Prescription benefit costs rise less steeply

John Doe went to the doctor in 2007, and again in 2008. Health insurers, pharmacy benefits managers (PBMs), and third-party administrators (TPAs) noticed a difference because the increase in what it cost them to provide care was less steep than what they saw last year.

That’s because the cost of medical and prescription claims filed by Doe’s doctor and pharmacy did not rise as precipitously in 2008, according to the 2008 Segal Health Plan Cost Trend Survey.

The biggest slowdown, according to the report, is in prescription drug coverage costs — to levels similar to medical coverage — for the second consecutive year. This is a decrease of nearly nine percentage points since their high of 19.5 percent in 2003.

“Prescription trend rates have gone down,” says Eileen Flick, vice president and director of Segal’s Health Technical Systems. “So the 2008 projected increase in cost for preferred provider organization/ point of service (PPO/POS) plans without a prescription benefit is 10.5 percent, while the retail costs for prescription drug carve-out are at 10.7 percent. This shows that prescription trend rates are very similar to medical coverages.” Trend is defined as the forecasted change in the health plans’ per capita claims cost determined by MCOs, PBMs, and TPAs.

Inflation appears to be the biggest contributor to overall medical costs, according to the report. It will account for about 60 percent of the increase of costs seen by PPOs.

Drug price inflation will continue to be a major driver of costs because of the ongoing focus on development and marketing of specialty drugs, according to the report.

Source: 2008 Segal Health Plan Cost Trend Survey.