111170-hw

Spending More on Pharmaceuticals:Spending More on Pharmaceuticals:Good News, Bad News or the WrongGood News, Bad News or the WrongQuestionQuestion

November 17, 2000November 17, 2000 Robert W. Dubois, MD, PhD Robert W. Dubois, MD, PhD

Protocare SciencesProtocare Sciences

211170-hw

1.1. How much growth has occurred?How much growth has occurred?

2.2. What could cause growth?What could cause growth?

3.3. Is it price or volume?Is it price or volume?

4.4. Is the volume appropriate?Is the volume appropriate?

5.5. Is spending growth bad news or good news?Is spending growth bad news or good news?

6.6. Are we asking the right question?Are we asking the right question?

Outline: Pharmaceutical SpendingOutline: Pharmaceutical Spending

311170-hw

Prescription Drug SpendingPrescription Drug Spending

0

20

40

60

80

1970 1980 1990 1999

5.55.512.012.0

37.737.7

101101

(7.5%*)(7.5%*) (4.9%*)(4.9%*) (5.4%*)(5.4%*) (8.2(8.2%*)%*)

BillionBillion($)($)

*Percentage of health expenditures*Percentage of health expendituresIglehart, N Engl J Med, 1999, HCFA Office of the ActuaryIglehart, N Engl J Med, 1999, HCFA Office of the Actuary

411170-hw

Do Rising Drug Costs Explain The Increase inDo Rising Drug Costs Explain The Increase inPrivately Covered Medical Costs?Privately Covered Medical Costs?

Drug Cost IncreaseDrug Cost Increase 13.8%13.8%

Drug Component Drug Component

of Health Care x 12.4%of Health Care x 12.4%

1.7% of Total Increase (6%)1.7% of Total Increase (6%)Due to DrugsDue to Drugs

28%28%DrugsDrugs

72%72%OtherOther

Proportion of IncreaseProportion of IncreaseDue to RXDue to RX

511170-hw

Conceptual Model for Growth inConceptual Model for Growth inDrug ExpendituresDrug Expenditures

Demographic ChangesDemographic Changes

§§ Multiple medicalMultiple medicalproblemsproblems

§§ Disease ProgressionDisease Progression

611170-hw

Conceptual Model for Growth inConceptual Model for Growth inDrug ExpendituresDrug Expenditures

ÒPrevalenceÓ (or patient volume)ÒPrevalenceÓ (or patient volume)

711170-hw

Conceptual Model for Growth inConceptual Model for Growth inDrug ExpendituresDrug Expenditures

Changes in Drug MixChanges in Drug Mix

Conceptual Model for Growth in Drug ExpendituresConceptual Model for Growth in Drug ExpendituresQuantityQuantity

Rx1Rx1

ÒUse PRNÓ

Change in Days SupplyÒUse DailyÓ

Change in Scripts/Pt. - YearÒUse on Chronic BasisÓMarch 1 Sept. 1

Rx2Rx2

Rx1Rx1 Rx2Rx2 Rx3Rx3 Rx4Rx4

March 1 June 1May 1April 1

March 1 Sept. 1

Rx1Rx1

Rx1Rx1

Rx2Rx2

Rx2Rx2

01100-nwDubois 8

911170-hw

Conceptual Model for Growth inConceptual Model for Growth inDrug ExpendituresDrug Expenditures

New ProductsNew Products

§§ ReliabilityReliability

§§ Crash SurvivabilityCrash Survivability

§§ ComfortComfort

§§ Smog EmissionSmog Emission

$40,000$3,000

01100-nwDubois

1011170-hw

Conceptual Model for Growth inConceptual Model for Growth inDrug ExpendituresDrug Expenditures

Price InflationPrice Inflation

$2$2$3$3

1111170-hw

1211170-hw

Study MethodologyStudy Methodology

§§ Performed by Protocare Sciences and MedstatPerformed by Protocare Sciences and Medstat

§§ Data from health plans and employersData from health plans and employers

§§ 3 year time interval (1994 vs. 1997, 19953 year time interval (1994 vs. 1997, 1995vs. 1998, 1997 vs. 1999)vs. 1998, 1997 vs. 1999)

§§ Controlled for changes in populationControlled for changes in population

§§ Examined Examined actual actual expendituresexpenditures¥¥ Pharmacy charge (co-pay, Plan benefit)Pharmacy charge (co-pay, Plan benefit)

1311170-hw

Methodology of Current Study Methodology of Current Study (contÕd)(contÕd)

§§ Disease/Class specific analysisDisease/Class specific analysis¥¥ Anti-diabeticsAnti-diabetics¥¥ Anti-depressantsAnti-depressants¥¥ Anti-lipidemicsAnti-lipidemics¥¥ Gastrointestinal drugsGastrointestinal drugs¥¥ Hormone replacement therapyHormone replacement therapy¥¥ Anti-histaminesAnti-histamines¥¥ AsthmaAsthma

50% ofTotal RxDollars

1411170-hw

Examples from Key Diseases and DrugExamples from Key Diseases and DrugClassesClasses

1511170-hw

All DiseasesAll Diseases

19

66

21

73

14

53

28

98

12

82

3

40 63

156

-25

25

75

125

175

225

Anti Depressants Asthma

Volume

Price

94%

43%

67%85%

126%

94%

219%

3 Year3 YearGrowthGrowth

t

Anti-depressants

Anti-diabetics

Antihyper-lipidemics

Asthma Gastro-intestinal

HormoneReplacementTherapy

Anti-histamines

Factors Responsible for Growth in Factors Responsible for Growth in AntihyperlipidemicsAntihyperlipidemics1997-19991997-1999

0%

20%

40%

60%

80%

100%

120%

140%

PerEligible

Inflation Mix ofEstablished

Products

EstablishedProducts

NewEntrants

EstablishedDrugs

NewEntrants

PrevalencePricesof

NewEntrants

Days ofTherapyper Rx

Rxs perPerson

Price FactorsPrice Factors Volume FactorsVolume FactorsSource: MedstatSource: Medstat01100-nw

Dubois 16

PricePriceFactorsFactors

VolumeVolumeFactorsFactors

1711170-hw

Changes in Lipid Care*Changes in Lipid Care*

New ScienceNew Science

Best PracticeBest Practice

More PatientsMore Patients

§§ Lipid reduction can stopLipid reduction can stopprogression and may reduceprogression and may reduceatherosclerosisatherosclerosis

§§ Routine lipid screeningRoutine lipid screening

§§ Ease ofEase of statin statin use improves use improvescompliancecompliance

§§ Result of screeningResult of screening

§§ Patient awarenessPatient awareness

*1997 vs. 1999 (66,270 patients in Ô99)*1997 vs. 1999 (66,270 patients in Ô99)

0%

50%

100%

150%

200%

PerEligible

InflationMix of

EstablishedProducts

EstablishedProducts

NewEntrants

EstablishedDrugs

NewEntrants

PrevalencePricesof

NewEntrants

Days ofTherapyper Rx

Rxs perPerson

Price FactorsPrice Factors Volume FactorsVolume Factors

VolumeFactors

PriceFactors

01100-nwDubois 18

Growth in Hormone Replacement TherapyGrowth in Hormone Replacement Therapy 1995-1998 1995-1998

Factors Responsible for Growth in all Factors Responsible for Growth in all Asthma-RelatedAsthma-RelatedTherapy 1995-1998Therapy 1995-1998

-40%

-20%

0%

20%

40%

60%

80%

100%

PerEligible

Inflation Mix ofEstablished

Products EstablishedProducts

NewEntrants

EstablishedDrugs

NewEntrants

PrevalencePricesof

NewEntrants

Days ofTherapyper Rx

Rxs perPerson

Price FactorsPrice Factors Volume FactorsVolume Factors

VolumeFactors

PriceFactors

01100-nwDubois

2011170-hw

Appropriateness of Lipid TherapyAppropriateness of Lipid Therapy

HierarchyHierarchy

�� Prior ÒeventÓ (MI, CABS/PTCA)Prior ÒeventÓ (MI, CABS/PTCA)

�� Vascular Disease (Angina, PVD, CVD)Vascular Disease (Angina, PVD, CVD)

�� Diabetes or Multiple Risk FactorsDiabetes or Multiple Risk Factors

�� Single Risk FactorSingle Risk Factor

�� HypercholesterolemiaHypercholesterolemia

�� No ReasonNo Reason

2¡ Prevention

1¡ Prevention

2111170-hw

1.1. How much growth has occurred?How much growth has occurred?

2.2. What could cause growth?What could cause growth?

3.3. Is it price or volume?Is it price or volume?

4.4. Is the volume appropriate?Is the volume appropriate?

5.5. Is it bad news or good news?Is it bad news or good news?

6.6. Is it the right question?Is it the right question?

Outline: Pharmaceutical SpendingOutline: Pharmaceutical Spending

2211170-hw

Cause of Rising VolumeCause of Rising Volume

Hypothesis: Hypothesis: Are the increases in volume due toAre the increases in volume due tomore patients receiving more prescriptions formore patients receiving more prescriptions forappropriate/high value situations?appropriate/high value situations?

Pre-DTCPre-DTC Post-DTCPost-DTC

ororAppropriateAppropriate

AppropriateAppropriate

InappropriateInappropriate InappropriateInappropriate

AppropriateAppropriate

InappropriateInappropriate

2311170-hw

0

25

50

75

100

76%76%

61%61%

10.3%10.3%13.5%13.5%

00 11

%%PatientsPatients

Number of Canister Claims per PatientNumber of Canister Claims per Patient

Utilization of Inhaled CorticosteroidsUtilization of Inhaled Corticosteroids

19951995

19981998

3+3+22

7.4%7.4%

18.5%18.5%

9%9%5.0%5.0%

Source: Protocare SciencesSource: Protocare Sciences

2411170-hw

0

50

100

150

200

250

300

350

400

45019951995

19981998

424424393393

163163128128

ERER($430 each)($430 each)

HospitalizationsHospitalizations($11,037 each)($11,037 each)

# per# per1,0001,000

Rate per 1,000 AsthmaticsRate per 1,000 Asthmatics

Asthma Related Hospital and ER UseAsthma Related Hospital and ER Use

Source: Protocare SciencesSource: Protocare Sciences

2511170-hw

0

100

200

300

400

Cost Savings

$224

$399

Per Patient($)

Resource Use Offset: AsthmaResource Use Offset: Asthma

RxRxIncreaseIncrease

SavingsSavings(ER/hosp)(ER/hosp)

Source: Protocare SciencesSource: Protocare Sciences

2611170-hw

1.1. How much growth has occurred?How much growth has occurred?

2.2. What could cause growth?What could cause growth?

3.3. Is it price or volume?Is it price or volume?

4.4. Is the volume appropriate?Is the volume appropriate?

5.5. Is spending growth bad news or good news?Is spending growth bad news or good news?

6.6. Is it the right question?Is it the right question?

Outline: Pharmaceutical SpendingOutline: Pharmaceutical Spending

2711170-hw

Market Responses to Rising VolumeMarket Responses to Rising Volume

§§ Be happy?Be happy?

§§ AdministrativeAdministrative¥¥ more excluded drugsmore excluded drugs¥¥ defined benefit ($1000/year)defined benefit ($1000/year)¥¥ higher co-payshigher co-pays¥¥ prior authorization for chronic therapiesprior authorization for chronic therapies