Three-year projection

Prescription drug spending will continue to rise between 13 and 18 percent annually over the next three years, with price inflation and higher utilization fueling the increase, Medco Health Solutions says in a new report.

The Medco Health 2003 Drug Trend Report estimates that drug utilization will increase by 6 to 8 percent during 2003. The pharmacy benefit management company bases this estimate on an analysis of prescription information accumulated for 1.3 million covered lives between 2000 and 2002. When drug price inflation and changes in the market share in a therapeutic category are taken into account, Medco estimates an additional 8 to 9 percent increase, resulting in a total projected increase in average cost per plan member of 14 to 17 percent this year. Similar increases are forecast for 2004 and 2005. The report notes that drug price inflation is becoming a greater contributor to overall drug spending.

The report, however, identifies two potential moderating factors on spending growth — the slowdown in the number of new entities approved by the FDA (see "Priority and Standard NMEs," right) and the loss of patent protection of several blockbuster drugs.

Medco expects the number of new molecular entity (NME) approvals to be between 25 and 30 for 2003 and 2004 (see "New Molecular Entities Approved, 1998–2003," right). Medco says the slowing trend in new molecular entity approvals appears to be the result of decreased numbers of new NDA submissions combined with increased numbers of NDA withdrawals and subsequent resubmissions. The decrease in NME approvals has contributed to the moderation of drug spending over the past two years.

Prescription drug spending on the rise: Change in average wholesale price per member, per year
  2002 2003* 2004* 2005*
Utilization increase 7–8% 6–8% 7–9% 7–9%
Price and mix increase 6–8% 8–9% 7–9% 7–9%
Annual total 13–16% 14–17% 14–18% 14–18%
*PROJECTED
SOURCE: MEDCO HEALTH SOLUTIONS

Priority and standard NMEs (1993–2002)

SOURCE: FDA, CENTER FOR DRUG EVALUATION RESEARCH; LAST UPDATED JANUARY 2003

New molecular entities approved, 1998–2003

A copy of the Medco report may be requested by visiting http://www.drugtrendreport.com

SOURCE: FDA, CENTER FOR DRUG EVALUATION AND RESEARCH; LAST UPDATED JUNE 2003

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