, leading academics in behavioral economics are accelerating studies to apply an advanced understanding of human behavior to the pharmacy benefit and to healthcare at large. Express Scripts works with the Center's advisory board to advance Consumerology, an innovative approach to helping consumers make better and more cost-effective healthcare decisions.

Several Center studies explore loss aversion, the tendency of people to focus more on possible losses than gains. Aversion to loss is one of the best-known principles of behavioral economics and one key to unlocking the $42 billion savings opportunity nationwide.

"Studies have repeatedly shown that people work much harder to avoid losses than to pursue gains," said Bob Nease, PhD, the company's chief scientist. "This suggests that a 'stop wasting money' message is more effective than a message focused on potential savings. In addition, by applying evidence-based segmentation, we have practical insight into which members are likely to be most sensitive to loss aversion. One size does not fit all."

Several other principles of behavioral economics are being applied and tested, as well. For more information, visit

About Express Scripts, Inc.

Express Scripts, Inc., is one of the largest pharmacy benefit management (PBM) companies in North America, providing PBM services to millions of consumers by serving thousands of client groups, including managed-care organizations, insurance carriers, employers, third-party administrators, public sector, workers' compensation and union-sponsored benefit plans.

Express Scripts provides integrated PBM services, including network-pharmacy claims processing, home delivery services, benefit-design consultation, drug-utilization review, formulary management, and medical- and drug-data analysis services. The company also distributes a full range of biopharmaceutical products directly to patients or their physicians, and provides extensive cost-management and patient-care services.

Express Scripts is headquartered in St. Louis. More information can be found at

SOURCE Express Scripts, Inc.
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