june drug trend report featuring the pharmacy benefit guide

Transcription

1 june drug trend report featuring the pharmacy benefit guide

2 Preface Dear Reader, This ninth publication of Express Scripts annual Drug Trend Report coincides with a significant milestone for the company. Barrett Toan and Fred Teitelbaum, the Report s two founders, are both retiring. preface How Can You Manage What You Cannot Measure? In the early 1990s, Barrett recognized that the pharmacy industry had a knowledge gap. The underlying drivers of drug trend were not clear. To address Barrett s concerns, Fred s research team developed a landmark methodology to help decision-makers understand factors that influence prescription-drug spend. Imitation Is the Sincerest Form of Flattery Since we introduced our original Report at the first Outcomes Conference in 1997, virtually every major PBM and pharmaceutical policy-making organization has produced similar information. Our Drug Trend Report is quoted in hundreds of news sources and cited in national publications. The More Things Change As the pharmacy benefit has evolved, our Report has adapted to industy changes. Committed to solid research, we added an extensive forecast section because we know that understanding where costs are going is just as important as identifying what factors affect them. We have incorporated the Pharmacy Benefit Guide and expanded the Therapy Class Review section. This year, we present a new approach for analyzing the drivers of specialty-drug trend. True To Our Heritage The Drug Trend Report will carry on Barrett s and Fred s ground-breaking work not only in reporting drug trend, but in using that research to create solutions. We will also continue to provide the latest research on the effectiveness of trend-management tools, and their impact on members. A special thanks to Barrett and Fred for their shared vision. Sincerely, Brenda Motheral, PhD, MBA, RPh Vice President, Product Development 1

3 contents Contents Page 4 Executive Summary Page 11 Introduction Key Events on the 2004 Pharmacy Landscape Medicare Modernization Act (MMA) Plan Actions Trends in Expenditures for Prescription Drugs Market Trends in Prescription-Drug Use Methods Page 25 Overall Drug Trend Components of Drug Trend Utilization of Common Drugs Inflation Therapeutic Mix Brand/Generic Mix Units per Prescription New Drugs Specialty Drugs Page 43 Therapy Class Review Antihyperlipidemics Gastrointestinals Antidepressants Antihypertensives Antidiabetics Antiasthmatics Anti-Rheumatics (NSAIDs) Anticonvulsants Narcotic Analgesics Dermatologicals Miscellaneous Endocrines Antihistamines Calcium Blockers Beta Blockers Antivirals Antipsychotics Stimulants/Anti-Obesity Oral Contraceptives Miscellaneous Hematologicals Decongestants Antineoplastics Migraine Products Ophthalmic Products Quinolones Macrolides 2 express scripts drug trend report 2004

4 Page 97 Pharmacy Benefit Guide Formulary Development: The Essential Element of Trend Management Is There Only One Formulary? Implications GenericsWork SM : NEW LEARNINGS Geographic Variation in Generic Fill Rate: NEW LEARNINGS Principles for Plan Design Enlist a Variety of Trend Interventions Communicate, Communicate, Communicate What Is a Formulary Notification? Member Communications: NEW LEARNINGS Cost Sharing Emerging Plan Designs Point-of-Service Programs Generic Policy Prior Authorization Automated PA for Erectile Dysfunction: NEW LEARNINGS Step Therapy Step Therapy for Statins: NEW LEARNINGS Step Therapy for Calcium Channel Blockers: NEW LEARNINGS How Much Does Step Therapy Save? What Is the Member Response? Quantity Limits Dose Consolidation: NEW LEARNINGS Consumer-Driven Healthcare Express Scripts Supports CDHC Express Choice SM : NEW LEARNINGS Plan Selection: Moving in the Right Direction Express Scripts Supports Consumer-Driven Health Plans Prescription Distribution Home Delivery Comparing Retail and Home Delivery Exclusive Home Delivery contents Page 141 Express Scripts Research Studies, Authors and Contributors 3

5 executive summary Executive Summary Beginning with the first Drug Trend Report in 1996, Express Scripts has analyzed yearly trends in prescription-drug use and cost. Based on this research, we customize evidence-based programs that help our clients offer safe, effective and affordable prescription-drug benefits for their members. The 2004 Drug Trend Report presents our current recommendations and the evidence that supports them. Although the situation in Iraq dominated the news in 2004, healthcare also made headlines. Issues ranged from the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) to medical liability reform. With the public share of healthcare expenses projected to reach $1.8 trillion almost 50% of total health expenditures by 2014, federal concerns will center increasingly on cost containment. 1 State and local governments are also struggling to balance their budgets and still provide adequate healthcare benefits. According to projections from the Centers for Medicare & Medicaid Services (CMS), total national healthcare expenses are expected to top $2 trillion in Employers are also being squeezed. A survey of more than 1,900 employers by the Henry J. Kaiser Family Foundation and the Health Research and Educational Trust found that the cost of employer-sponsored health coverage has risen more than 45% since Anticipating an average healthcare cost increase of about 8% in 2005, employers may see their annual cost per employee exceed $6, Of particular concern is the cost of prescription drugs, which continues to increase faster than most other components of healthcare, as shown in Exhibit 1. Although the growth of prescription spending slowed 1 Heffler S, Smith S, Keehan S, Borger C, Clemens MK, Truffer C. Trends: U.S. Health Spending Projections For Health Affairs (Millwood). Web exclusive. February 23, Available at: Accessed February 23, Centers for Medicare & Medicaid Services, Office of the Actuary: National Health Statistics Group. Table 2: National Health Expenditure Amounts and Average Annual Percent Change by Type of Expenditure: Selected Calendar Years Last modified September 17, Available at: Accessed February 8, Employer health benefits 2004 survey. Kaiser Family Foundation and the Health Education Trust. September 9, Available at: Accessed February 8, Towers Perrin Health Care Cost Survey. Towers Perrin express scripts drug trend report 2004

6 nationally from 2002 to 2003, prescription-drug expenses still represented 11% of total healthcare spending in the U.S. for The share of prescription-drug cost paid by Medicare is expected to balloon from about 2% of total drug spend in 2005 to more than 25% of the total when the full-scale Medicare Part D gets under way in Exhibit 1 National Health Expenditures for Selected Healthcare Accounts 1990 and 1994 to executive summary 1500 In Billions Other Hospital Care Physician and Clinical Services Prescription Drugs Source: Centers for Medicare & Medicaid Services, Office of the Actuary: National Health Statistics Group. Table 2: National Health Expenditure Amounts and Average Annual Percent Change, by Type of Expenditure: Selected Calendar Years Last modified September 17, Available at: Accessed February 16, In 2004, multiple factors interacted to increase prescription-drug cost. Direct-to-consumer (DTC) advertising, often identified as a driver in increased drug spending, may indeed have played a significant role. In addition, after the November 2004 elections, prices increased up to 11% for 31 of the 50 top-selling prescription drugs. 7 Pharmaceutical manufacturers cited anticipation of price controls from the new Medicare prescription-drug legislation and the impact of new and expected generics as reasons for the increases. 5 Smith C, Cowan C, Sensenig A, Catlin A, and the Health Accounts Team. Health spending growth slows in Health Affairs. 2005;24(1): Heffler S, Smith S, Keehan S, Borger C, Clemens MK, Truffer C. Trends: U.S. Health Spending Projections For Health Affairs (Millwood). Web exclusive. February 23, Available at: Accessed February 23, Won Tesoriero H, Hensley S. Prices increase on popular drugs. The Wall Street Journal. January 25,

7 executive summary Generic drugs, however, play a big part in keeping growth in spending for prescription drugs relatively low. A 1% increase in generic use results in nearly a 1% decrease in overall drug cost. 8 As shown in Exhibit 2, the generic fill rate among clients in the entire Express Scripts book of business increased from 48% in fourth quarter 2003 to 52.7% by the end of Recently, generics for several widely-used drugs were introduced, and several other important generics are expected in the next few years, so the use of generics is expected to remain high. Exhibit 2 Express Scripts Generic Fill Rate Fourth Quarter 2002 to Fourth Quarter 2009 (Estimated) Percent Q Q Q Q Q Q4 (est) 2006 Q4 (est) 2007 Q4 (est) 2008 Q4 (est) 2009 Q4 (est) To control the rate of increase in prescription-drug costs, employers continue to adopt a number of strategies. Nationally, for example, 65% of companies that used formularies in 2004 had a three-tiered formulary more than twice as many as in As shown in Exhibit 3, Express Scripts clients surpassed national levels, with more than 68% of their members covered by a three-tiered formulary. 8 Geographic variations in generic fill rate. Express Scripts. No date given. Available at: ourcompany/news/outcomesresearch/onlinepublications/regionalgenericvariation/regionalgenericvariation.pdf. Accessed February 28, Employer health benefits 2004 survey. Kaiser Family Foundation and the Health Education Trust. September 9, Available at: Accessed February 8, express scripts drug trend report 2004

8 Exhibit 3 Formulary Structure: Express Scripts Clients Fourth Quarter 2004 One-Tier Formulary 6.6% 24.7% Two-Tier Formulary 68.7% Three-Tier Formulary executive summary Additional measures taken by employers to control drug costs include: Point-of-service (POS) programs, such as step therapy and prior authorization (PA) Home delivery of prescriptions Specialty drug management Consumer-driven options, such as health savings accounts (HSAs) Express Scripts consumer-driven healthcare (CDHC), POS and homedelivery programs are detailed in the Pharmacy Benefit Guide section of this Report. DRUG TREND Clients that managed trend aggressively by implementing two or more new programs in 2004 saw essentially no increase in drug spend for the year. Those implementing at least one additional trend-management program averaged a trend increase of 3.3%, compared with 9.3% among clients that did not add programs (Exhibit 4). Exhibit 4 Net Drug Trend From 2003 to Percent All Managed Clients Implemented One Or More Programs 0 Implemented Two Or More Programs 7

9 executive summary THERAPY CLASS HIGHLIGHTS Highly-publicized negative outcomes associated with the use of COX-2s, antidepressants and estrogens resulted in lower utilization in each of their respective therapy classes. In fact, declining use caused estrogens to fall out of the top 25 therapy classes for the first time since the Drug Trend Report began publication. Antihyperlipidemics remained in the top spot, increasing by 21% per member per year (PMPY), accounting for 20.8% of overall cost growth and making up 11% of total overall drug spend for the year. Rounding out 2004 s top five classes ranked by cost are gastrointestinals, antidepressants, antihypertensives and antidiabetics. With trend increasing by only 4.5%, gastrointestinals continued to be affected by the September 2003 introduction of Prilosec OTC TM. After rising 22.2% in 2003, trend for anti-rheumatics (NSAIDs) also increased by only 4.5%, mostly due to decreased use of COX-2s. The lowest trend increase among the top 10 was for antidepressants, which rose by only 3.8%. Slowed growth was due to the introduction of the generic for Celexa as well as to the possible influence of negative press about SSRI-antidepressant use by children and teens. Increased utilization of common drugs was only 2.9% in 2004, compared with 6.8% the previous year. Inflation contributed 6% to overall trend growth, the smallest increase due to inflation in three years. Therapeuticmix trend rebounded slightly to 3.7%, while brand-generic mix continued to decline. The fall of 2.6% for brand-generic mix in 2004 was nearly identical to the drop seen in FORECAST Between 2005 and 2009, unmanaged trend is expected to reach a low of 11.2% in 2008 after a high of 12% in express scripts drug trend report 2004

10 BENEFIT DESIGN To moderate or even negate the expected increases in unmanaged trend, plan sponsors can implement programs that optimize the use of the growing number of generic medications in key therapy classes. Proven programs for promoting the use of the most cost-effective brand and generic medications include: Tiered Copayments Step Therapy Express Choice SM executive summary Three-tiered copayments are an industry standard because they align the interests of plan sponsors and members, provide financial incentives for members to use the most cost-effective alternatives, and still allow members a choice of medication. Express Scripts has done extensive research on three-tier copayments, finding that they can provide significant savings without negative effects on clinical outcomes, such as medication compliance or other medical costs. Nearly two-thirds of Express Scripts clients currently have a three-tier copayment design. Step-therapy programs extend a generic policy to promote therapeutic substitution. With step therapy, the use of a first-line medication, typically a generic, is required before coverage is provided for a second-line drug, typically a more expensive brand medication. The number of therapy classes for which step therapy is appropriate has grown significantly in the past two years. Currently, multiple therapy classes including all of the top five have step-therapy programs available through Express Scripts. Additional step-therapy programs are in development for several other therapy classes. Finally, Express Choice, the consumer-oriented plan design offered by Express Scripts, allows plan sponsors to offer multiple prescription-drug plans. Each member selects the plan that best meets his or her needs. By encouraging efficient use of the prescription-drug benefit through Express Choice, plan sponsors consistently have seen significant reductions in trend while still maintaining high member satisfaction. 9

11 executive summary Notes 10 express scripts drug trend report 2004

12 introduction Express Scripts Drug Trend Report

13 Introduction KEY EVENTS ON THE 2004 PHARMACY LANDSCAPE Even though prescription-drug spending was up again in 2004, the year s lone major gain for pharmaceuticals was more than offset by losses. In one of the year s few bright spots for the pharmaceutical industry, the overall utilization of cholesterol-lowering drugs known as statins increased by 12% in boosted in large part by updated clinical guidelines that recommend reduced goal levels of low-density lipoproteins (LDL) for high-risk patients. introduction In general, however, 2004 was a year of significant problems, not only for the pharmaceutical industry but also for the U.S. Food and Drug Administration (FDA). Voluntary removal of Vioxx from the world market in September 2004 and its later reintroduction in some countries focused attention on the prescription-drug approval process in the U.S. Along with other drugs in the COX-2 subclass, Vioxx was advertised heavily in direct-to-consumer (DTC) ads following its U.S. introduction in Particular emphasis was placed on the stomach-protective effect of COX-2s. However, subsequent research found that individuals who take Vioxx for 18 months or longer are at increased risk for heart attacks and strokes. In December 2004, concerns spread to include all COX-2s after additional information linked Celebrex and Bextra to health problems similar to those seen with Vioxx. As a result, U.S. prescriptions for COX-2s dropped from about 4.5 million to about 2.7 million in the last three months of While an FDA decision in February 2005 allowed some COX-2s to stay on the market, the manufacturer of Bextra suspended its sales in early April after a request for its withdrawal from the FDA. A black-box warning is now required on the labels of all COX-2s still sold in this country. DTC advertising for them has been eliminated, and COX-2 utilization is expected to stay relatively low since physicians are being advised to prescribe them in lower doses and for shorter lengths of time. 10 IMS Health Year-End U.S. Prescription and Sales Information and Commentary. No date given. Available at: Accessed February 25, IMS Health Year-End U.S. Prescription and Sales Information and Commentary. No date given. Available at: Accessed February 25,

14 introduction An FDA advisory in October 2004 addressed issues raised earlier about the use of antidepressants for children and teens. Research that linked suicide attempts and suicidal thoughts among pediatric and adolescent patients to treatment with antidepressant drugs led to both a warning label on all antidepressants and a decrease in antidepressant use among patients aged 18 years and younger. 12 Newer, second-generation (atypical) antipsychotic drugs have been associated with higher risks of developing diabetes, high cholesterol and obesity. Early in 2004, four major medical societies, including the American Diabetes Association and the American Psychiatric Association, recommended more frequent and extensive health testing for patients taking a second-generation antipsychotic medication. As a result, expenses on the medical side are expected to increase for these patients. Recent negative press about prescription drugs is likely to cause changes in the drug-approval process. In February 2005, the FDA announced plans to establish a Drug Safety Oversight Board. The board, consisting of FDA employees and medical personnel from other federal agencies, will consult with independent experts and patients. In addition to posting safety information on a new Drug Watch Web site, the board will also work to improve the printed drug information patients receive with their prescriptions. Additionally, the FDA has stated plans to make its review and decision-making processes more independent and transparent. 13 Problems with drug safety may also lead to more stringent requirements for clinical trials, slower approval times and less chance of approval for me-too drugs. Another result of the pharmaceutical industry s recent challenges is a new drive to establish a clinical trials registry. Despite some manufacturer complaints that making their trials public will give competitors unfair advantages, several have set up their own trial-information Web sites. 12 Center for Drug Evaluation and Research. U.S. Food and Drug Administration. FDA Public Health Advisory. Suicidality in children and adolescents being treated with antidepressant medications. October 15, Available at: Accessed March 11, U.S. Food and Drug Administration. FDA Fact Sheet. FDA improvements in drug safety monitoring. February 15, Available at: Accessed February 15, express scripts drug trend report 2004

15 However, the medical establishment favors an independent repository (such as which is designed to discourage selective reporting from drug trials and other medical studies. Although trial registration in an independent database is voluntary at this time, the International Committee of Medical Journal Editors has put pressure on pharmaceutical companies to comply. The group, which includes editors of major medical journals such as the Annals of Internal Medicine, the Journal of the American Medical Association, Lancet and the New England Journal of Medicine, instituted a new policy in These editors have stated that effective July 1, 2005, they will not accept for consideration study results that have not been registered in an independent database before patient enrollment begins. According to the group s criteria, the registry must be comprehensive, free, public, maintained by a nonprofit entity and open to all clinical investigators. In addition, it must have a mechanism for validating information, and readers must be able to search the contents electronically. introduction Dilemmas for the FDA and the pharmaceutical industry were not the only prescription-related issues that made news in Other dramatic developments may affect prescription-drug benefits for years to come. On the supply side, drug reimportation from Canada and other countries is an ongoing issue. One increasing concern with reimports is the potential for counterfeited drugs, a long-standing problem in many parts of the world. Estimated to affect about 10% of the world s prescription-drug supply, drug counterfeiting recently has become more visible in the U.S. The number of counterfeit drug cases investigated by the FDA increased from five in 2000 to 21 in In another area of rising concern, supplies of certain vaccines and some other drugs have been inadequate to meet current needs. 15 On the policy side, federal budget cuts threaten to eliminate significant amounts of drug coverage under Medicaid at the same time that Medicare reform will provide prescription-drug benefits for millions of seniors. 14 Cockburn R, Newton PN, Agyarko E, Akunyili D, White NJ (2005). The Global Threat of Counterfeit Drugs: Why Industry and Governments Must Communicate the Dangers. PLoS Medicine 2(4): e100. Available at: Accessed March 14, Marcus AD. Critical cancer drug faces shortage. The Wall Street Journal. March 15, Page D1. 13

16 introduction MEDICARE MODERNIZATION ACT (MMA) The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) is the most significant recent development affecting prescription-drug coverage in the U.S. MMA expands services for Medicare beneficiaries. Among its major provisions is Part D, which offers Medicare enrollees an optional outpatient prescription-drug benefit that is being implemented in two phases. Beginning in May 2004, enrollees were offered the choice of several prescription discount-card options. These discount programs remain active until either May 15, 2006, or the date that the beneficiary enrolls in a Part D plan, whichever is earlier. The interim cards provide up to an estimated 25% discount on prescriptiondrug purchases. 16 The full-scale drug-benefit program will go into effect on Jan. 1, Under Medicare Part D, services will be provided by private plans that will assume some financial risk for the programs. Exhibit 5 Summary of Medicare Benefits PART ALSO KNOWN AS ENROLLMENT BENEFICIARIES COVERAGE A Hospital coverage Automatic Qualified disabled individuals and Inpatient hospital, Social Security or Railroad Retirement nursing home, hospice recipients who are 65 or older B Supplementary Optional Individuals entitled to Part A Doctor s office visits, medical coverage laboratory testing, outpatient hospital C Medicare Advantage Optional Individuals entitled to Part A HMO- or PPO-type (formerly Medicare+Choice) and enrolled in Part B who choose health-plan coverage managed care rather than fee-forservice Medicare D Prescription-drug Optional Individuals entitled to Part A Prescription-drug coverage and enrolled in Part B coverage As shown in Exhibit 6, prescription-drug coverage under Medicare Part D is complex. It includes a monthly premium, a deductible, a copayment for partial coverage up to a specified dollar amount, an out-of-pocket period (the so-called donut hole ), and then 95% coverage for expenses over a specified amount. 16 Centers for Medicare & Medicaid Services. Overview. Medicare prescription drug discount card and transitional assistance program. Last modified September 16, Available at: Accessed February 15, express scripts drug trend report 2004

17 Exhibit 6 Medicare Part D Prescription-Drug Coverage 2006 Defined Standard Benefit* TOTAL DRUG COST MEDICARE PAYS ENROLLEE PAYS** OUT-OF-POCKET COST TO ENROLLEE Deductible Up to $ % Up to $250 $251 to $2,250 75% 25% Up to $750 Donut Hole $2,251 to $5, % Up to $3,600 introduction $5,101 and up 95% 5% $3,600 and 5% of costs above $5,100 * The defined standard benefit is the basic plan as outlined in the MMA. Plan sponsors may offer alternative benefits that provide equal or greater value to plan participants. ** Adapted from: Centers for Medicare & Medicaid Services. Alternative part D benefit designs and options for enhancing medicare drug coverage. Issue paper #31. January 19, Available at: part_d_benefit_designs_and_options_for_enhancing_medicare_drug_coverage_.pdf. Accessed April 27, Individuals eligible for Medicare Part A are also eligible for Part D. Enrollee contributions will be adjusted on an annual basis. Initial costs for each enrollee are shown in Exhibit 7, along with estimates of costs for Exhibit 7 Medicare Part D Enrollee Contributions Drug Premium $35/month (est) $68/month (est) Deductible $250/year $472/year (est) Maximum Out-of-Pocket Cost $3,600 $6,800 (est) Sources: Connolly C, Allen M. Medicare drug benefit may cost $1.2 trillion. Washington Post. February 9, 2005; Page A01; and A detailed description of CBO s cost estimate for the Medicare prescription drug benefit. The Congressional Budget Office. July Available at: Accessed February 9, Plans that provide Medicare prescription-drug coverage will serve specified geographical regions. Enrollees who opt for drug coverage will have the choice of joining an integrated medical and prescription-drug plan (Medicare Advantage, also known as an MA-PD); or joining a prescriptiondrug only plan (PDP). Enrollees in each Medicare-defined region will be able to choose from at least two plans, one of which must be a PDP. The Congressional Budget Office estimates that around three-quarters of Medicare Part B enrollees will also participate in Part D, with about onefifth staying in employer-sponsored plans and the remaining individuals choosing either alternate forms of prescription insurance or no coverage A detailed description of CBO s cost estimate for the Medicare prescription drug benefit. The Congressional Budget Office. July Available at: Accessed February 9,

18 introduction Retirees cannot receive both Medicare Part D and prescription-drug coverage that is completely employer-sponsored. To reduce the possibility that employers might simply drop coverage for retirees when Part D becomes fully operational, MMA also provides incentives to companies that continue providing drug coverage. 18,19 Options that employers may choose include: Maintaining the current plan and receiving a tax-free government subsidy to reimburse 28% of permitted drug costs for each Medicare-eligible retiree who does not enroll in Part D. The plan offered by the employer must be at least equivalent to Part D, and the subsidy will be capped at a maximum amount. Adapting the existing drug benefit to coordinate with (or wrap-around) Part D probably by covering some Part D copayments and deductibles for retirees who choose to enroll in Part D. Paying the monthly premiums for eligible retirees who choose Part D. Contracting for prescription-drug coverage from a third-party PDP or MA-PD, or becoming a PDP or MA-PD. As part of MMA, plans that provide Part D prescription-drug benefits will be required to support e-prescribing. Sending electronic prescriptions directly from the prescribing physician to the dispensing pharmacy adds extra dimensions of safety. Difficult-to-read handwriting is eliminated, and chances for alteration or loss of the prescription are minimized. Common access to the patient s prescription history also allows automatic checks for allergies, drug interactions and duplicate therapy at the point of prescribing, as well as at the dispensing pharmacy. Private efforts are under way to accelerate the adoption of both e-prescribing and the use of electronic medical records a priority issue for the current administration. Two organizations already exist to facilitate e-prescribing: RxHub, a joint effort of the three largest pharmacy benefit managers (PBMs), which handles the electronic transfer of information among 18 Deloitte. Employer response to Medicare part D prescription drugs 2005 survey. BenefitsLink. January 10, Available at: Accessed February 8, Bakich K. Medicare prescription drug law requires new disclosures for retiree health plans. Employee Benefit News. December express scripts drug trend report 2004

19 physician offices, pharmacies and PBMs; and SureScripts, a similar company founded by the National Association of Chain Drug Stores (NACDS) and the National Community Pharmacists Association (NCPA). Additionally, America s big three car manufacturers Chrysler, Ford and General Motors announced in February 2005 their alliance with the three biggest healthcare insurers in Michigan. The car makers and the health plans hope to recruit as many as 17,000 physicians willing to initiate e-prescribing systems funded by the companies, as allowed in the MMA. 20 introduction On the public-policy side, the U.S. Departments of Defense, Veterans Affairs, and Health and Human Services announced a collaboration in March Together, they will create a common set of standards for information-sharing among the health programs including Medicare that they oversee. Eight high-technology companies are working with the government to implement guidelines that will assure compatibility among computer systems and software. The new policies are set to take effect concurrently with the full-scale implementation of Medicare Part D prescription-drug coverage on Jan. 1, PLAN ACTIONS Even though the pharmaceutical landscape changed dramatically in 2004, many plan sponsors were able to manage prescription-drug trend. Plan sponsors most successful in controlling trend use a number of different programs that control costs while still preserving adequate coverage. Three-tier formulary programs remain popular, and nearly 70% of Express Scripts clients were using a three-tier formulary by the end of In a three-tier formulary, generic drugs are covered at the lowest copayment, formulary brands at a higher amount and nonformulary brands at the highest copayment. Among Express Scripts clients, more than 18% are now using Generics Preferred, our mandatorygeneric plan design. An additional 49% use a restricted generic policy Generics Preferred-Physician s Choice which does not require the member to pay a higher amount if the doctor orders a brand drug. 20 Porretto J. Wagoner: Medical costs huge competitive disadvantage. Miami Herald. February 10,

20 introduction While formularies are the cornerstone of pharmacy-benefit design, the strategies that best control trend incorporate a variety of programs all aimed at improving generic penetration. Generic-drug costs average approximately $45 less than brand costs, and member copayments for generics average $10 less than brand copayments. 21 Trend programs should not be implemented abruptly, however. A phase-in approach, which adds programs over a multi-year time frame and uses frequent communications, minimizes member disruption. In addition, Express Scripts recommends that plan sponsors develop a trend strategy that gives members confidence in the continuing ability to afford maintenance drugs. Plan sponsors are advised to set overall member financial contributions between 20% and 35% of drug-ingredient cost. Generic utilization can be driven by the use of home delivery for maintenance drugs. Across the Express Scripts book of business, each maintenance prescription filled through home delivery costs up to 10% less than the equivalent prescription filled at a local participating (retail) pharmacy. Exclusive Home Delivery, our mandatory-mail program, focuses on drugs that are appropriate for home delivery and results in total average savings of approximately $35 per member per year (PMPY). Many Express Scripts clients that initiated step-therapy programs during 2003 added more modules throughout 2004, and more clients adopted at least one step-therapy module. By the end of the year, more than 13 million members were enrolled in step-therapy plans, using an average of seven step-therapy modules. Each module focuses on appropriate utilization in one therapy class (such as antihypertensives) or subclass (such as non-sedating antihistamines). By implementing all the step-therapy modules that Express Scripts offers, some clients have saved 10% or more of overall drug spend through greater generic penetration. For specific types of drug-delivery systems (such as eye drops or inhalers) that contain measured amounts of drugs or specific numbers of doses, quantity limits ensure that the amount of medication supplied is consistent with both clinical dosing guidelines and the plan sponsor s benefit design. 21 Geographic variations in generic fill rate. Express Scripts. No date given. Available at: ourcompany/news/outcomesresearch/onlinepublications/regionalgenericvariation/regionalgenericvariation.pdf. Accessed February 28, express scripts drug trend report 2004

21 As detailed in the Pharmacy Benefit Guide section, quantity limits also help prevent billing errors. As part of the Drug Quantity Management program, Express Scripts also offers concurrent dose consolidation, which recommends a single unit of one drug strength in place of two units that are half that strength when the price for different strengths is similar. The recommendation is relayed to the dispensing pharmacy on the first fill of a new prescription. Some research has touted large savings from retrospective dose consolidation (using prescription claims to identify dose-consolidation opportunities after the prescription has been filled). Express Scripts researchers, however, found savings of only $0.02 to $0.03 per member per month (PMPM) for a retrospective dose-consolidation program after savings were calculated using realistic, partial-compliance rates and before administrative costs were considered. 22 This research article received the Journal of Managed Care Pharmacy s Paper of the Year Award for introduction Client interest in newer and developing plan designs is also increasing. For example, as today s consumers are becoming more prepared to participate in healthcare decisions, plan sponsors are recognizing that its members can take more responsibility for those decisions. As a result, consumer-driven healthcare is receiving renewed attention. Express Choice SM (Express Scripts consumer-oriented plan design) allows plan sponsors to offer multiple prescription-drug plans with varying degrees of management. Each member selects the most appropriate plan for his or her given situation. Those who choose more tightly-managed plan designs pay the lowest premiums and copayments, while those who select a richer benefit have higher associated costs. For the more than 2 million members enrolled in Express Choice, the result has been a significant reduction in drug spend while maintaining strong member satisfaction. 22 Delate T, Fairman KA, Carey SM, Motheral BR. Randomized controlled trial of a dose consolidation program. Journal of Managed Care Pharmacy. 2004;10(5):

22 introduction TRENDS IN EXPENDITURES FOR PRESCRIPTION DRUGS Express Scripts clients that used any trend-management program saw a trend increase of 9.3% in However, those implementing one or more programs for the first time in 2004 saw an average increase of only 3.3%, and those implementing two or more programs had no increase in drug spend (Exhibit 8). Exhibit 8 Net Drug Trend From 2003 to Percent All Managed Clients Implemented One Or More Programs 0 Implemented Two Or More Programs MARKET TRENDS IN PRESCRIPTION-DRUG USE In 2004, prescription-drug costs were affected by many of the same issues that influenced costs in Movement of key drugs to overthe-counter (OTC) status continued to affect the cost of antihistamines, cough and cold products, and gastrointestinals. This trend is not expected to abate as new strengths of products already available OTC continue to flood the market. Completely new products, never before available without prescriptions, are also expected to enter the OTC market within the next few years. The second continuing trend was the increasing availability of generic alternatives to blockbuster brand drugs. By the end of the fourth quarter of 2004, trend-management programs implemented by Express Scripts clients also helped drive the generic fill rate to 52.7% for the Express Scripts book of business. The third and potentially most significant issue affecting 2004 drug trend was the body of evidence showing that the long-term side effects of several classes or subclasses of drugs exceeded their treatment benefits. In 2004, information regarding the safety of COX-2 inhibitors led to the withdrawal of Vioxx from the market. Subsequently, utilization 20 express scripts drug trend report 2004

23 of other COX-2s declined. Exhibit 9 shows the monthly cost of COX-2s and NSAIDs among Express Scripts clients in When examined on a quarterly basis, costs for the entire class were down 10.5% in the fourth quarter compared with the first-quarter baseline. Exhibit 9 Change in COX-2 and NSAID Prescriptions PMPM January 2003 to December 2004 introduction Prescriptions PMPM Vioxx Withdrawn From the Market Jan 03 Mar 03 May 03 Jul 03 Sep 03 Nov 03 Jan 04 Mar 04 May 04 Jul 04 Sep 04 Nov 04 NSAIDs COX-2s Antidepressants also took a hit late in 2004 when the FDA issued a black-box warning on selective serotonin reuptake inhibitors (SSRIs) and selective norepinephrine reuptake inhibitors (SNRIs). The warning followed the results of repeated studies indicating that these antidepressant subclasses increase suicidal tendencies in children and teenagers. Exhibit 10 shows the prevalence of antidepressant use in children and adolescents for 2003 and the first half of The data, which reveal decreases in either prevalence or prevalence growth, signify the beginning of a trend that continued though the rest of 2004, contributing to the change in overall antidepressant use. Exhibit 10 Change in Antidepressant Use Among Patients Under 20 Years of Age 2003 to 2004 PREVALENCE PER 100 CHILDREN ABSOLUTE CHANGE QUARTER TO QUARTER IN PREVALENCE PER 100 CHILD BENEFICIARIES Age Q1 Q2 Q3 Q4 Q1 Q2 Q1 03- Q2 03- Group Q1 04 Q yrs 0.049% 0.050% 0.043% 0.040% 0.036% 0.036% yrs 0.555% 0.549% 0.527% 0.560% 0.579% 0.536% yrs 1.651% 1.687% 1.602% 1.738% 1.818% 1.741% yrs 3.244% 3.309% 3.176% 3.431% 3.577% 3.430% yrs 1.473% 1.499% 1.433% 1.547% 1.612% 1.541% Source: Express Scripts Research October

24 introduction Also in 2004, fallout from concerns about the safety of estrogens continued, and estrogen use declined by almost 20%. As a result, the estrogens class dropped out of the top 25 therapy classes. At the same time, the miscellaneous endocrines class, which includes several drugs used to treat the same conditions as estrogens, grew only 8.8% a far cry from the explosive growth of more than 20% seen in each of the previous three years. Part of the high miscellaneous endocrines trend in previous years was due to the inclusion of drugs now considered in the specialty drug class. However, the relatively low use of these products compared with other drugs in the class indicated that the majority of the trend was due to higher use of non-specialty products. Both classes are returning to more natural utilization rates after estrogens fell dramatically out of favor and patients flocked to miscellaneous endocrines for treating osteoporosis. The fact that 2004 was a healthier year than 2003 received much less publicity than OTC releases and safety concerns, but it probably had a bigger impact on overall utilization. Exhibit 11 shows the monthly PMPY utilization for five classes of drugs that are usually taken to treat acute conditions. Included are antivirals, quinolones and macrolides three classes in the top 25 for both 2003 and Antiviral drug patterns are particularly compelling. Consisting of drugs used to treat conditions as diverse as the flu and HIV, the antivirals saw a large increase for flu treatment in Flu drugs are typically taken for short durations. In 2004, short-term antiviral drug use was much lower, contributing to the negative 15.3% prevalence change. Quinolones and macrolides, classes used to treat bacterial infections, saw declines of 3.6% and 12.2%, respectively. Decreases in the use of quinolones and macrolides were not offset by corresponding increases in common first-line antibiotics, such as cephalosporins or penicillins. In fact, utilization of cephalosporins and penicillins declined at rates similar to those for other acute drug classes, with respective drops of 7.2% and 11.3%. 22 express scripts drug trend report 2004

25 Exhibit 11 Changes in the Use of Acute Drug Classes 2003 to 2004 Percent 15 Antivirals Macrolides 10 Quinolones Penicillins Cephalosporins introduction While the trend-management programs detailed in the Pharmacy Benefit Guide section of this Report have shown their ability to control or decrease drug trend, unmanaged trend is expected to continue in double digits. Our projections for the increases in unmanaged PMPY ingredient costs are shown in Exhibit 12. Exhibit 12 Increases in Unmanaged PMPY Cost 2002 to 2004 (Actual), 2005 to 2009 (Projected) Percent Rxs Cost METHODS The analyses included in the 2004 Drug Trend Report are based on prescription-drug use for a sample of approximately 3 million unique individuals, all members of commercial plans that maintained individual member-eligibility data in both 2003 and These clients used Express Scripts for both participating-pharmacy and home-delivery services. They also offered a funded benefit, meaning that the client 23

26 introduction paid at least some portion of the cost for prescriptions dispensed to its members. Medicaid recipients and Medicare beneficiaries receiving drug coverage through prescription-discount cards are excluded from this study because of their unique demographics and drug-coverage policies. About 70% of the resulting 2004 sample consists of nonmanaged-care commercial members, and about 30% are members of commercial managed-care plans. Cost data included in the Trend and Therapy Class Review sections are expressed on a discounted Average Wholesale Price (AWP) ingredient-cost basis only. AWP is the retail list price of the medication as reported by First DataBank. Dispensing fees, administrative fees, member contribution and rebates are not included in the cost calculations. Brand and generic discounts are representative of average rates charged across the Express Scripts book of business. It should be noted that while all generics are discounted at the same rate in this Report, actual generic discount rates can vary significantly for specific products. Also, in order to eliminate the impact of any changes in discounts from year to year, the same discount percentages were used in both years. As in previous Reports, prescription counts have been converted to equivalent quantities that would have been dispensed through participating pharmacies to adjust for differential home-delivery use rates and varying benefit structures. Drugs sold OTC and prescriptions dispensed in inpatient settings are not included in this analysis. In a departure from previous years, drugs that Express Scripts places in the specialty class have been excluded from the final calculations. Drugs were categorized into therapy classes groups of pharmaceutical agents that are chemically or therapeutically related. Therapy classes were defined by the first two digits of the 14-digit Generic Product Identifier (GPI) code maintained by the Facts and Comparisons division of Wolters Kluwer Health. 24 express scripts drug trend report 2004

27 OVERALL DRUG TREND 2 overall drug trend Express Scripts Drug Trend Report 2004

28 Overall Drug Trend From 2003 to 2004, per member per year (PMPY) ingredient costs for members in Express Scripts groups with funded, integrated benefits rose 10.6% 3.9 percentage points lower than the trend from 2002 to Of the increase, 27% was due to an increase in the utilization of drugs, 70% to increases in the cost per prescription and 3% to the introduction of new drugs in trend The lessening of trend was due primarily to the slower rate of utilization growth only 2.9% in 2004, compared with 6.8% in Factors contributing to lower utilization included the movement of drugs to over-the-counter (OTC) status, safety concerns surrounding some heavily-prescribed drugs, and a much milder cold and flu season in the fourth quarter of Prevalence which tracks the proportion of members who fill one or more prescriptions from one year to the next actually declined 0.9% in 2004, down from an increase of 3% in Conversely, intensity which tracks the number of prescriptions filled by users from one year to the next increased slightly from 3.7% in 2003 to 4% in The changes in both prevalence and intensity further reflect an overall decrease in short-term utilization. In a departure from previous years, four of the top 10 classes by total cost experienced less than double-digit increases in However, the antihyperlipidemics class, which accounted for 14% of overall cost growth in 2003, accounted for 20.8% in

29 trend COMPONENTS OF DRUG TREND Exhibit 13 Components of Unmanaged PMPY Cost Trend 2000 to 2004* 2000 vs vs vs 2003** 2003 vs 2004** Inflation 5.6% 7.5% 6.9% 6.0% x Units per Rx 0-0.1% 0.3% 0.2% x Brand/Generic Mix -1.4% -2.3% -2.6% -2.6% x Therapeutic Mix 4.4% 5.3% 2.6% 3.7% x Utilization 6.3% 6.3% 6.8% 2.9% = Common Drugs 15.6% 17.5% 14.0% 10.4% + New Drugs 1.0% 1.0% 0.5% 0.3% = All Drug 16.7% 18.5% 14.5% 10.6% * The percentage contribution of each factor does not total the All Drug percentage increase. The calculation takes the base cost for a given year and multiplies it by one times the percentage contributed by the first factor (inflation). The resulting total is then multiplied by the percentage contributed by the second factor (number of units dispensed) and so on for each Common Drug factor. The percentage added by the New Drugs is then added to the Common Drug percentage to yield an All Drug percentage increase. Final results may differ due to rounding. ** Specialty drugs were removed from the calculations for 2002 versus 2003, and 2003 versus The 2003 to 2004 PMPY ingredient-cost trend was analyzed in terms of the following three major dimensions: 1. Changes in the utilization of common drugs (prescription drugs that were dispensed in both 2003 and 2004) 2. Changes in the ingredient cost per prescription of these common drugs 3. Introduction of new products to the market (prescription drugs dispensed in 2004 but not in 2003) Utilization of common drugs was further divided by prevalence and intensity. Prevalence tracks the proportion of members who fill one or more prescriptions from one year to the next (i.e., users). Intensity is the number of prescriptions filled by users from one year to the next. 26 express scripts drug trend report 2004

30 Per-prescription costs were separated into the relative effects of four factors: 1. Inflation 2. Therapeutic Mix 3. Brand/Generic Mix 4. Units per Prescription trend Two factors were used to measure the effect of new drugs: the change in per-prescription cost (the differential between the cost of new drugs and the average cost of common drugs), and the added cost associated with increased utilization of new drugs. The remainder of this section presents general discussions for the 25 most-costly therapy classes according to each of the trend components: utilization, inflation, therapeutic mix, brand/generic mix, units per prescription and new drugs. A summary of specialty-drug cost is also presented in this section. Detailed reviews for each therapy class are included in the Therapy Class Review section. 27

31 trend UTILIZATION OF COMMON DRUGS After hitting a five-year high of 6.8% in 2003, common-drug utilization growth dropped to only 2.9% in While 13 classes experienced double-digit growth in 2003, only three classes exceeded a utilizationgrowth rate of 10% in In contrast, last year only three classes experienced a utilization decrease; but in 2004, seven classes dropped in utilization, with five of the seven classes also declining in prevalence. The classes with utilization declines in 2004 shared some common characteristics, including movement to OTC status, safety issues and prevalence of acute illness. Among classes that decreased in both overall utilization and prevalence, two (gastrointestinals and antihistamines) now have OTC options for drugs that were leaders in the class as recently as two years ago. Prilosec OTC and nonprescription Claritin are available for members who previously may have filled only one or two prescriptions a year to treat episodic heartburn or seasonal allergies, respectively. Drug safety, also a significant concern in 2004, affected utilization in many classes, especially the anti-rheumatics (NSAIDs). Publicity surrounding the withdrawal of Vioxx and the suspension of Bextra from the market was followed by much debate on the entire subclass of COX-2s. The three classes experiencing double-digit growth in 2004 were miscellaneous hematologicals, stimulants/anti-obesity and antihyperlipidemics. Not coincidentally, these three classes also had double-digit increases in prevalence, indicating that conditions treated with these drugs are being diagnosed more frequently. Miscellaneous hematologicals consists mainly of products used to prevent blood clots. Utilization of these drugs has been spurred by studies showing their effectiveness in preventing a second heart attack or stroke when taken by individuals who have already experienced a cardiovascular event. Increases in the stimulants/anti-obesity class have been driven by increased diagnosis of attention-deficit/hyperactivity disorder (ADHD) in children and adolescents, as well as new indications for ADHD in adults. Antihyperlipidemics benefited from new guidelines that promote lower LDL-levels among patients who are considered to be at high risk for adverse cardiac events and who are appropriate for treatment with lipid-lowering drugs. 28 express scripts drug trend report 2004

32 Exhibit 14 Utilization of Common Drugs for the Top 25 Therapy Classes 2003 to 2004 Ranked by 2004 Percent Change Rxs PMPY % CHANGE RANK THERAPY CLASS PREVALENCE INTENSITY TOTAL trend 1. Misc. Hematologicals % 6.2% 25.8% 2. Stimulants/Anti-Obesity % 3.2% 16.4% 3. Antihyperlipidemics % 2.6% 16.0% 4. Misc. Endocrines % 2.8% 8.8% 5. Anticonvulsants % 1.0% 8.7% 6. Beta Blockers % 0.4% 8.5% 7. Antineoplastics % 2.3% 8.4% 8. Antipsychotics % 3.1% 8.0% 9. Antihypertensives % 0.3% 7.7% 10. Antidiabetics % 0.1% 7.1% 11. Antidepressants % 3.7% 12. Narcotic Analgesics % 0.3% 3.3% 13. Ophthalmic Products % 3.5% 3.2% 14. Migraine Products % 0.5% 2.8% 15. Calcium Blockers % -0.8% 1.9% 16. Decongestants % 2.9% 1.5% 17. Antiasthmatics % 3.2% 1.5% 18. Oral Contraceptives % 0.2% 0.3% 19. Anti-Rheumatics (NSAIDs) % -1.5% -0.6% 20. Dermatologicals % -1.1% -0.7% 21. Gastrointestinals % 1.3% -0.9% 22. Antivirals % 15.0% -2.6% 23. Quinolones % -3.2% -3.6% 24. Antihistamines % 3.4% -5.1% 25. Macrolides % -4.0% -12.2% Top % -8.34% 4.5% Other % -6.9% -0.6% Total % 3.9% 2.9% 29

33 trend INFLATION Inflation represents the cost-per-prescription impact of changes made in the unit price charged by manufacturers. While still high, the 6% overall inflation rate seen in 2004 was the lowest since The overall inflation rate included a 7.2% rate for brands and a 0.4% rate for generics. With estrogens the perennial leader in inflation rate dropping out of the top 25 classes due to declining utilization, antivirals assumed the top spot in inflation trend. Most of the antivirals trend was due to increases in the cost of a single drug, Norvir, which is used to treat HIV. Anticonvulsants, the class that was second in 2004 inflation trend, had a 9.7% increase. The major cause was increases as high as 17% in the unit price of Neurontin as its manufacturer anticipated generic competition, which finally arrived in October. New generics or impending generic competition were common to many of the classes ranked highest due to inflation. Concerta and Adderall XR, two drugs used to treat ADHD, are expected to go generic in These products led price increases in the stimulants/anti-obesity therapy class. Among dermatologicals, the one drug driving higher-than-average inflation trend in this class was oral isotretinoin, sold under the brand-name Accutane, and several recently-introduced branded generics. Price increases for Accutane exceeded 20% in 2004, while generic prices stayed relatively flat. Within the contraceptives class, the most frequently dispensed product, Ortho Tri-Cyclen, lost patent protection in late With price increases in mid-2003 and late 2003, the effective price increase for Ortho Tri-Cyclen from 2003 to 2004 was more than 12%. Finally, within the decongestants class, prices for Flonase, due to go generic in 2005, increased more than 8% in 2004, leading to the 8% inflation increase in the class. In other classes that experienced relatively high inflation trends, generics did not play as big a factor. Surprisingly, despite the recent introduction of three new generics, the antidiabetics class was led by a brand product, Lantus, which had price increases approaching 20%. As a long-lasting product that slowly releases insulin over an entire day, Lantus can be used alone or with other drugs to treat diabetes. Because it has little 30 express scripts drug trend report 2004

34 competition, Lantus has experienced above-average price increases. Other classes with little generic competition were miscellaneous hematologicals and miscellaneous endocrines. Plavix, which commands the dominant position in the miscellaneous hematologicals, saw price increases of almost 8%. Among miscellaneous endocrines, Fosamax had the biggest impact on inflation trend, due to moderate price increases and its dominant market share. Evista and Miacalcin, miscellaneous endocrines products that saw market-share declines, had the largest price increases at 8.5% and 15.8%, respectively. trend Exhibit 15 Price Changes Due to Inflation for the Top 25 Therapy Classes 2003 to 2004 Ranked by Percent Change PRICE % CHANGE RANK THERAPY CLASS BRAND GENERIC ALL 1. Antivirals 11.0% 1.8% 10.4% 2. Anticonvulsants 10.5% 1.1% 9.7% 3. Stimulants/Anti-Obesity 10.4% 0.3% 9.3% 4. Dermatologicals 11.3% 0.3% 9.0% 5. Oral Contraceptives 10.9% 2.1% 8.2% 6. Decongestants 8.1% -0.7% 8.0% 7. Antidiabetics 9.1% 0.3% 7.7% 8. Ophthalmic Products 8.3% 0.7% 7.7% 9. Misc. Hematologicals 7.8% 2.5% 7.6% 10. Misc. Endocrines 7.6% 0 7.3% 11. Narcotic Analgesics 9.9% 1.4% 7.0% 12. Antipsychotics 6.9% 0.9% 6.7% 13. Macrolides 6.5% 4.8% 6.5% 14. Migraine Products 6.5% 0 6.4% 15. Anti-Rheumatics (NSAIDs) 7.1% 1.7% 6.2% 16. Antidepressants 7.5% -0.2% 6.1% 17. Antihyperlipidemics 5.8% 0.2% 5.6% 18. Antihypertensives 7.6% 0.3% 5.6% 19. Quinolones 5.4% 0 5.4% 20. Antiasthmatics 6.9% -10.8% 5.1% 21. Antihistamines 5.1% 0.1% 5.0% 22. Calcium Blockers 5.6% -0.2% 3.7% 23. Antineoplastics 5.1% -0.3% 3.7% 24. Beta Blockers 6.1% 0.6% 3.5% 25. Gastrointestinals 4.2% 0.3% 3.4% Top % 0.1% 6.1% Other 7.5% 1.0% 5.4% Total 7.2% 0.4% 6.0% 31

35 trend THERAPEUTIC MIX Therapeutic mix results from the changing market shares of individual drugs within therapy classes, additional new strengths of existing drugs, and changes in overall market share of each class. Compared with an increase of 2.6% in 2003 when specialty drugs were excluded, therapeutic mix increased to 3.7% in Analysis of the top 25 classes for 2004 reveals decreases in six classes with double-digit increases in two. In 2003, seven classes experienced a mix-trend decrease, and the magnitude of the therapeutic-mix declines in 2003 was greater than in For example, in 2003, antihistamines experienced a 10.1% mix decline, due primarily to the withdrawal of Claritin from the prescription market. In 2004, however, the antihistamine market was much more stable, declining by only 0.7%. Likewise, miscellaneous endocrines stabilized from a specialty-adjusted 5.2% decline in 2003 to a 1.2% decline in 2004, due to smaller increases in market share of lower-priced drugs. Even estrogens, which dropped out of the top 25 by cost in 2004 due to declining utilization, had a relatively flat therapeutic-mix change in 2004 after dropping 4.3% in Perhaps most dramatic among the top 25 classes was the movement of the top two classes, antineoplastics and antivirals. Due to the use of more expensive drugs to treat breast cancer and lung cancer, antineoplastics increased 5.1 percentage points over last year s therapeutic-mix trend of 5.3% without specialty drugs. The antivirals class was actually more in line with patterns seen before last year as it jumped 20 places in the top 25 from a 2.4% decline in 2003 to a 10.5% increase in In 2003, an exceptionally severe flu season produced a run on drugs used to mitigate flu symptoms. Generally used for only a few days, flu drugs are much less expensive than most other drugs in the class, which are used to treat longer-term conditions such as HIV. Despite a shortage of flu vaccines, fewer outbreaks of flu occurred in 2004, resulting in a therapeutic-mix trend that once again leaned toward the more expensive products. Five of the remaining classes in the top 10 (anticonvulsants, antipsychotics, stimulants/anti-obesity, narcotic analgesics and antiasthmatics) experienced smaller mix increases in 2004 than in Patterns in these classes indicate slowing in market-share growth for relatively new, more expensive products in their respective classes. Relatively new drugs such as Strattera (in the stimulants/anti-obesity class) and Advair (in antiasthmatics) are two of the drugs driving these trends. 32 express scripts drug trend report 2004

36 Perhaps the most compelling aspect of therapeutic-mix trend lies beyond the top 25 classes, however. Last year, the mix trend of all other classes decreased by 1.5%, driven largely by three factors increases in the utilization of relatively inexpensive classes used to treat acute conditions, transfer of Claritin-D products to the non-prescription market and a relatively weak new drug pipeline. In 2004, the impact on mix trend from classes outside the top 25 was an increase of 4.2%. The increase reflected a decline in the use of drugs to treat acute conditions, and stabilization of the market for non-sedating antihistamine and decongestant combinations. More significant, though, is the introduction of new, more expensive drugs to treat previously untreated or under-treated conditions as diverse as erectile dysfunction, pulmonary hypertension, Alzheimer s disease and advanced bacterial infections. As new drugs are introduced into currently low-profile classes, the effect will be felt across the entire drug spectrum. trend Exhibit 16 Price Changes Due to Therapeutic Mix for the Top 25 Therapy Classes 2003 to 2004 Ranked by Percent Change RANK THERAPY CLASS % CHANGE 1. Antivirals 10.5% 2. Antineoplastics 10.4% 3. Anticonvulsants 6.7% 4. Antipsychotics 6.6% 5. Stimulants/Anti-Obesity 5.7% 6. Narcotic Analgesics 5.0% 7. Ophthalmic Products 4.8% 8. Oral Contraceptives 4.8% 9. Antiasthmatics 4.7% 10. Antidiabetics 3.4% 11. Beta Blockers 3.3% 12. Antidepressants 3.2% 13. Dermatologicals 3.0% 14. Gastrointestinals 2.2% 15. Antihypertensives 2.0% 16. Misc. Hematologicals 1.9% 17. Calcium Blockers 1.4% 18. Quinolones 0.7% 19. Decongestants 0.1% 20. Migraine Products -0.4% 21. Anti-Rheumatics (NSAIDs) -0.5% 22. Antihistamines -0.7% 23. Antihyperlipidemics -1.1% 24. Misc. Endocrines -1.2% 25. Macrolides -1.4% Top % Other 4.2% Total 3.7% 33

37 trend BRAND/GENERIC MIX In 2004, the strong impact of movement from brands to their generic equivalents resulted in a brand/generic-mix trend decline of 2.6% essentially the same percentage seen in For the second year, the contraceptives class had the greatest brand-to-generic movement, resulting in a brand/generic-mix trend of -14.5%, after a decline of 7.8% in About 64% of the overall change in the contraceptives class was due to the introduction of a generic for Ortho Tri-Cyclen late in Other classes with brand/generic-mix trend of -7.8% or more (the maximum impact of any class in 2003) were quinolones and antidepressants. Quinolones saw a dramatic increase in the generic fill rate due primarily to the introduction of generics to a single drug, Cipro, in mid Generic conversions for Cipro alone accounted for 98% of the change in the class. Generics for two significant brand antidepressants, Wellbutrin SR and Celexa, were introduced in However, the product that accounted for 44% of the change in antidepressants due to brand/generic mix was paroxetine (the generic for Paxil ), which was introduced in With the full effects of all three generic antidepressants hitting the class, generic fill rate in the antidepressant class increased almost 10 percentage points from 2003 to Other classes with significant changes due to generics were antidiabetics and narcotic analgesics. In the antidiabetics class, generic equivalents for three products, Glucophage XR, Glucotrol XL and Glucovance, contributed to the brand/generic-mix change in the class. Changes in brand/generic mix among the narcotic analgesics were somewhat tempered because generics for several brands were introduced only in a few strengths, rather than all strengths available for the brand. The biggest effect on the class came from the late-2003 release of Percocet generics in higher strengths than were previously available. The 80mg strength generic for OxyContin was a close second. Other strengths of OxyContin that are expected to go generic are likely to impact brand/generic trend significantly in Still other classes with notable trends in brand/generic mix were dermatologicals, led by generics for Accutane, and antineoplastics, led by generics for Purinethol and Nolvadex. 34 express scripts drug trend report 2004

38 Exhibit 17 Changes in Brand/Generic Mix for the Top 25 Therapy Classes 2003 to 2004 Ranked by Percent Change trend RANK THERAPY CLASS KEY GENERIC INTRODUCTION % CHANGE 1. Oral Contraceptives Ortho Tri-Cyclen -14.5% 2. Quinolones Cipro -9.1% 3. Antidepressants Wellbutrin SR, Paxil, Celexa -8.5% 4. Antidiabetics Glucophage XR, Glucotrol XL, Glucovance -6.1% 5. Narcotic Analgesics Percocet, OxyContin -5.8% 6. Dermatologicals Accutane, Diprolene AF -5.4% 7. Antineoplastics Purinethol, Nolvadex -4.0% 8. Antihypertensives Monopril, Lotensin -2.3% 9. Anticonvulsants Neurontin -2.2% 10. Calcium Blockers Tiazac -1.4% 11. Gastrointestinals Prilosec -1.3% 12. Ophthalmic Products Ciloxin, Ocuflox -1.3% 13. Stimulants/Anti-Obesity Adderall -0.8% 14. Antipsychotics Lithobid, Clozaril -0.7% 15. Beta Blockers Betapace AF, Lopressor -0.4% 16. Decongestants Atrovent -0.3% 17. Misc. Hematologicals Pletal -0.2% 18. Antivirals Cytovene -0.2% 19. Migraine Products D.H.E. 45, Midrin -0.2% 20. Antihistamines Phenergan -0.1% 21. Anti-Rheumatics (NSAIDs) Voltaren XR -0.1% 22. Antihyperlipidemics N/A Macrolides N/A Misc. Endocrines N/A Antiasthmatics N/A 0.1% Top % Other -1.9% Total -2.6% 35

39 trend UNITS PER PRESCRIPTION As usual, the impact of changes in the number of units per prescription on overall costs was very small in Changes in units per prescription had only a 0.2% impact on overall trend. Within the top 25 classes, the effect was positive in 12 classes, negative in 11and nominal in two. Changes in units per prescription can be attributed to several distinct factors. One major influence is increasing use of larger package sizes, particularly for dermatologicals, the class with the greatest positive change due to units. Although recent developments may affect its future use, the current leading brand dermatological product is Elidel. A cream used primarily to treat mild or moderate eczema, Elidel comes in several tube sizes. In 2004, market share of its two largest sizes increased from 31% to 46% of all Elidel prescriptions. This trend toward the use of larger package sizes likely will continue as conditions such as eczema are treated prophylactically on a regular basis, rather than as-needed only when a rash develops. Changes in units are also due to more maintenance therapy for pain management. Narcotic analgesics, typically a class with a relatively large units impact, is an example of this trend. Hydrocodone and oxycodone, two oral, solid generic products, have the greatest effect. Also increasing in units per prescription was Duragesic, a narcotic patch often used by patients unable to take medications orally. Classes with negative changes in units per prescription included anticonvulsants, antivirals and antipsychotics. Increasingly, anticonvulsants are prescribed for pain management in addition to seizure control. With typical daily doses for pain management less than those for seizure control, the number of units per prescription has declined for the class. For antivirals, a decline in units per prescription was led by the anti-hiv product Norvir. New treatment regimens for HIV likely have contributed to this decline. Among antipsychotics, the decrease was primarily due to a decline in the numbers of units per prescription for Seroquel, which may be used more than competing products for short-term management of insomnia or anxiety. 36 express scripts drug trend report 2004

40 Exhibit 18 Changes in Units per Prescription for the Top 25 Therapy Classes 2003 to 2004 Ranked by Percent Change trend RANK THERAPY CLASS % CHANGE 1. Dermatologicals 3.6% 2. Narcotic Analgesics 2.6% 3. Antiasthmatics 1.4% 4. Gastrointestinals 1.1% 5. Stimulants/Anti-Obesity 1.0% 6. Macrolides 0.8% 7. Antineoplastics 0.8% 8. Beta Blockers 0.6% 9. Antidiabetics 0.4% 10. Antihistamines 0.3% 11. Antihypertensives 0.2% 12. Misc. Hematologicals 0.2% 13. Misc. Endocrines Oral Contraceptives Anti-Rheumatics (NSAIDs) -0.3% 16. Calcium Blockers -0.4% 17. Migraine Products -0.4% 18. Antidepressants -0.5% 19. Antihyperlipidemics -0.5% 20. Decongestants -0.7% 21. Ophthalmic Products -0.9% 22. Quinolones -1.0% 23. Antipsychotics -1.7% 24. Antivirals -1.7% 25. Anticonvulsants -1.9% Top % Other 0.2% Total 0.2% 37

41 trend NEW DRUGS In 2004, the FDA approved 31 new molecular entities and five new therapeutic biologics. 23 While the absolute number of drug approvals is higher than in either 2002 or 2003, several approvals were for unusual products (i.e., nutritional supplements) that were previously available as nondrug products or in different formulations. Consequently, the increase in drug approvals has not translated into an increased impact on PMPY spending. The 0.3% increase for new drugs in 2004 is the lowest seen since The new drug pipeline continues to have no more than a modest effect on drug trend. Only nine of the top 25 therapy classes had a measurable change due to new drugs, and only one of those classes had an increase of greater than 1%. The 2004 findings are dramatically different from those seen in 2003, when a single product, Strattera, resulted in a 21% change in PMPY costs for the stimulant/anti-obesity class, and four additional therapy classes saw increases of greater than 1%. The antiasthmatic therapy class exhibited the largest growth in PMPY spend. Although overall trend growth of 1.6% among antiasthmatic drugs was modest, it was almost three times the trend growth observed in the second-highest therapy class. New drug spend for antiasthmatics was almost entirely due to Spiriva, an inhaled drug for chronic obstructive pulmonary disease (COPD). Spiriva offers less-frequent dosing than its competitors. A combination product, Vytorin TM, was introduced into the antihyperlipidemics class in 2004; its entry caused a slight decrease in costs per prescription since Vytorin is less expensive than the two drugs it contains when they are taken independently. Other significant new drugs in 2004 were combinations of existing products that belong to different therapy classes. Because they are combinations, some of these new products are not included in either of the classes corresponding to their components. Therefore, they are not in the top 25 classes. Caduet, a combination of Norvasc (a calcium blocker) and Lipitor (an antihyperlipidemic) accounted for 6.5% of total new drug costs, and Symbyax TM, a combination of the antidepressant Prozac and the antipsychotic Zyprexa, accounted for 10% of new drug costs. 23 F-D-C Reports, Inc. The Pink Sheet 2004/2005 Pharma Almanac. 2004;66(52): express scripts drug trend report 2004

42 Exhibit 19 Changes in New Drugs per Prescription for the Top 25 Therapy Classes 2003 to 2004 Ranked by Percent Change RANK THERAPY CLASS SIGNIFICANT NEW DRUG % UTILIZATION % COST % CHANGE trend 1. Antiasthmatics Spiriva 1.2% 0.5% 1.6% 2. Ophthalmic Products Elestat TM 0.5% 0.2% 0.7% 3. Antihyperlipidemics Vytorin TM 0.5% -0.1% 0.4% 4. Antidepressants Cymbalta 0.3% 0.1% 0.4% 5. Misc. Endocrines Orfadin 0 0.4% 0.4% 6. Antineoplastics Tarceva TM 0 0.2% 0.2% 7. Quinolones Factive 0.1% 0 0.1% 8. Migraine Products Ergomar % 9. Dermatologicals Ertaczo TM 0.1% Anticonvulsants N/A Decongestants N/A Gastrointestinals N/A Antihypertensives N/A Antidiabetics N/A Anti-Rheumatics (NSAIDs) N/A Narcotic Analgesics N/A Antihistamines N/A Calcium Blockers N/A Beta Blockers N/A Antivirals N/A Antipsychotics N/A Stimulants/Anti-Obesity N/A Oral Contraceptives N/A Misc. Hematologicals N/A Macrolides N/A Top % 0.1% 0.2% Other 0.3% 0.3% 0.5% Total 0.2% 0.1% 0.3% 39

43 trend SPECIALTY DRUGS Drug products that must be stored, distributed or administered in nonstandard ways are considered to be specialty drugs. Because of their unique requirements and their usually high average costs per prescription which have distorting effects on costs for their therapy classes these products have been removed from the main analyses in the Drug Trend Report. However, the impact of specialty drugs on PMPY costs is important to recognize. For that reason, we have included top-level data on PMPY specialty-drug costs for the sample of members used in this Report to determine overall prescription-drug trend. A list of the top 10 specialty drugs for 2004 is also included. For 2004, PMPY spending on specialty drugs was $52.94, approximately 7% of total PMPY costs in This percentage is likely an underrepresentation of the true specialty-drug market, because some specialty drugs are still covered under medical benefits. In 2004, utilization of specialty drugs by the population of members analyzed for the 2004 Drug Trend Report increased by 8.9% almost three times the rate of increase for non-specialty drugs. Likely reasons for this growth include the continued transfer of specialty drugs from the medical benefit to the prescription-drug benefit, significant new specialty-drug launches and expanded indications for existing specialty drugs. Cost-per-prescription trend was 9.1% slightly higher than the trend for non-specialty drugs. Exhibit 20 Specialty-Drug Trend Top 10 Drugs 2004 BRAND NAME INDICATION(S) COST PMPY % OF SPECIALTY-DRUG SPEND Enbrel RA, Psoriasis, Others $ % Avonex MS $ % Copaxone MS $ % Humira RA $ % Procrit Anemia $ % Lovenox Blood Clots $ % Pegasys Hepatitis C $ % Betaseron MS $ % Rebif MS $ % Neupogen Neutropenia $ % Other $ % Total All Specialty $ express scripts drug trend report 2004

44 Exhibit 20 provides a glimpse of the top 10 drugs contributing to specialtydrug spend in Drugs for two conditions, rheumatoid arthritis (RA) and multiple sclerosis (MS), contributed almost 40% of overall drug spending for specialty drugs in trend Treatment of RA accounts for the most cost among specialty drugs, with two drugs, Enbrel and Humira, representing approximately 20% of total specialty spend. A third injectable product, Remicade, is also commonly used in the treatment of RA, but because it is an intravenous infusion given at an infusion center or medical clinic, its use is under-reported through prescription-drug claims alone. As new data emerge for these products, more individuals with RA are being treated earlier in the disease process, and treatment usually continues for longer periods of time. In addition, the classification of these products as therapy for RA may be misleading, since new indications may increase their use in other disease states. For example, Enbrel, which received a new indication in 2004 for the treatment of psoriasis, is also approved for several types of arthritis. The second class with significant specialty-drug spend in 2004 contains the drugs used to treat MS. The four most common MS drugs all made the top 10. When combined, these four drugs represent approximately 18.5% of overall specialty-drug spend. The MS market is more stable than the anti-rheumatics market, and in contrast to drugs used to treat RA, MS drugs generally are not used for other diseases. PMPY drug spend for MS drugs had been projected to decrease in 2005, because Tysabri, a new infusion product, was expected to replace other therapies for a significant number of MS patients. Since Tysabri must be administered by a healthcare professional, its use would have shifted some costs to the medical benefit. However, Tysabri marketing was suspended in February 2005 due to a potentially severe side effect, and its re-introduction to the market is uncertain. The other drugs in the top 10 list of specialty drugs are used to treat or prevent relatively serious conditions that include blood clots, hepatitis C and complications of cancer. 41

45 trend Notes 42 express scripts drug trend report 2004

46 3 THERAPY CLASS REVIEW therapy class review Express Scripts Drug Trend Report 2004

47 Therapy Class Review This section presents detailed information on the utilization and cost of the top 25 therapy classes for Components of trend have been analyzed for each class. Also included are market-share trends for the major drugs within the class and projected trends for the class as a whole. Because specialty drugs have been removed from the calculations in some therapy classes, trends for 2002 have been recalculated. Therefore, percentages reported for 2002 in the 2003 Drug Trend Report may not match those in this Report. All drugs classified in this Report as both common and new are included in the reviews. Drugs that are in the pipeline and patent expirations that have significant potential to affect a specific class in the next several years are also presented. therapy class review Cost per Prescription and PMPY Cost For the Top 25 Therapy Classes 2003 to 2004 (Excluding Specialty Drugs) AWP PER Rx PMPY COST THERAPY CLASS % CHANGE % CHANGE Antihyperlipidemics $ $ % $ $ % Gastrointestinals $ $ % $ $ % Antidepressants $ $ % $ $ % Antihypertensives $ $ % $ $ % Antidiabetics $ $ % $ $ % Antiasthmatics $ $ % $ $ % Anti-Rheumatics (NSAIDs) $ $ % $ $ % Anticonvulsants $ $ % $ $ % Narcotic Analgesics $ $ % $ $ % Dermatologicals $ $ % $ $ % Miscellaneous Endocrines $ $ % $ $ % Antihistamines $ $ % $ $ % Calcium Blockers $ $ % $ $ % Beta Blockers $ $ % $ $ % Antivirals $ $ % $ $ % Antipsychotics $ $ % $ 9.93 $ % Stimulants/Anti-Obesity $ $ % $ 8.77 $ % Oral Contraceptives $ $ % $ $ % Miscellaneous Hematologicals $ $ % $ 7.88 $ % Decongestants $ $ % $ 9.87 $ % Antineoplastics $ $ % $ 8.44 $ % Migraine Products $ $ % $ 8.05 $ % Ophthalmic Products $ $ % $ 7.45 $ % Quinolones $ $ % $ 9.25 $ % Macrolides $ $ % $ 8.82 $ % Top 25 $ $ % $ $ % Other $ $ % $ $ % Total $ $ % $ $ % 43

48 therapy class review ANTIHYPERLIPIDEMICS RANK 1 COMPONENTS OF TREND Cost per Prescription 3.9% Inflation 5.6% Units per Prescription -0.5% Brand/Generic Mix 0 Therapeutic Mix -1.1% Utilization 16.0% Prevalence 13.0% Intensity 2.6% New Drugs 0.4% TOTAL 20.9% KEY FACTS PMPY: $81.76 Rx PMPY: 0.97 Prevalence of Use: 10.3% Average Cost/Rx: $84.62 # Rx/User/Year: 9.38 The antihyperlipidemics continued their reign as the top therapy class in With a PMPY cost of $81.76, they now represent over 11% of total PMPY spending. Utilization growth continued to drive trend, rising 16% in An increase in prevalence was responsible for approximately 80% of the utilization increase. Cost-per-prescription trends were down in 2004, from 5.2% to 3.9%, driven largely by decreases in inflation and therapeutic mix. A new drug, Vytorin TM, also contributed to the trend increase. Vytorin, approved in July 2004, is a combination of Zocor and Zetia, two products that were already on the market. As expected, statins dominate the therapy class, with a combined market share of approximately 80%. Newer products such as Crestor and Vytorin are beginning to take market share from the leading products, but the top drug, Lipitor, still commands over 50% of prescriptions. Among the non-statins, Zetia continues to gain market share, growing to 6.6% of prescriptions, up from 3.8% in Generic lovastatin the only generic statin currently on the U.S. market also grew in market share, from 1.7% to 2.4% of prescriptions. Antihyperlipidemics Market-Share Trend 60 Lipitor $81.62 Percent of Prescriptions Zocor $ Pravachol $ Zetia $69.83 Generics $ Crestor $ express scripts drug trend report 2004

49 LOOKING AHEAD While another therapy class is unlikely to dislodge the antihyperlipidemics from their top perch in the foreseeable future, upcoming events probably will have an impact on their drug trend. First, the patents for Pravachol and Zocor expire in These products, which had a combined market share of 21.1% in 2004, will be the second and third statins to become available as generics. Then in 2007, the patent-extension strategy for Lipitor could emerge in the form of a combination product that both lowers LDL and raises HDL. These events, combined with significant marketing budgets for existing drugs and the aging of the population, will likely result in continued utilization growth. We expect drug trend for this class to average 17.9% annually over the next four years. Antihyperlipidemics Projected Trend Cost Prescriptions Percent therapy class review Antihyperlipidemics Pipeline Brand Generic Proposed Use Availability Lipitor and torcetrapib atorvastatin and torcetrapib Decreasing LDL/Increasing HDL 2007 Niaspan and Zocor niacin, extended release and simvastatin Combination high-cholesterol therapy 2007 implitapide High cholesterol/atherosclerosis 2007 eflucimibe High cholesterol 2008 JTT-705 Increasing HDL 2008 GW High cholesterol 2009 Mevacor OTC lovastatin OTC treatment of high cholesterol Unknown Pravachol OTC pravastatin OTC treatment of high cholesterol Unknown Antihyperlipidemics Patent Expirations Brand Generic Patent Expiration Niaspan niacin, extended release Challenge pending Pravachol pravastatin April 20, 2006 Zocor simvastatin June 23, 2006 The most significant new drug story in this class is the Lipitor and torcetrapib combination product that is being developed. Known chemically as a cholesteryl ester transfer protein (CETP) inhibitor, torcetrapib blocks one of the proteins that transports cholesterol in the blood. Unlike statins and most other currently-available cholesterol agents, which lower LDL, or bad cholesterol, torcetrapib raises HDL, or good cholesterol. It will not be available as a stand-alone product, so it cannot be combined with any statin other than Lipitor. The combination product also represents a patentextension strategy for Lipitor, which faces patent expiration in A 2007 launch for Lipitor and torcetrapib is possible, but optimistic. JTT-705 is also a CETP inhibitor. Other drugs in the lipid-control pipeline affect blood components other than 3-hydroxy-3-methylglutaryl coenzyme A (HMG-CoA) reductase the enzyme blocked by statins. Eflucimibe blocks acyl-coa cholesterol acyltransferase (ACAT); implitapide is an inhibitor of microsomal triglyceride transfer protein (MTTP); GW is an agonist for peroxisome proliferation-activated receptors (PPARs). Another significant story in this class is the probable availability in 2006 of generics for Pravachol and Zocor, statins that together represent approximately 20% of the total market for lipid-lowering drugs. The generic for Zocor will also be the most potent statin available generically. Over-the-counter (OTC) versions of statin drugs are unlikely in the near term, after an early 2005 vote by members of two FDA Advisory Committees repeated an earlier committee recommendation against the switch. 45

50 therapy class review GASTROINTESTINALS RANK 2 COMPONENTS OF TREND Cost per Prescription 5.4% Inflation 3.4% Units per Prescription 1.1% Brand/Generic Mix -1.3% Therapeutic Mix 2.2% Utilization -0.9% Prevalence -2.2% Intensity 1.3% New Drugs 0 TOTAL 4.5% KEY FACTS PMPY: $61.84 Rx PMPY: 0.59 Prevalence of Use: 8.9% Average Cost/Rx: $ # Rx/User/Year: 6.56 For the second consecutive year, PMPY trend for gastrointestinal (GI) drugs decreased significantly, with the 2004 trend increase of 4.5% being the lowest in recent history. A significant slowdown in utilization was the culprit, most likely due to the introduction of Prilosec OTC in September Fewer people were taking prescription versions of these drugs in 2004, as indicated by the 2.2% decrease in prevalence. Cost-per-prescription trends increased in 2004, largely due to increased use of the brands Nexium and Prevacid. Proton pump inhibitors (PPIs) are the most popular gastrointestinal drugs, with a combined 79% of prescriptions. In 2004, a switch occurred in the top product in terms of market share, with Nexium surpassing Prevacid. Despite the slowdown in utilization, three of the four brandonly PPIs grew their market share, while the omeprazole family (Prilosec and generics) held steady. Generic market share dropped from 35% to 32.6%, as fewer people used H2 antagonists such as ranitidine and famotidine. Generic erosion could continue in 2005 as prescription versions of ranitidine 150mg shift to OTC status. Gastrointestinals Market-Share Trend Percent of Prescriptions Generics $77.87 Nexium $ Prevacid $ Protonix $ Aciphex $ Prilosec $ express scripts drug trend report 2004

51 LOOKING AHEAD While we do not expect utilization growth of this class to return to past levels, use could increase slightly in 2005 as concerns over the COX-2 inhibitors could lead more patients to try an NSAID plus a PPI. Additional omeprazole generics that could enter the market in 2005 or 2006 would provide the first low-cost generic competition. The remaining PPIs are patent-protected until at least 2009, and additional OTC introductions are unknown. We expect annual growth to be consistent at 5% over the next four years. Gastrointestinals Projected Trend Cost Prescriptions Percent therapy class review Gastrointestinals Pipeline Brand Generic Proposed Use Approval Entereg TM alvimopan Post-operative ileus 2005 Calmactin TM cilansetron Irritable bowel syndrome 2007 ITAX TM itopride Dyspepsia 2007 GW Chemotherapy-induced nausea and vomiting 2007 DDP-225 Irritable bowel syndrome 2008 renzapride Irritable bowel syndrome 2008 AZD0865 Acid-related GI disease mosapride GERD Gastrointestinals Patent Expirations Brand Generic Patent Expiration Zofran ondansetron Dec. 24, 2006 Kytril granisetron June 29, 2008 Prevacid lansoprazole Nov. 10, 2009 The bulk of drug use in this class is for the treatment of gastroesophageal reflux disease (GERD) and the treatment or prevention of ulcers. PPIs, which have largely replaced the H2 receptor antagonists for those indications, continue to be the mainstay of therapy for these conditions. The PPIs are a mature class, with a significant change in 2003 caused by the introduction of an OTC form of Prilosec, allowing patients with GERD to treat themselves. Omeprazole, the generic version of Prilosec, is now widely available, and has, along with Prilosec OTC, tempered previous growth in the GI class. No patent expirations on other branded PPIs are expected until 2009, and no new products are expected in the class. Research focus has shifted to two areas: new therapies for Crohn s disease (mostly injectables, which will be included as specialty drugs) and agents for irritable bowel syndrome, which are in the pipeline for 2005 and beyond. Researchers continue to search for a drug to replace Propulsid (cisapride), which was used to treat ileus and gastroparesis before cardiac side effects forced its withdrawal in

52 therapy class review ANTIDEPRESSANTS RANK 3 COMPONENTS OF TREND Cost per Prescription -0.3% Inflation 6.1% Units per Prescription -0.5% Brand/Generic Mix -8.5% Therapeutic Mix 3.2% Utilization 3.7% Prevalence 0 Intensity 3.7% New Drugs 0.4% TOTAL 3.7% KEY FACTS PMPY: $60.80 Rx PMPY: 0.86 Prevalence of Use: 10.6% Average Cost/Rx: $70.63 # Rx/User/Year: 8.09 Antidepressant trend slowed markedly in 2004, due to both the introduction of generics to Celexa and a general slowdown in utilization. The overall trend increase of 3.7% in 2004 is down sharply from a 16.9% increase in The negative growth in per-prescription costs was led by a significant decrease in brand/generic mix, reflecting increased use of generics to Celexa, Wellbutrin SR and Paxil. The overall utilization trend increase of 3.7% was down from 11.2% in The difference in utilization growth was almost entirely driven by a decrease in prevalence. The negative publicity surrounding a potential link between antidepressants and suicidal behavior among children and adolescents may have caused patients to seek other treatments. The introduction of a new drug, Cymbalta, contributed approximately 10% of the overall trend increase. As expected, market share for generic antidepressants increased in 2004, up a full 10% from Several products, including Paxil, Celexa, Wellbutrin SR and Remeron SolTab, faced generic competition at some point in the year. Zoloft remains the market leader, but it too is facing generic competition in Lexapro and Effexor continue to grow in share Lexapro due to heavy advertising and Celexa conversions, and Effexor positioning itself as a non-ssri (selective serotonin reuptake inhibitor). Antidepressants Market-Share Trend Percent of Prescriptions Generics $54.33 Zoloft $86.17 Lexapro $65.08 Celexa $78.04 Paxil $85.52 Prozac $ Effexor $ express scripts drug trend report 2004

53 LOOKING AHEAD With Zoloft losing patent protection in 2006, only one brand SSRI (Lexapro) with significant market share will remain. Effexor and Cymbalta are likely to become leading players in the class. With higher costs per prescription than SSRIs, these products could offset any trend decreases due to generics. Utilization should also rebound as safety concerns are addressed. We project annual growth averaging 9.7% through Antidepressants Projected Trend Cost Prescriptions therapy class review Antidepressants Pipeline Brand Generic Proposed Use Availability EMSAM TM selegiline transdermal Depression 2005 desvenlafaxine (DVS-233) Depression 2007 R-673 Depression/Anxiety disorder 2007 SR Depression 2007 saredutant Depression 2008 CP 122,721 Depression/Nausea 2008 radafaxine Depression 2008 Antidepressants Patent Expirations Brand Generic Patent Expiration Paxil CR TM paroxetine, controlled release Aug. 12, 2005 Zoloft sertraline June 30, 2006 Wellbutrin XL bupropion, extended release Aug. 28, 2006 Effexor /XR venlafaxine June 13, 2008 Lexapro escitalopram In litigation The antidepressant market is in transition, with all of the SSRIs plus Effexor/XR and Wellbutrin XL expected to face generic competition by the end of the decade. A highly-studied new category of antidepressants, the neurokinin receptor antagonists, has not met early high expectations, even though several products in the subclass (saredutant, R-673 and CP 122,721) are in late-stage development. Desvenlafaxine and radafaxine are the patent extension strategies for Effexor XR and Wellbutrin XL, respectively. Approval of the first transdermal patch for depression, EMSAM, could be granted as early as EMSAM contains selegiline, which is both a relatively selective inhibitor of the enzyme monoamine oxidase B (MAO-B) and a drug originally developed for treating Parkinson s disease. 49

54 therapy class review ANTIHYPERTENSIVES RANK 4 COMPONENTS OF TREND Cost per Prescription 5.5% Inflation 5.6% Units per Prescription 0.2% Brand/Generic Mix -2.3% Therapeutic Mix 2.0% Utilization 7.7% Prevalence 7.4% Intensity 0.3% New Drugs 0 TOTAL 13.6% KEY FACTS PMPY: $41.02 Rx PMPY: 1.1 Prevalence of Use: 10.9% Average Cost/Rx: $37.23 # Rx/User/Year: The antihypertensives class contains angiotensin-converting enzyme inhibitors (ACEIs), angiotensin receptor blockers (ARBs), vasodilators and combination products. For the first time in a number of years, overall trend growth in this class was less than 10%, driven by slower utilization growth. Cost-per-prescription trends actually rose, as the introduction of fewer new generics caused an increase in brand/generic mix. Utilization growth of 7.7% was down from 12.4% in 2003, with decreases in both prevalence and intensity of use. Antihypertensives continue to be the most widely used therapy class, at 1.1 prescriptions PMPY. Generic drug use, which continues to grow in this class, now approaches 50% of overall use, up from 14% in Overall generic market-share growth should begin to slow in upcoming years as fewer products lose patent protection. Among the remaining brands, Diovan is the only brand product with a market share of greater than 10%. Antihypertensives Market-Share Trend 50 Generics $32.18 Percent of Prescriptions Diovan $54.13 Altace $49.46 Lotrel $57.29 Accupril $ express scripts drug trend report 2004

55 LOOKING AHEAD The aging of the population, the epidemic of obesity, and more aggressive treatment of hypertension should result in consistent trend growth for the next few years despite the lack of significant new products in the class. Cost-per-prescription trend increases should remain modest, given the level of generic competition. We expect trend to continue in the 12% to 14% range through Antihypertensives Projected Trend Cost Prescriptions Percent therapy class review Antihypertensives Pipeline Brand Generic Proposed Use Availability BiDil isosorbide dinitrate and hydralazine Congestive heart failure in African-Americans 2005 Revatio TM sildenafil Pulmonary arterial hypertension 2005 Thelin TM sitaxsentan Pulmonary arterial hypertension 2006 aliskiren Hypertension 2007 darusentan Resistant hypertension 2008 Antihypertensives Patent Expirations Brand Generic Patent Expiration Altace ramipril In litigation Aceon perindopril Feb. 21, 2007 Mavik trandolapril Dec. 12, 2007 Cozaar losartan Feb. 11, 2010 Hyzaar losartan and HCTZ Feb. 11, 2010 In the last year, few new developments affected the antihypertensives class, which is composed primarily of the two subclasses: ACEIs and ARBs. About two years ago, the ACEIs reached a mature state, with generic products dominating ACEI prescriptions. Although the ARBs have not yet matured, no new ARBs are in development, and the use of existing ARBs for hypertension is stable. Any growth for ARBs will be tied to new indications; they are currently under investigation for use by high-risk congestive heart failure (CHF) patients. Aliskiren, a new type of antihypertensive that inhibits renin, is expected to be approved in BiDil, which combines two older drugs into a combination product, is being studied specifically to treat CHF in African-Americans. Approval is expected in Short-term growth in this class may come from new compounds designed to treat pulmonary arterial hypertension, a relatively rare but severe condition that can cause permanent lung and heart damage. Revatio, a new formulation of the erectile dysfunction drug Viagra, is expected to be approved in 2005, and approval for Thelin is expected in These drugs will be priced significantly higher than drugs for general hypertension. 51

56 therapy class review ANTIDIABETICS RANK 5 COMPONENTS OF TREND Cost per Prescription 5.1% Inflation 7.7% Units per Prescription 0.4% Brand/Generic Mix -6.1% Therapeutic Mix 3.4% Utilization 7.1% Prevalence 7.1% Intensity 0.1% New Drugs 0 TOTAL 12.5% KEY FACTS PMPY: $36.31 Rx PMPY: 0.56 Prevalence of Use: 4.1% Average Cost/Rx: $64.30 # Rx/User/Year: 13.9 Antidiabetic drug trend slowed in 2004, with the overall trend increase of 12.5% more closely resembling the trend increase in 2002 (14.6%) than in 2003 (23.1%). This slower rate of growth was due to decreases in both cost-per-prescription and utilization trends. Cost-per-prescription trend increased by 5.1%, down from 10.2% in Brand/generic mix dropped to -6.1% in 2004, down from -1.2% in 2003, due to growth in generic metformin prescriptions. Utilization-trend growth decreased from 11.7% to 7.1%, driven by a decrease in prevalence, which is surprising, given the obesity epidemic and its associated increased risk for diabetes in the U.S. As in 2003, new drugs did not contribute to drug-trend increases in this therapy class. As mentioned previously, prescriptions for generic metformin continued to grow, resulting in a market share of 26.6% at the end of Among the single-source brands, both Actos and Avandia held steady market shares. Market share for Glucotrol XL declined, however, following the introduction of its generic counterparts. 52 express scripts drug trend report 2004

57 Oral Antidiabetics Market-Share Trend Percent of Prescriptions metformin $35.57 glipizide $15.49 Actos $ Avandia $ Glucophage $56.48 Glucotrol $23.74 therapy class review The long-acting insulin Lantus continues to grow in market share, as more patients convert to the once-daily product from other insulins. The newer short-acting insulins, which are often used in combination with a long-acting product, showed mixed market-share gains. The leading product, Humalog, has largely preserved its market share in recent years, and a second product, Novolog, is also growing at the expense of the older Novolin products. Average costs per prescription are higher for the newer short-acting products, although exact costs are difficult to measure given the dosing variability of insulin. Insulins Market-Share Trend Percent of Prescriptions Lantus $79.85 Humalog $93.69 Humulin N $68.38 Novalog $ Novolin $

58 therapy class review LOOKING AHEAD The decrease in diabetes-drug trend in 2004 was likely a one-year event, as the market benefited from additional metformin-based products losing patent protection. The increasing prevalence of obesity and a continued emphasis on aggressive management of diabetes, combined with the probable introduction of several new products in the coming years, likely will cause trend increases leveling off at 21% through Antidiabetics Projected Trend Cost Prescriptions Percent Antidiabetics Pipeline Brand Generic Proposed Use Availability Glumetza TM metformin, extended release Oral antidiabetic 2005 Levemir insulin detemir Long-acting insulin 2005 Avandaryl rosiglitazone and glimepiride Oral antidiabetic 2005 muraglitazar Oral antidiabetic 2005 exenatide Diabetes (type 2) 2005 Actoplus Met TM pioglitazone and metformin Oral antidiabetic 2005 Neurodex TM dextromethorphan and quinidine Neuropathic pain 2006 vildagliptin (LAF237) Oral antidiabetic 2006 ruboxistaurin Diabetic complications 2006 sulodexide Diabetic nephropathy 2006 Exubera TM inhaled insulin Inhaled insulin 2006 MK-0431 Oral antidiabetic 2007 Pyridorin TM pyridoxamine Diabetic kidney disease 2007 Basulin basal insulin Long-acting insulin 2007 naveglitazar Oral antidiabetic 2008 Galida TM tesaglitazar Oral antidiabetic 2008 liraglutide Diabetes (type 2) Antidiabetics Patent Expirations Brand Generic Patent Expiration Amaryl glimepiride Oct. 6, 2005 Avandia rosiglitazone Feb. 28, 2009 Glyset miglitol July 27, 2009 Precose TM acarbose March 6, express scripts drug trend report 2004

59 The relatively strong diabetes-drug pipeline reflects changing attitudes in medical treatment of the disease. Physicians no longer treat diabetes conservatively by trying diet and exercise initially, then using one or two oral medications for years before finally switching to insulin after oral medications are no longer effective. New recommendations call for early and aggressive treatment often initiating therapy not only with lifestyle changes, but also with more than one type of drug to bring blood sugar levels close to normal ranges as rapidly as possible. One reason for this new aggressiveness is that under-treated patients with diabetes are at greater risk for developing long-term complications. Although insulin has been available for 80 years, it has never been available in an oral formulation because it is not stable in stomach acid. New technology may make oral insulin possible through inhalation. Exubera, the inhaled insulin closest to approval, has had a long development path, with many bumps along the way, mostly relating to safety. However, its eventual approval may expand the insulin market, as patients unwilling or unable to use insulin injections may choose new delivery technologies. At least five additional inhaled insulin products are in development; however, most are at least three years away from the market. therapy class review With regard to oral antidiabetic agents, two general categories have emerged in the near-term pipeline: PPAR agonists and DPP-IV inhibitors. Stimulating PPARs (peroxisome proliferatoractivated receptors) sensitizes the body to insulin. Sometimes referred to as glitazones, currently-available PPAR activators (agonists) include Avandia and Actos. Investigational PPAR agonists muraglitazar, naveglitazar and tesaglitazar are expected to be on the U.S. market by PPAR agonists that target mainly PPAR-gamma receptors are known for their glucoselowering abilities; those that are more active at PPAR-alpha receptors generally have positive effects on blood cholesterol. A new category of oral antidiabetic agents in the pipeline, DPP-IV inhibitors, work by blocking an enzyme called dipeptidyl peptidase IV (DPP-IV). Inhibition of DPP-IV reduces hyperglycemia (high blood sugar) in a way that does not cause hypoglycemia (low blood sugar). Somewhat related to the DPP-IV inhibitors is an injectable product called exenatide. This drug, derived from the saliva of Gila monsters, increases blood levels of a protein called glucagon-like peptide (GLP-1), which promotes insulin secretion and limits glucagon secretion. Increased GLP-1 results in the same effect seen with the DPP-IVs, that is, lowering of blood sugar only when blood sugar is elevated. The numerous long-term complications of diabetes often affect organs such as the kidneys and eyes as well as nerves in the fingers and toes. Called microvascular complications of diabetes because they result from damage to small blood vessels, these adverse effects can be irreversible. In 2004, two new drugs, Cymbalta and Lyrica TM, were approved for treating nerve pain (neuropathy) in patients with diabetes. Ruboxistaurin, a drug being developed to treat kidney (nephropathy) and/or eye (retinopathy) complications of diabetes, could be approved in

60 therapy class review ANTIASTHMATICS RANK 6 COMPONENTS OF TREND Cost per Prescription 11.7% Inflation 5.1% Units per Prescription 1.4% Brand/Generic Mix 0.1% Therapeutic Mix 4.7% Utilization 1.5% Prevalence -1.7% Intensity 3.2% New Drugs 1.5% TOTAL 14.9% KEY FACTS PMPY: $32.72 Rx PMPY: 0.44 Prevalence of Use: 7.7% Average Cost/Rx: $74.96 # Rx/User/Year: 5.61 Antiasthmatic drug trend increased 14.9% in 2004, down from a 26.1% increase in This dramatic decrease was due primarily to a slower utilization growth. Utilization-trend growth in 2004 was only 1.5%, which was significantly less than the 9.9% increase observed in 2003 but similar to the 2.6% increase in Most notable was the decrease in prevalence (10.4% in 2003 versus -1.7% in 2004). A more severe cold/flu season in 2003 could explain this significant shift at least partially, since asthma and related respiratory conditions may be aggravated by a cold or the flu. Cost-perprescription trend increases continued to grow at double-digit rates due to use of more expensive controller products. A new drug, Spiriva, contributed 1.5% of the overall trend. Generic products, while still leading the market share for antiasthmatic drugs, continue their gradual decline, with their 2004 share of 34.5% the lowest seen in the past five years. Singulair and Advair Diskus continue to build market share, however, with their combined share passing 40% in This trend is expected to continue, and generic market share could shrink further now that the FDA has instituted a ban on chlorofluorocarbon (CFC)-containing albuterol inhalers. The ban will become effective on Jan. 1, If CFCcontaining generic albuterol inhalers are replaced with non-cfc brand products, generic share could quickly slide to less than 20%. In addition, Spiriva is expected to build market share as its use increases for the treatment of chronic obstructive pulmonary disease (COPD). Antiasthmatics Market-Share Trend Percent of Prescriptions Generics $21.51 Singulair $83.44 Advair Diskus $ Flovent $82.16 Combivent $68.58 Pulmicort $ express scripts drug trend report 2004

61 LOOKING AHEAD As mentioned earlier, the upcoming ban on CFC-containing generic albuterol inhalers likely will have significant consequences on long-term drug-trend growth in this class. Utilization growth should also rebound as new drugs are introduced and marketing efforts increase. We expect the 2005 growth of 16.3% to be similar to 2004 s 15.1%, and then growth rates should increase in 2006 and beyond due to the impact of the CFC ban and new product introductions. Antiasthmatics Projected Trend Cost Prescriptions Percent therapy class review Antiasthmatics Pipeline Brand Generic Proposed Use Availability Aerospan TM flunisolide HFA Asthma 2005 Intal HFA cromolyn sodium Asthma 2005 arformoterol Asthma 2005 Alvesco ciclesonide Asthma 2006 Ariflo cilomilast COPD 2006 Daxas roflumilast Asthma/COPD 2006 Foradil HFA formoterol Asthma 2006 Symbicort budesonide and formoterol Asthma 2006 R411 Asthma Asthma Asthma/COPD Antiasthmatics Patent Expirations Brand Generic Patent Expiration Flovent fluticasone Expired Serevent salmeterol Aug. 12, 2008 Advair fluticasone and salmeterol Aug. 12, 2008 The pipeline for new asthma drugs is unremarkable, but the bigger story for 2005 and beyond is the phasing out of inhalers that contain ozone-depleting CFCs. Generic albuterol inhalers, which represent the largest percentage of generic prescriptions in this category, will be off the market completely by the end of Patients are unlikely to be affected clinically by a switch to CFC-free inhalers; but the transition from almost 100% generic utilization back to nearly total brand usage will have major consequences on PMPY spending in this category. 57

62 therapy class review ANTI-RHEUMATICS (NSAIDs) RANK 7 COMPONENTS OF TREND Cost per Prescription 5.1% Inflation 6.2% Units per Prescription -0.3% Brand/Generic Mix -0.1% Therapeutic Mix -0.5% Utilization -0.6% Prevalence 0.8% Intensity -1.5% New Drugs 0 TOTAL 4.5% KEY FACTS PMPY: $28.66 Rx PMPY: 0.43 Prevalence of Use: 12.7% Average Cost/Rx: $67.04 # Rx/User/Year: 3.38 The withdrawal of Vioxx and the transfer of information on the injectable rheumatoid arthritis (RA) products from this therapy class to the specialty section resulted in a dramatic decrease in overall drug trend from 22.2% in 2003 to only 4.5% in The effect of moving the injectable products can be seen in the cost-per-prescription trends, with therapeutic mix dropping from 6.8% to -0.5%. Although Vioxx was not withdrawn until Sept. 30, its removal from the world market still had a definite impact on utilization growth, which was flat in 2004, compared with a 5.6% increase in In terms of market share, generic NSAIDs continued to lead the class, growing to just over 50% in Based on the safety issues associated with COX-2 inhibitors and effective utilization-management programs, market share for generics should continue to increase. Among the COX-2s, Celebrex remained the market leader in Following the withdrawal of Bextra in 2005, Celebrex is also the lone COX-2 on the U.S. market. The demand for COX-2s is fading, however, so 2005 will tell a much different story. Anti-Rheumatics (NSAIDs) Market-Share Trend Generics $29.92 Celebrex $ Percent of Prescriptions Vioxx $84.79 Bextra $92.12 Mobic $ express scripts drug trend report 2004

63 LOOKING AHEAD The growth outlook for this therapy class is pessimistic, given the market withdrawal of Bextra, new FDA safety warnings placed on all NSAIDs and COX-2 inhibitors, and a decrease in direct-toconsumer advertising. Approval for the few COX-2 inhibitors in the pipeline is questionable at best in the current regulatory environment. We expect a negative trend for 2005 and then only modest drug-trend growth in the range of 4% to 6% through Anti-Rheumatics (NSAIDs) Projected Trend Cost Prescriptions Percent therapy class review Anti-Rheumatics (NSAIDs) Pipeline Brand Generic Proposed Use Availability temsirolimus RA 2007 milnacipran Fibromyalgia 2008 Prexige lumiracoxib OA/RA/Pain 2008 Arcoxia TM etoricoxib OA/RA/Pain 2009 Anti-Rheumatics (NSAIDs) Patent Expirations Brand Generic Patent Expiration Mobic meloxicam April 13, 2005 (generics in 2006) The future of COX-2 inhibitor development is in question after the withdrawal of Vioxx and Bextra. Arcoxia was expected to be approved in 2004, but safety questions have delayed its entry indefinitely. No new classes are appearing on the horizon to replace COX-2 inhibitors. Mobic, which gained market share in the wake of the Vioxx withdrawal, is expected to face generic competition in The significant cost-drivers for the treatment of RA will continue to be the injectable products Enbrel, Humira TM, Kineret and Remicade. However, the components of trend for these products are no longer included in the anti-rheumatics (NSAIDs) class. They have been moved into the specialty class. 59

64 therapy class review ANTICONVULSANTS RANK 8 COMPONENTS OF TREND Cost per Prescription 12.2% Inflation 9.7% Units per Prescription -1.9% Brand/Generic Mix -2.2% Therapeutic Mix 6.7% Utilization 8.7% Prevalence 7.6% Intensity 1.0% New Drugs 0 TOTAL 21.9% KEY FACTS PMPY: $22.94 Rx PMPY: 0.23 Prevalence of Use: 3.1% Average Cost/Rx: $ # Rx/User/Year: 7.54 Drug spend in the anticonvulsants class grew by 21.9% in 2004, down from 28.9% in A slowdown in utilization was the main reason for the overall trend decrease; however, the introduction of the first Neurontin generics also played a role. Drug inflation was 9.7%, the second-highest of the top 25 therapy classes in this Report. Therapeuticmix trend is usually high in this category, and the 6.7% increase in 2004 was no exception, placing it third-highest among the top 25 classes. Utilization growth slowed to 8.7% in 2004, down from 13.3% in Generics remained the market-share leader in 2004, and their share should rise considerably in 2005 as additional Neurontin market share moves to generics. Among the brand drugs, both Topamax and Lamictal gained in market share; their average costs per prescription ($ and $220.70, respectively) are approximately twice the cost per prescription of the class. The market share for Depakote dropped in 2004; all other brand products with a cost per prescription of $100 or greater and no generic competition showed market-share increases. Anticonvulsants Market-Share Trend Percent of Prescriptions Generics $35.68 Neurontin $ Topamax $ Lamictal $ Depakote $ Dilantin $ express scripts drug trend report 2004

65 LOOKING AHEAD In 2005, drug trend for anticonvulsants is likely to be lower than it was in 2004, as Neurontin generics take hold. In 2006 and beyond, cost-per-prescription trends should stay steady. Utilization growth should also be relatively constant, perhaps slightly higher than in We project annual growth leveling off to about 13.4% for 2007 through Anticonvulsants Projected Trend Cost Prescriptions Percent therapy class review Anticonvulsants Pipeline Brand Generic Proposed Use Availability Sabril vigabatrin Seizures 2006 rufinamide Seizures 2006 lacosamide Seizures 2008 Anticonvulsants Patent Expirations Brand Generic Patent Expiration Depakote divalproex sodium July 29, 2008 Lamictal lamotrigine Jan. 22, 2009 Topamax topiramate March 26, 2009 A handful of new anticonvulsant drugs are under development. Although they have unique mechanisms of action for the treatment of epilepsy and other seizure disorders, they likely will gain initial approval for use as adjunctive therapy for patients who are not adequately controlled with current therapy. A relatively new drug, Lyrica TM (pregabalin), was approved for treating neuropathic pain in It should receive approval for epilepsy in Although a key patent for Lamictal does not expire until 2009, its manufacturer has made an agreement that allows generics to enter the market before its scheduled patent-expiration date. 61

66 therapy class review NARCOTIC ANALGESICS RANK 9 COMPONENTS OF TREND Cost per Prescription 8.5% Inflation 7.0% Units per Prescription 2.6% Brand/Generic Mix -5.8% Therapeutic Mix 5.0% Utilization 3.3% Prevalence 3.0% Intensity 0.3% New Drugs 0 TOTAL 12.1% KEY FACTS PMPY: $20.14 Rx PMPY: 0.52 Prevalence of Use: 16.1% Average Cost/Rx: $38.87 # Rx/User/Year: 3.22 Overall drug trend in the narcotic analgesics therapy class was 12.1% in 2004, down from 24.8% in A significant decrease in perprescription costs was the primary reason for the overall trend decrease, although declining utilization also played a role. Therapeutic mix, which was quite high at 11% in 2003, fell to 5% in 2004, as prescription switches to the two most expensive products in the class, Duragesic and OxyContin, slowed. Utilization-trend growth slowed to 3.3%, down from 7.4% in Generics dominate the narcotic analgesics class, with a 2004 market share of 88% and an average cost per prescription of $ To better show movement among the brand narcotic analgesics, generics have not been included on the following market-share chart. Among the brands, OxyContin led in market share; however, one strength of OxyContin went generic in With generics to the remaining strengths expected in 2005, a continued presence of the brand product is in question. Duragesic also began to experience generic competition in early 2005, so it will also drop from the charts next year, leaving Ultracet as the only brand with a market share greater than 1%. Narcotic Analgesics Market-Share Trend Percent of Prescriptions OxyContin $ Ultracet $64.72 Duragesic $ Percocet $96.36 Ultram $ express scripts drug trend report 2004

67 LOOKING AHEAD With patent expirations for OxyContin and Duragesic and few new products in the pipeline, costper-prescription trends should continue to slow in 2005 and beyond, while utilization growth in this category should remain steady. We predict an average growth of about 7% through Narcotic Analgesics Projected Trend Cost Prescriptions Percent therapy class review Narcotic Analgesics Pipeline Brand Generic Proposed Use Availability Dilaudid-CR TM hydromorphone Chronic pain 2005 fentanyl lozenge Pain 2005 oxymorphone, extended-release Moderate-to-severe pain 2006 Oxytrex TM oxycodone and naltrexone Moderate-to-severe pain 2006 Narcotic Analgesics Patent Expirations Brand Generic Patent Expiration Actiq fentanyl transmucosal Feb. 5, 2007 OxyContin oxycodone, extended release Pending Generics continue to dominate this therapy class, and products in the pipeline are merely reformulations of existing products. Two expensive brand products, OxyContin and Duragesic, both face increased generic competition in Generics to Duragesic were launched in January, and a court case to determine the validity of the OxyContin patents should conclude by the middle of the year. A generic version of the 80mg strength of OxyContin was launched in 2004, ahead of the court ruling, because the generic company making it decided to launch it at risk. Lower strengths were not launched at that time because the generic manufacturer that was approved to release them chose to wait until after legal challenges were resolved. 63

68 therapy class review DERMATOLOGICALS RANK 10 COMPONENTS OF TREND Cost per Prescription 10.0% Inflation 9.0% Units per Prescription 3.6% Brand/Generic Mix -5.4% Therapeutic Mix 3.0% Utilization -0.7% Prevalence 0.4% Intensity -1.1% New Drugs 0 TOTAL 9.2% KEY FACTS PMPY: $18.78 Rx PMPY: 0.33 Prevalence of Use: 13.5% Average Cost/Rx: $57.23 # Rx/User/Year: 2.44 Dermatologicals are a relatively stable class from year to year, and 2004 was no exception. Cost-per-prescription trend growth was 10% in 2004, down slightly from 10.9% in 2003, while utilization growth was -0.7%, down from 1.3% in Inflationary trends tend to be higher in this class than in many others, and in 2004, the class inflation rate of 9% was the fourthhighest among the top 25 therapy classes. Generics continue to dominate the class, with their combined market share reaching an all-time high of 52.3% in The market share for brand drugs is spread over a large number of products, with the top product, Elidel, commanding only a 3.5% market share, even though its use has grown quickly since it was released in Each of the next four largest brands lost market share in Recently, the safety of some dermatologicals has been questioned. Accutane, a frequently-used drug, has had black-box warnings for years because it causes birth defects. In 2004, further warnings were added about its potential links to depression, psychoses and suicidal behavior. Despite these serious side effects, prescriptions for Accutane and its generics increased by slightly over 4% in 2004 indicating that for many patients the benefits outweigh the risks. In March 2005, the FDA issued a Public Health Advisory on potential cancer risks associated with Elidel and Protopic, topicals used to treat eczema. Prior to the advisory, both drugs were among the fastest-growing dermatologicals, with 2004 growth rates of 16.1% and 7.6%, respectively. Although these developments had no impact on 2004 trends, they will surely be felt in drug trend for dermatologicals in Dermatologicals Market-Share Trend Percent of Prescriptions Generics $39.46 Elidel $91.86 BenzaClin $90.61 Differin $88.31 Bactroban $44.52 Accutane $ express scripts drug trend report 2004

69 LOOKING AHEAD The overall drug trend for dermatologic products shows little change from year to year, due to the vast number of products in the therapy class and the resulting inability of any single product to establish significant market share. We expect drug-trend growth to slow in upcoming years and to hold steady at about 6% from 2007 through Dermatologicals Projected Trend Cost Prescriptions Percent therapy class review Dermatologicals Pipeline Brand Generic Proposed Use Availability Tazoral tazarotene oral Psoriasis 2006 SB Bacterial skin infections 2006 Dimericine T4N5 liposome lotion Xeroderma pigmentosum 2007 MX-594AN Acne PsorBan cyclosporine conjugate topical Psoriasis Dermatologicals Patent Expirations Brand Generic Patent Expiration Pandel cream hydrocortisone probutate Feb. 26, 2005 Apligraf skin substitute May 27, 2006 Dovonex calcipotriene June 29, 2008 With a multitude of generic and brand products in this therapy class, the impact of any single new drug is not as noticeable as it might be for other classes. Additionally, many of the newer agents in this class fall under the specialty-drug benefit and/or carry additional indications, such as treating rheumatoid arthritis (RA), so their impact may not be noticed in the dermatologicals class. One of the few new products in development, Tazoral, an oral form of a drug that is already available as a topical product, was expected on the market in 2004, but safety concerns have delayed it until at least Impending patent expirations are expected to have only a limited impact. 65

70 therapy class review MISCELLANEOUS ENDOCRINES RANK 11 COMPONENTS OF TREND Cost per Prescription 6.0% Inflation 7.3% Units per Prescription 0 Brand/Generic Mix 0 Therapeutic Mix -1.2% Utilization 8.8% Prevalence 5.8% Intensity 2.8% New Drugs 0.3% TOTAL 15.7% KEY FACTS PMPY: $16.36 Rx PMPY: 0.23 Prevalence of Use: 2.8% Average Cost/Rx: $70.99 # Rx/User/Year: 8.33 After several years of 20%-plus growth, the miscellaneous endocrines therapy class is showing signs of maturity, and 2004 drug trend slowed significantly. While cost-per-prescription trends were up slightly, utilization trends decreased from 21.8% in 2003 to 8.8% in Part of the slowdown is attributable to a decrease in prevalence, as the class readjusts from the surge it experienced when safety concerns were raised with estrogen products in Many patients changed from estrogens to miscellaneous endocrines for the prevention and treatment of osteoporosis. In addition, with the top three drugs accounting for more than 90% of the market share, small shifts in their use could affect trend growth more dramatically than in other categories. The injectable products such as growth hormones, most infertility drugs and the osteoporosis drug Forteo that were formerly included in this class are now in the specialty-drug therapy class. As mentioned, three drugs dominate the class. Fosamax continues to lead in market share with just over 50% of total prescriptions a share that has remained steady in recent years. A similar product, Actonel, is the fastestgrowing product in the class, with the majority of its share gains coming at the expense of Evista, which has seen market-share declines each year since Also used to treat osteoporosis, Evista belongs to a different subclass (selective estrogen receptor modulators or SERMs) of miscellaneous endocrines than Fosamax and Actonel, which belong to the bisphosphonates subclass. Generic market share, at 2.1% in 2004, is unlikely to get a significant boost until 2008, when the Fosamax patent expires. Miscellaneous Endocrines Market-Share Trend Percent of Prescriptions Fosamax $65.90 Actonel $64.19 Evista $74.67 Miacalcin $78.12 Generics $ express scripts drug trend report 2004

71 LOOKING AHEAD With trend growth averaging 28% over the past three years, the dramatic drop in 2004 trend makes the future of this class difficult to predict. The expected addition of several new products in the next 12 months to 24 months should stimulate growth. However, some of the new drugs are similar to Evista, which is losing market share as physicians migrate toward the more potent bisphosphonates. Generics will not play a role until We believe that the class will level off in 2005 and continue to grow in the range of 15.5% annually until 2007, and then fall slightly. Miscellaneous Endocrines Projected Trend Cost Prescriptions Percent therapy class review Miscellaneous Endocrines Pipeline Brand Generic Proposed Use Availability Oporia lasofoxifene Osteoporosis 2005 Prestara TM prasterone Systemic lupus erythematosus 2005 bazedoxifene Osteoporosis 2006 Miscellaneous Endocrines Patent Expirations Brand Generic Patent Expiration Geref sermorelin June 28, 2005 Proscar finasteride June 19, 2006 Fosamax alendronate Feb. 6, 2008 Skelid tiludronate July 30, 2010 Two well-established subcategories in this class could face new competition in First, the bisphosphonate Boniva approved in 2004 as a once-daily dosage form, was not competitive with other products, Fosamax and Actonel, which are dosed once weekly. Additional studies were conducted, and a new once-monthly dosing schedule for Boniva was approved in early Secondly, the SERMs subclass, currently represented only by Evista on the U.S. market, could begin to see competition from lasofoxifene and bazedoxifene this year or next. Generics to Fosamax, which is the leading drug in the class, are now expected in 2008 following an early 2005 court decision against its manufacturer. 67

72 therapy class review ANTIHISTAMINES RANK 12 COMPONENTS OF TREND Cost per Prescription 4.4% Inflation 5.0% Units per Prescription 0.3% Brand/Generic Mix -0.1% Therapeutic Mix -0.7% Utilization -5.1% Prevalence -0.1% Intensity 3.4% New Drugs 0 TOTAL -0.9% KEY FACTS PMPY: $16.01 Rx PMPY: 0.29 Prevalence of Use: 7.7% Average Cost/Rx: $56.03 # Rx/User/Year: 3.71 The antihistamines class rebounded in 2004 to achieve an overall trend of -0.9%, which seems low but is actually an improvement over the -20.9% trend observed in Both cost-per-prescription and utilization trends were higher in 2004 than in These increases come as little surprise, given the market adjustment that occurred in 2003 with the introduction of OTC Claritin. Actual utilization growth remained negative, as fewer patients took prescription antihistamines in 2004 than in Therapeutic mix, which was the lowest of the top 25 therapy classes in 2003 at -10.1%, rebounded to -0.7%, as the removal of Claritin from inclusion in prescription calculations brought greater price equilibrium among the remaining products. Much like the miscellaneous endocrines therapy class, the antihistamines are dominated by three brands. Allegra, which continues to be the market leader, combines with Zyrtec and Clarinex for 90% of the market share in the class. Although it is a small percentage of the overall market, generic share continued to grow, with the first-generation generic product promethazine being the primary contributor. Antihistamines Market-Share Trend Allegra $65.71 Zyrtec $53.49 Percent of Prescriptions Clarinex $65.65 Generics $11.53 Claritin $ express scripts drug trend report 2004

73 LOOKING AHEAD Patent expirations rule the day in the antihistamines therapy class, with each of the leading drugs facing generics in the next three years. Limited new product introductions, wide availability of OTC loratadine products and plan-sponsor restrictions on prescription antihistamine use all will contribute to minimal growth in upcoming years. We forecast growth recovering to the 6% to 7% range through 2007, then a sharp drop that virtually eliminates the prescription status of the class as additional OTC products come to market in 2008 and beyond. Antihistamines Projected Trend Cost Prescriptions therapy class review Percent Antihistamines Pipeline Brand Generic Proposed Use Availability Xyzal levocetirizine Allergies 2007 Antihistamines Patent Expirations Brand Generic Patent Expiration Allegra fexofenadine Pending Clarinex desloratadine 2007 (generics anticipated in 2008) Zyrtec cetirizine Dec. 25, 2007 Patent expirations are the only news in the antihistamine class, since new product development appears essentially stagnant. The one antihistamine in development, Xyzal, is not a truly new product but a derivative of an existing product, Zyrtec. Whether Xyzal offers clinical benefits is unclear it may simply be an extension of the Zyrtec franchise. Legal proceedings to determine the validity of Allegra s patents begin in A loss by its manufacturer would mean that the introduction for OTC versions of Allegra could be sooner than expected. 69

74 therapy class review CALCIUM BLOCKERS RANK 13 COMPONENTS OF TREND Cost per Prescription 3.2% Inflation 3.7% Units per Prescription -0.4% Brand/Generic Mix -1.4% Therapeutic Mix 1.4% Utilization 1.9% Prevalence 2.7% Intensity -0.8% New Drugs 0 TOTAL 5.2% KEY FACTS PMPY: $15.22 Rx PMPY: 0.35 Prevalence of Use: 3.9% Average Cost/Rx: $43.05 # Rx/User/Year: 8.96 The story remains about the same for the calcium blockers therapy class, as its 2004 trend of 5.2% closely resembles its 2003 trend of 3.7%. The primary reason for the minor increase is a rise in cost-per-prescription trend. Inflation, brand/generic mix and therapeutic mix were all slightly higher in 2004, as well. Utilization also saw a small increase from 1.7% to 1.9%. Although overall trend for the class has increased a little in each of the past three years, no new indications or clinical guidelines are expected that would cause a significant change in prescription growth. Generics and one brand, Norvasc, make up 91% of the therapy class. Norvasc market share grew in 2004 to an all-time high of 47.2%. Generics grew as well, although at a slower rate than in previous years. With few brands left in the class, generic market share likely will stay relatively constant until 2007, when Norvasc generics are expected. Calcium Blockers Market-Share Trend 50 Norvasc $51.37 Percent of Prescriptions Generics $48.79 Plendil $48.91 Tiazac $ express scripts drug trend report 2004

75 LOOKING AHEAD Current market-share trends will continue until At that time, almost the entire therapy class will convert to generics, and trend growth will drop significantly. We expect growth rates to be in the 5% range through 2006, then falling to 1% or 2% from 2007 through Calcium Blockers Projected Trend Cost Prescriptions Percent therapy class review Calcium Blockers Pipeline Brand Generic Proposed Use Availability Amvaz TM amlodipine maleate Hypertension 2007 lercandipine Hypertension 2008 Calcium Blockers Patent Expirations Brand Generic Patent Expiration Norvasc amlodipine Jan. 31, 2007 Lotrel amlodipine and benazepril Jan. 31, 2007 No new calcium channel blockers are expected on the market until 2007, when AmVaz, a new formulation of Norvasc, is expected. The manufacturer of AmVaz tried to enter the market in 2004, but a court ruling delayed its entry until the Norvasc patent expired. The approval of lercandipine has been delayed repeatedly due to frequency of dosing and formulation issues. Its earliest possible availability has been pushed back from 2006 to

76 therapy class review BETA BLOCKERS RANK 14 COMPONENTS OF TREND Cost per Prescription 7.1% Inflation 3.5% Units per Prescription -0.6% Brand/Generic Mix -0.4% Therapeutic Mix 3.3% Utilization 8.5% Prevalence 8.0% Intensity 0.4% New Drugs 0 TOTAL 16.2% KEY FACTS PMPY: $15.00 Rx PMPY: 0.57 Prevalence of Use: 6.4% Average Cost/Rx: $26.31 # Rx/User/Year: 8.89 In contrast to calcium blockers, the beta blockers class continues to grow at a healthy rate. In 2004, the overall drug trend for beta blockers was 16.2%, which was down from 24.7% in 2003 but still greater than the total PMPY trend. Both cost-per-prescription and utilization trends decreased in A drop in inflation trend from 6.8% to 3.5% was the main reason for the slowdown in cost-per-prescription trend. Utilization growth was affected by decreases in prevalence and intensity. Beta blockers remain one of the least expensive therapy classes, with the average cost per prescription of $26.31 being the second-lowest of the top 25 therapy classes (oral contraceptives were the lowest). While a generic, atenolol, still leads the class in market share, generic drugs are slowly losing ground to brand beta blockers. One brand product, Toprol XL, continues to grow each year, with its 2004 market share of 31% almost double its 1999 share of 17%. Another brand product, Coreg, also is growing, although its market share is well under 10%. The AWP cost per prescription of Coreg is more than three times the class average. Beta Blockers Market-Share Trend 50 atenolol $16.12 Percent of Prescriptions Topol XL $28.41 metoprolol $15.01 Coreg $94.81 Inderal LA $51.50 propranolol $ express scripts drug trend report 2004

77 LOOKING AHEAD Beta blockers place in national treatment guidelines appears secure, and with the prevalence of hypertension increasing, we expect solid growth to continue at least through 2007, when generics to Coreg could have a modest effect. We project trend increases in the range of 18% to 20% through 2007, then slowing slightly to 15.5% by Beta Blockers Projected Trend Cost Prescriptions Percent therapy class review Beta Blockers Pipeline Brand Generic Proposed Use Availability nebivolol Hypertension 2005 Beta Blockers Patent Expirations Brand Generic Patent Expiration Coreg carvedilol Sept. 5, 2007 Toprol XL metoprolol, extended release In litigation The beta blockers class has been mature for several years, with utilization mostly from generic products. One new product, nebivolol, is expected on the market in 2005 for the treatment of hypertension. However, the long-term value of nebivolol may be for congestive heart failure, because its slightly different mechanism of action and limited brand-name competition may improve its market penetration. The exact timing of generic competition for Toprol XL is unclear due to litigation issues. 73

78 therapy class review ANTIVIRALS RANK 15 COMPONENTS OF TREND Cost per Prescription 19.7% Inflation 10.4% Units per Prescription -1.7% Brand/Generic Mix -0.2% Therapeutic Mix 10.5% Utilization -2.6% Prevalence -15.3% Intensity 15.0% New Drugs 0 TOTAL 16.5% KEY FACTS PMPY: $14.17 Rx PMPY: 0.07 Prevalence of Use: 2.0% Average Cost/Rx: $ # Rx/User/Year: 3.39 The antiviral therapy class contains drugs that treat herpes, hepatitis, HIV and influenza. In 2004, overall drug-trend growth for antivirals was 16.5%, up from 11.6% in Cost-per-prescription trends drove the trend increase, with inflation rising 10.4% (versus 6.5% in 2003) and therapeutic mix increasing 10.5% (versus -7.1%). One reason for higher inflation was a 17% increase in the AWP per prescription for the leading drug, Valtrex. Therapeutic mix increased due to lower use of the less expensive flu drug, Tamiflu. The influenza outbreak in 2003, and the resulting increase in Tamiflu use, did not repeat itself in Decreased use of Tamiflu was also partly responsible for the decrease in utilization seen among the antivirals in The prevalence and intensity rates are almost a mirror opposite of 2003, which saw a 22.9% increase in prevalence and an 8.3% decrease in intensity. Valtrex, which is used to treat herpes infection, gained market share in 2004, while the leading generic product, acyclovir, held steady. Together, these two products command almost two-thirds of all prescriptions in the class. Among the remaining products, Famvir continues to lose market share each year, while Viread took over as the leading HIV drug. The impact of Tamiflu in 2003 and 2004 is also illustrated on the graph below. A significant AWP per-prescription price differential remains among products in this class, with generic acyclovir and Tamiflu on the lower end in the $50 to $60 range, and selected HIV drugs on the high end at over $600. Antivirals Market-Share Trend Percent of Prescriptions Valtrex $ acyclovir $49.77 Famvir $ Viread $ Sustiva $ Tamiflu $ express scripts drug trend report 2004

79 LOOKING AHEAD The severity of the flu season seems to be the most influential factor on trend growth in this category. Since flu severity is impossible to predict, guidance on trend for the drugs used to treat flu is difficult. Trend growth for the other types of antiviral drugs (for herpes, hepatitis and HIV) is not likely to be affected significantly by new drugs or patent expirations in the coming years. On average, we expect trend growth to be 8.2% through Antivirals Projected Trend Cost Prescriptions Percent therapy class review Antivirals Pipeline Brand Generic Proposed Use Availability Aptivus tipranavir HIV 2005 capravirine HIV 2007 telbivudine Hepatitis B 2007 UK-427,857 HIV 2007 Viramidine Hepatitis C (ONO-4128) HIV 2008 Antivirals Patent Expirations Brand Generic Patent Expiration Retrovir zidovudine March 17, 2006 Zerit stavudine Dec. 24, 2008 Valtrex valacyclovir Dec. 23, 2009 Trizivir abacavir, lamivudine and zidovudine May 17, 2010 Combivir lamivudine and zidovudine May 17, 2010 Epivir lamivudine May 17, 2010 The HIV-drug pipeline is currently between cycles. Approved drugs are meeting the need for the majority of patients, and new drugs with different mechanisms of action are a few years away. Drugs in the short-term pipeline work similarly to existing therapies. In a sign of market maturity, the first generic antiretroviral, didanosine (for Videx EC), became available in Several other generics are expected in the next few years. Hepatitis C treatment also appears stable in the near term, with Viramidine, an oral product similar to ribavirin, the closest to market. Several antiviral vaccines for conditions such as herpes zoster (the cause of shingles), rotavirus (which results in diarrhea among infants), and human papilloma virus (a precursor to cervical cancer) are also in development. 75

80 therapy class review ANTIPSYCHOTICS RANK 16 COMPONENTS OF TREND Cost per Prescription 11.0% Inflation 6.7% Units per Prescription -1.7% Brand/Generic Mix -0.7% Therapeutic Mix 6.6% Utilization 8.0% Prevalence 4.7% Intensity 3.1% New Drugs 0 TOTAL 19.8% KEY FACTS PMPY: $11.89 Rx PMPY: 0.08 Prevalence of Use: 1.3% Average Cost/Rx: $ # Rx/User/Year: 5.92 Like the trends seen in many other classes, overall trend for antipsychotics dropped in The 2004 trend of 19.8% was a full 9% lower than the 2003 trend of 28.8%. Therapeutic mix, usually the leading driver of trend for this class, slowed in 2004, as the use of less expensive brands and generics grew. The 2004 therapeutic-mix gain of 6.6% was half that seen in The decrease in therapeutic mix could be a sign that the newer, atypical antipsychotics have fully penetrated the category, and that future shifts in mix will be among the newer products and not the older ones. Utilization growth for 2004 was similar to Seroquel overtook Risperdal for the brand market-share lead in 2004, while Zyprexa slipped from second to third. The newest brand product, Abilify, doubled its market share. With an AWP of over $335 per prescription, Abilify is also the most expensive atypical antipsychotic. The atypical antipsychotics represent approximately 70% of total market share. Generic use in the class increased in 2004 due to the transition of lithium brands to generics. Antipsychotics Market-Share Trend Generics $21.80 Seroquel $ Percent of Prescriptions Risperdal $ Zyprexa $ Abilify $ Geodon $ express scripts drug trend report 2004

81 LOOKING AHEAD If therapeutic-mix trends continue at their current pace, overall drug-trend growth among antipsychotics may be lower than previously predicted. However, if the newer products, such as Abilify, begin to take share from less-expensive products, such as Seroquel, therapeutic mix could rise again. A newly-required warning that antipsychotics could be associated with serious side effects may limit their use in conditions such as dementia. Several new products are expected on the market in the next few years, however, and expanded indications for the existing products will also keep trend levels high. Little generic pressure is expected until We project an annual trend increase of approximately 18.8% through 2008, then a slight slowdown in 2009 to reflect the entry of generics to Risperdal. Antipsychotics Projected Trend Cost Prescriptions Percent therapy class review Antipsychotics Pipeline Brand Generic Proposed Use Availability asenapine Schizophrenia 2007 bifeprunox Schizophrenia 2007 osanetant Schizophrenia Antipsychotics Patent Expirations Brand Generic Patent Expiration Geodon ziprasidone Sept. 2, 2007 Risperdal risperidone June 29, 2008 Abilify aripiprazole April 20, 2010 While the past decade has seen the approval of several atypical antipsychotics that appear to affect more receptors than older antipsychotics, the difficulty in treating patients with psychoses lends itself to as many drug choices as possible. Recognizing that the treatment of psychoses may require multiple drugs, as well as frequent adjustments in drug dosage and/or combinations, pharmaceutical manufacturers continue to develop new compounds. New antipsychotics may be particularly effective in combination with existing drugs or for specific patient populations. The antipsychotics that are probably next in line for approval are asenapine and bifeprunox, which are both potentially available as soon as Further from the market is osanetant, which affects the brain s neurokinin receptors, rather than dopamine and/or serotonin receptors like most currently-marketed antipsychotics. Whether osanetant s difference is clinically meaningful has yet to be determined. Generics for Risperdal should have a noticeable impact on the class in Conversely, legal challenges to the Zyprexa patents, which expire in 2011, cloud the timing of generics for that widely-used product. Although one of the key patents on Geodon expires in 2007, it is likely to receive a patent-term extension. 77

82 therapy class review STIMULANTS/ANTI-OBESITY RANK 17 COMPONENTS OF TREND Cost per Prescription 15.8% Inflation 9.3% Units per Prescription 1.0% Brand/Generic Mix -0.8% Therapeutic Mix 5.7% Utilization 16.4% Prevalence 12.8% Intensity 3.2% New Drugs 0 TOTAL 34.8% KEY FACTS PMPY: $11.82 Rx PMPY: 0.13 Prevalence of Use: 1.9% Average Cost/Rx: $94.08 # Rx/User/Year: 6.76 This therapy class contains drugs for attention-deficit/hyperactivity disorder (ADHD), narcolepsy and obesity. Following a remarkable 42.2% overall trend increase in 2003, the stimulant/anti-obesity class recorded another impressive gain of 34.8% in Utilization growth led the way, with a 16.4% increase in 2004, compared with 3.1% in Most of the utilization growth was due to an increase in prevalence. A relatively new ADHD drug, Strattera, is largely responsible for the increase in PMPY spending in this class. Among the other types of drugs in the class, Provigil is the leading drug for narcolepsy, with an average cost per prescription about double that of the ADHD therapies. Antiobesity drugs are not a meaningful contributor to trend in this class. The top three brand drugs, all for ADHD, comprise 60% of total prescriptions in this class. Concerta remains the class market-share leader, although its share decreased slightly in Strattera has achieved a 16% market share after only two years on the market. At $117.56, Strattera s cost per prescription is approximately 20% higher than the other brand products. The impact of generics continues to decline, dropping from 40% in 2000 to 24% in Generic share should rebound in 2005 and 2006, however, as the two leading products face generic competition. Stimulants Anti-Obesity Market-Share Trend Percent of Prescriptions Generics $36.77 Concerta $96.61 Adderall XR $99.69 Strattera $ Provigil $ Metadate CD $ express scripts drug trend report 2004

83 LOOKING AHEAD Future growth should continue at a similar pace to 2004, as newer products for narcolepsy and obesity offset the generics expected for the ADHD drugs. We are forecasting that growth will creep down from 31.1% in 2005 to 20.9% in 2008 and Stimulants/Anti-Obesity Projected Trend Cost Prescriptions Percent therapy class review Stimulants/Anti-Obesity Pipeline Brand Generic Proposed Use Availability Focalin XR TM dexmethylphenidate, ADHD 2005 extended release Acomplia TM rimonabant Obesity 2006 Nuvigil TM armodafinil Narcolepsy 2006 SPD503 ADHD 2006 MethyPatch methylphenidate patch ADHD 2006 Axokine modified ciliary neurotrophic factor (CNTF) Obesity 2007 ABT-089 ADHD ATL-962 Obesity 2008 PYY3-36 Obesity Stimulants/Anti-Obesity Patent Expirations Brand Generic Patent Expiration Concerta methylphenidate, modified release In litigation Adderall XR amphetamine salts, extended release In litigation Provigil modafinil June 24, 2006 Meridia sibutramine Dec. 11, 2007 Xenical orlistat Dec. 18, 2009 This therapy class includes drugs for several conditions, including ADHD, narcolepsy and obesity. Among agents for ADHD, generics for the popular drug, Concerta, could become available in 2005, and the one remaining brand in the Adderall franchise could lose exclusivity in In narcolepsy treatment, Provigil has gained momentum in recent years, and its manufacturer hopes that negative effects of its 2006 patent expiration will be mitigated by the introduction of a new product, Nuvigil. Clinically similar to Provigil, Nuvigil has a longer duration of action. Nuvigil s patent is not expected to expire until The third subcategory of this class may be the one to watch. Spurred by publicity about a global obesity epidemic, research on obesity drugs is intensifying at several pharmaceutical manufacturers. A number of new anti-obesity drugs could be launched in the next five years. The first significant push is likely to be in 2006 with the expected approval of Acomplia. Clinical trial data for Acomplia is intriguing the drug may suppress the desire to smoke and improve blood sugar and blood lipid levels, in addition to limiting appetite. However, its ultimate success depends on the willingness of plan sponsors to cover a drug approved initially for obesity and smoking cessation. Its manufacturer is also seeking an additional indication for delaying the development of type 2 diabetes. 79

84 therapy class review ORAL CONTRACEPTIVES RANK 18 COMPONENTS OF TREND Cost per Prescription -3.0% Inflation 8.2% Units per Prescription 0 Brand/Generic Mix -14.5% Therapeutic Mix 4.8% Utilization 0.3% Prevalence 0.1% Intensity 0.2% New Drugs 0 TOTAL -2.7% KEY FACTS PMPY: $11.25 Rx PMPY: 0.46 Prevalence of Use: 5.6% Average Cost/Rx: $24.58 # Rx/User/Year: 8.17 The oral contraceptive class experienced the full impact of generic competition in 2004, as trend growth fell significantly from a 15.1% increase in 2003 to a 2.7% decrease in Brand/generic mix, which measures the impact of new generics, dropped by 14.5%, causing cost-perprescription trends to be negative, as well. This significant change in mix was driven by new generics to Ortho Tri-Cyclen, which had been the leading brand product in the class. Utilization growth, which was essentially flat in 2004, also contributed to the decrease in trend. The average cost per prescription continues to decline for oral contraceptives, with the 2004 cost of $24.58 the lowest average cost in the top 25 classes. The introduction of generics for Ortho Tri-Cyclen resulted in generics capturing the majority of market share for the first time in However, several brands continued to grow their market shares, despite the generic competition. Ortho Evra, the first contraceptive patch, and Ortho Tri-Cyclen Lo, a lower-dose oral product, are from the same manufacturer as Ortho Tri-Cyclen. Their market-share gains partially offset Ortho Tri-Cyclen s loss to generics. Yasmin, which contains a unique progestin that also mimics the action of the diuretic spironolactone, was also among the few brands showing increased use. Oral Contraceptives Market-Share Trend Percent of Prescriptions Generics $23.73 Ortho Evra $35.54 Ortho Tri-Cyclen Lo $35.26 Ortho Tri-Cyclen $33.42 Ortho-Novum $ express scripts drug trend report 2004

85 LOOKING AHEAD With many different contraceptives available as generics, future trend growth will be tied to changes in utilization, rather than cost per prescription. Changes in benefit design could also play a role. After a negative trend of nearly 3% in 2004, we project stable growth of 9.2% from 2005 through Oral Contraceptives Projected Trend Cost Prescriptions Percent therapy class review Oral Contraceptives Pipeline Brand Generic Proposed Use Availability Yaz ethinyl estradiol and drospirenone Contraception 2005 Seasonique TM ethinyl estradiol and levonorgestrel Contraception, extended-cycle 2005 Seasonale Lo ethinyl estradiol and levonorgestrel Contraception, extended-cycle 2006 male contraceptive Contraception 2007 tanaproget (NSP-989) Contraception 2007 Totelle ethinyl estradiol and trimegestone Contraception 2008 The approval of the first extended-cycle oral contraceptive, Seasonale, and its popularity among users have prompted its manufacturer to study additional extended-cycle formulations. Seasonale Lo has a lower dose of both the estrogen and the progestin that it contains, and another formulation (Seasonique) contains seven low-dose estrogen tablets instead of placebo tablets, which are in the original Seasonale formulation. A reformulation of the already-marketed contraceptive Yasmin, Yaz contains lower doses of the estrogen. With the full impact of generics for Ortho Tri-Cyclen felt in 2004, generic products now represent a majority of prescriptions in this therapy class. Despite delays in FDA authorization for a prescription-to-otc switch, Plan B, an emergency contraceptive, is expected to go OTC in

86 therapy class review MISCELLANEOUS HEMATOLOGICALS RANK 19 COMPONENTS OF TREND Cost per Prescription 9.6% Inflation 7.6% Units per Prescription 0.2% Brand/Generic Mix -0.2% Therapeutic Mix 1.9% Utilization 25.8% Prevalence 18.5% Intensity 6.2% New Drugs 0 TOTAL 38.0% KEY FACTS PMPY: $10.88 Rx PMPY: 0.1 Prevalence of Use: 1.2% Average Cost/Rx: $ # Rx/User/Year: 8.09 Miscellaneous hematologicals is new to the 2004 Drug Trend Report. It contains anti-platelet drugs, which work to prevent blood clots from forming. Typically not given as general preventive therapy, anti-platelet drugs usually are prescribed for patients who have had a cardiovascular or a peripheral vascular event. The class leapfrogged to 19th place over several well-established classes due to its significant drug-trend growth of 38% in While the cost-per-prescription trends were generally unremarkable, the utilization increase of 25.8% was the highest of the top 25 therapy classes. Because the class is dominated by one drug, Plavix, an increase in the use of Plavix is likely to result in similar increases for the class. With Plavix capturing over 80% of market share, little is left to discuss about the remaining products in the class. The second-place brand, Pletal, is not a competitor for Plavix. Instead, it is used to treat peripheral vascular disease. The first generic to Pletal was launched in Aggrenox, a combination of two older drugs (aspirin and extended-release dipyridamole), competes with Plavix, but its side effects limit its use. Generic market share has decreased in recent years now representing only 8.1% of the prescriptions in the class. Additional market-share losses for generics are expected in the future as more brand products are in position to enter this market. Miscellaneous Hematologicals Market-Share Trend Percent of Prescriptions Plavix $ Generics $49.79 Pletal $96.24 Aggrenox $ Trental $ express scripts drug trend report 2004

87 LOOKING AHEAD Because 2004 is the first year that miscellaneous hematologicals has been in the top 25 therapy classes, we have no history for forecasting its future growth. Even though last year s utilization growth seems high, an aging population that has multiple risk factors for heart disease should stimulate continued growth in the class. New brand products and limited generic competition will also keep cost trends high. We predict annual growth to slow as the market matures, however, gradually falling from 38% in 2004 to 16.6% by Miscellaneous Hematologicals Projected Trend Cost Prescriptions Percent therapy class review Miscellaneous Hematologicals Pipeline Brand Generic Proposed Use Availability Exanta TM ximelagetran Anticoagulant 2006? Bay Antithrombotic 2008 prasugrel Anticoagulant 2008 razaxaban Anticoagulant 2008 odiparcil Anticoagulant BIBR-1048 Antithrombotic AZD-0837 Antithrombotic AZD-6140 (AR-C126532) Antithrombotic YM-150 Antithrombotic Miscellaneous Hematologicals Patent Expirations Brand Generic Patent Expiration Plavix clopidogrel 2012 Challenge pending Several products are under investigation for use as oral anticoagulants, but they are years away from reaching the market if development continues as planned. Exanta, the most-advanced product in clinical development, hit a roadblock after clinical trials revealed its potential for increased liver toxicity, which may outweigh its possible benefits. As a result, an FDA advisory committee recommended against its approval in September On the patent front, the largest-selling oral product in this category, Plavix, is facing patent challenges from several generic manufacturers. Although the strength of later patents for Plavix has yet to be determined in court, generics are not likely to reach the market until

88 therapy class review DECONGESTANTS RANK 20 COMPONENTS OF TREND Cost per Prescription 7.1% Inflation 8.0% Units per Prescription -0.7% Brand/Generic Mix -0.3% Therapeutic Mix 0.1% Utilization 1.5% Prevalence -1.3% Intensity 2.9% New Drugs 0 TOTAL 8.8% KEY FACTS PMPY: $10.74 Rx PMPY: 0.17 Prevalence of Use: 5.8% Average Cost/Rx: $61.83 # Rx/User/Year: 2.97 The decongestants class includes mainly nasally-administered products, mostly steroids. The overall drug trend of 8.8% in 2004 is down from 15.9% in Decreased utilization specifically a decrease in the prevalence of use was responsible for the lower trend. Lower utilization could also be a reflection of changing market dynamics in the larger class of all respiratory agents. In 2003, decongestants benefited from the introduction of OTC Claritin and the subsequent restrictions placed on prescription antihistamines. In this relatively small category, the top five products represent 95% of the total market share. Flonase continues to be the leading product, with its use growing slightly in Generics to Flonase are possible in 2005 or The remaining products show few market-share changes from year to year. Unlike most other members of the class, Astelin, with a 5.9% share in 2004, is not a nasal steroid but a nasal antihistamine. Decongestants Market-Share Trend 50 Flonase $60.97 Percent of Prescriptions Nasonex $66.50 Nasacort AQ $63.60 Rhinocort Aqua $63.77 Astelin $ express scripts drug trend report 2004

89 LOOKING AHEAD The patent for Flonase was set to expire in May 2004, but last-minute action by the manufacturer pushed the earliest possible generic entry into 2005 or If and when generics to Flonase appear, cost-per-prescription trends should decrease for the class. While a generic for Flonase is unlikely to have a significant impact on utilization growth, the end of direct-to-consumer advertising for Flonase when it goes generic may curtail new prescriptions for the whole class. We predict Flonase generics will have an impact on 2006 trend and beyond. Therefore, we forecast annual growth will drop into the 4% to 5% range from 2006 through Decongestants Projected Trend Cost Prescriptions therapy class review Percent Decongestants Pipeline Brand Generic Proposed Use Availability loteprednol nasal Allergic rhinitis 2006 Allermist nasal Allergic rhinitis 2007 Decongestants Patent Expirations Brand Generic Patent Expiration Flonase fluticasone nasal Expired (generics in 2005 or 2006) Nasally-administered steroids are the primary products in this therapy class. Because the leading product, Flonase, probably will face generic competition in 2005, recent cost-trend gains from this class should slow. The pipeline offers no new drugs that appear better than currently-available products. Furthermore, the manufacturer of at least one prescription decongestant could apply for OTC status in the next few years. 85

90 therapy class review ANTINEOPLASTICS RANK 21 COMPONENTS OF TREND Cost per Prescription 10.8% Inflation 3.7% Units per Prescription 0.8% Brand/Generic Mix -4.0% Therapeutic Mix 10.4% Utilization 8.4% Prevalence 5.9% Intensity 2.3% New Drugs 0.2% TOTAL 20.3% KEY FACTS PMPY: $10.15 Rx PMPY: 0.06 Prevalence of Use: 0.8% Average Cost/Rx: $ # Rx/User/Year: 7.17 The antineoplastics, one of the broadest drug categories represented in this Report, also carry a high average cost per prescription. In 2004, overall trend increased to 20.3%, up from 15.2% in Cost-perprescription increases were the primary cause of the increase, particularly in therapeutic mix. New oral drugs, such as Gleevec and Temodar carry a substantially higher price than the rest of the class. Gleevec, for example, is approximately $2,500 per prescription. Even though the combined market share for these products is less than 3%, their dramatic cost differences drove up therapeutic mix in Utilization-trend increases were similar in 2003 and The two leading products in the category, methotrexate and tamoxifen, both generics, are also two of the lowest-cost products. Methotrexate is widely used for rheumatoid arthritis (RA) in addition to treating a variety of cancers. Arimidex and Femara, newer drugs that are replacing tamoxifen for some breast cancer patients, each gained share. Tamoxifen s share is likely to decrease further in the coming years. No other products had greater than a 5% market share in the class. Antineoplastics Market-Share Trend 35 methotrexate $45.35 Percent of Prescriptions tamoxifen $62.54 Arimidex $ Femara $ mercaptopurine $ express scripts drug trend report 2004

91 LOOKING AHEAD The oncology field contains some of the most promising drugs in the pipeline, with potential treatments for many different kinds of cancer in various stages of development. With new drugs come higher costs, however. As evident in 2004, even a small market share for a new product can have a noticeable impact on overall trend in this class. Generic exposure is limited in coming years. As stated previously, tamoxifen share may decrease over time as newer products replace it. We project annual trend increases in the range of 16.6% for the next five years. Antineoplastics Projected Trend Cost Prescriptions Percent therapy class review Antineoplastics Pipeline Brand Generic Proposed Use Availability Dacogen TM decitabine Myelodysplastic syndromes 2005 Zarnestra tipifarnib RAS-dependent tumors 2005 Xinlay TM atrasentan Prostate cancer 2005 Revlimid TM (formerly Revimid TM ) lenalidomide (CC-5013) Multiple myeloma 2005 nelarabine Leukemia/Lymphoma 2005 Sutent SU GI stromal tumors/renal cell carcinoma 2006 sorafenib (BAY ) Renal cell carcinoma 2006 lapatinib (GW572016) Solid tumors 2006 satraplatin Prostate cancer 2007 tirapazamine Non-small cell lung cancer 2007 Orathecin TM rubitecan Pancreatic cancer 2006 ixabepilone Breast cancer/ Prostate cancer 2006 Telcyta TM TLK286 Ovarian cancer 2006 Affinitak TM ISIS 3521 Non-small cell lung cancer 2006 vatalanib Metastatic colorectal cancer 2007 temsirolimus (CCI-779) Renal cell carcinoma/breast cancer 2007 edotecarin Glioblastoma 2007 AMG 706 GI stromal tumors 2008 Antineoplastics Patent Expirations Brand Generic Patent Expiration Doxil doxorubicin liposome injection June 28, 2006 Camptosar irinotecan Feb. 20, 2008 Casodex bicalutamide Oct. 1, 2008 Arimidex anastrozol June 27, 2010 Gemzar gemcitabine Nov. 15, 2010 Hycamtin topotecan Nov. 28, 2010 Cancer-drug research has become a leading focus for several pharmaceutical and biotechnology companies. Many new compounds are in development, including some that could alter the course of the disease significantly. In the near future, cancer may be regarded as a chronic disease, similar to RA or HIV. Like other chronic conditions, certain cancers may soon be kept at bay for years by regular treatments with chemotherapy or biologic agents. In addition, factors such as limited generic exposure and relative ease of reimbursement from plan sponsors make antineoplastics one of the few classes that promise long-term financial viability for the pharmaceutical industry. New drugs are likely to be available in the next few years for several cancers, such as renal cell carcinoma, glioblastoma and non-small cell lung cancer, which currently have limited treatment options. 87

92 therapy class review MIGRAINE PRODUCTS RANK 22 COMPONENTS OF TREND Cost per Prescription 5.4% Inflation 6.4% Units per Prescription -0.4% Brand/Generic Mix -0.2% Therapeutic Mix -0.4% Utilization 2.8% Prevalence 2.3% Intensity 0.5% New Drugs 0 TOTAL 8.4% KEY FACTS PMPY: $8.73 Rx PMPY: 0.06 Prevalence of Use: 1.5% Average Cost/Rx: $ # Rx/User/Year: 4.16 Few changes were observed in the migraine category in 2004, although the overall trend of 8.4% was slightly higher than the 6.2% increase seen in An increase in utilization was responsible for the overall-trend increase, but the utilization trend of 2.8% was still well below the average for all therapy classes. Drugs in this category are in large part well established, with little generic competition. Although Imitrex, the first of the triptan drugs to be approved, continues to lead in market share, its lead shrank a bit in Depakote ER, which is not a triptan but a drug for migraine prevention, gained share, as did the newest triptan, Relpax. The rest of the triptans showed little change in Additionally, as mentioned above, generics are not a factor in this class, representing only 11% of total prescriptions. Migraine Products Market-Share Trend 50 Imitrex $ Percent of Prescriptions Depakote ER $ Zomig $ Generics $12.89 Maxalt $ Relpax $ express scripts drug trend report 2004

93 LOOKING AHEAD The upcoming patent expiration for Imitrex will certainly affect cost-per-prescription trends, but this impact is not expected until We expect below-average growth trends to continue at 7.1% through 2007, and then drop to 5.1% in 2008, when Imitrex generics become available. Migraine Products Projected Trend Cost Prescriptions Percent therapy class review Migraine Products Pipeline Brand Generic Proposed Use Availability MT-100 TM metoclopramide and naproxen Acute migraine 2006 MT-400 TM sumatriptan and naproxen Acute migraine 2006 Migraine Products Patent Expirations Brand Generic Patent Expiration Imitrex sumatriptan June 28, 2007 New drug development in this therapy class is limited, because the several members of the triptan family of drugs already on the market are effective for the majority of people with migraine symptoms. The only products in the migraine pipeline, MT-100 and MT-400, are both combinations of currently-approved drugs. Partly due to concerns about possible side effects, MT-100 was found not approvable by the FDA in May Its manufacturer plans to resubmit, however. Imitrex, the first triptan approved by the FDA, is facing generic competition in Whether all or only some of the dosage forms of Imitrex will lose patent protection at that time is not yet clear. 89

94 therapy class review OPHTHALMIC PRODUCTS RANK 23 COMPONENTS OF TREND Cost per Prescription 10.4% Inflation 7.7% Units per Prescription -0.9% Brand/Generic Mix -1.3% Therapeutic Mix 4.8% Utilization 3.2% Prevalence -0.3% Intensity 3.5% New Drugs 0.6% TOTAL 14.6% KEY FACTS PMPY: $8.55 Rx PMPY: 0.19 Prevalence of Use: 6.5% Average Cost/Rx: $46.05 # Rx/User/Year: 2.86 The ophthalmic category is new to this year s Drug Trend Report. Drugs in this class are primarily used for glaucoma, eye infections and ophthalmic symptoms of allergies. As expected, a wide range of drugs is available to treat eye conditions, and only one ophthalmic product had a market share of greater than 10%. At 14.6%, however, the overall trend for ophthalmic products is higher than the trend observed for all classes. Cost-per-prescription trends were driven by inflation and therapeuticmix increases that were higher than average. While utilization trends were unremarkable, one new drug, Elestat TM, an ophthalmic antihistamine that was released during 2004, contributed 0.6% to overall trend. Because the ophthalmic class is so diverse, market-share shifts are more difficult to achieve. Xalatan, a glaucoma drug that has led the class for the past few years, increased its market share slightly. Cosopt TM, a combination drug for glaucoma, also showed modest gains. Another leading brand glaucoma medication, Alphagan P, saw its market share decrease slightly in 2004 due to competition from newer products. The leading prescription ophthalmic antihistamine, Patanol, has seen its use level off as more antihistamines for the eyes move OTC. Ophthalmic Products Market-Share Trend Percent of Prescriptions Generics $13.50 Xalatan $52.48 Patanol $74.00 Cosopt $71.94 Alphagan P $67.07 TobraDex $ express scripts drug trend report 2004

95 LOOKING AHEAD This is the first time that we are forecasting ophthalmic-drug growth. Because the class includes so many products with so many different uses, the impact of any single product, brand or generic, is limited. We expect trend growth in this category to mirror overall trend growth closely in the coming years returning to 11.2% after a slight rise in Ophthalmic Products Projected Trend Cost Prescriptions Percent therapy class review Ophthalmic Products Pipeline Brand Generic Proposed Use Availability Xalcom latanoprost and timolol Glaucoma 2005 Alphagan Z brimonidine Glaucoma 2005 bimatoprost and timolol Glaucoma 2005 Extravan TM travoprost and timolol Glaucoma 2005 AzaSite TM azithromycin Conjunctivitis 2006 dexamethasone and moxifloxacin Anti-inflammatory/Anti-infective 2007 Ophthalmic Products Patent Expirations Brand Generic Patent Expiration Alphagan P brimonidine In litigation Livostin levocabastine June 7, 2005 Emadine emedastine Feb. 14, 2006 Alocril nedocromil April 2, 2007 Trusopt dorzolamide Oct. 28, 2008 Zymar gatifloxacin June 25, 2008 Vexol rimexolone Jan. 22, 2009 Acular ketorolac tromethamine Nov. 5, 2009 Development of new products in this category is dominated by combinations of currently-available products usually a prostaglandin with a beta blocker for the treatment of glaucoma. Since most patents for the prostaglandin eye drops are protected for some time, this strategy probably is not intended to extend their patent lives. It demonstrates, instead, the need for combination therapy to better control glaucoma. Although many ophthalmic products are scheduled to lose patent protection over the next few years, equivalent formulation and stability issues may limit the number of generic competitors. The FDA generally requires manufacturers of ophthalmic products to follow production standards that are more stringent than those for other drug manufacturers. In addition, liquid products, such as ophthalmic suspensions and solutions, often can be more difficult to develop and produce than solid oral dosage forms. 91

96 therapy class review QUINOLONES RANK 24 COMPONENTS OF TREND Cost per Prescription -4.4% Inflation 5.4% Units per Prescription -1.0% Brand/Generic Mix -9.1% Therapeutic Mix 0.7% Utilization -3.6% Prevalence -0.4% Intensity -3.2% New Drugs 0.1% TOTAL -7.8% KEY FACTS PMPY: $8.53 Rx PMPY: 0.11 Prevalence of Use: 7.0% Average Cost/Rx: $79.23 # Rx/User/Year: 1.53 Quinolones, which are antibiotics used primarily for respiratory and urinary tract infections, saw an overall trend decrease of 7.8% in 2004, down from a positive trend of 15.4% in Both cost-per-prescription and utilization trends were down. The decrease in cost-per-prescription trends is largely attributable to the introduction of generics to Cipro in mid Greater use of Cipro s generic equivalents affected both inflation and brand/generic-mix trends. Utilization growth was also negative, most likely due to the less severe flu season in While quinolones are not used to treat flu directly, they are often used to treat bacterial infections sometimes associated with flu. Levaquin continues to be the market leader, but its market-share growth plateaued in Generic ciprofloxacin, which was the first generic in the category, showed the greatest gain in share. Avelox, which is marketed by the same company that marketed Cipro, saw its market share increase, mostly at the expense of a rival product, Tequin, which has decreased in share each year since Quinolones Market-Share Trend Levaquin $90.97 Generics $50.16 Percent of Prescriptions Avelox $83.76 Cipro $77.74 Tequin $78.01 Floxin $ express scripts drug trend report 2004

97 LOOKING AHEAD Little growth is expected for quinolones, since the therapy class is maturing. The next major patent expiration, for Levaquin, is not due until 2009, when we expect trend to fall below 5%. Until then, we project growth to be about 7% slightly less than the average trend growth for all classes. Quinolones Projected Trend Cost Prescriptions Percent therapy class review Quinolones Pipeline Brand Generic Proposed Use Availability prulifloxacin CAP*/Sinusitis 2006 garenoxacin CAP/Sinusitis 2006 sitafloxacin (IV only) Drug-resistant infections 2006 *Community-acquired pneumonia Quinolones Patent Expirations Brand Generic Patent Expiration Maxaquin lomefloxacin Aug. 21, 2006 Tequin gatifloxacin Dec. 25, 2007 Avelox moxifloxacin Dec. 30, 2009 Zagam sparfloxacin Aug. 4, 2010 Barring unexpected clinical data that prove otherwise, drugs in the quinolone pipeline have limited commercial potential, since generics to Cipro are already on the market. Additional patent expirations will dent the market share for branded quinolones even further in the next five to six years. The patent for Levaquin, the current market leader, is not expected to expire until December However, if litigation concerning possible patent infringement goes in favor of the generic manufacturer, generics for Levaquin could enter the market well before

98 therapy class review MACROLIDES RANK 25 COMPONENTS OF TREND Cost per Prescription 5.9% Inflation 6.5% Units per Prescription 0.8% Brand/Generic Mix 0 Therapeutic Mix -1.4% Utilization -12.2% Prevalence -8.6% Intensity -4.0% New Drugs 0 TOTAL -7.1% KEY FACTS PMPY: $8.19 Rx PMPY: 0.18 Prevalence of Use: 12.3% Average Cost/Rx: $46.07 # Rx/User/Year: 1.45 This is probably the final year that the macrolides will be among the top 25 classes in the Drug Trend Report, because generic introductions are likely to decrease 2005 PMPY costs significantly. In 2004, drug-trend growth was negative. Much like the quinolones, the macrolides suffered from a milder flu season in 2004; however, macrolide utilization was affected to a greater degree, with a decrease of 12.2% in utilization trend. At 5.9%, cost-per-prescription trends in 2004 were similar to those in Biaxin and Zithromax, which represent 84% of 2004 market share, are both expected to lose patent protection in Whether or not Biaxin XL preserves its brand status, it is expected to lose more ground because at least some Biaxin XL prescriptions are likely to be converted to Biaxin generics. Market share for Biaxin XL declined slightly in Erythromycin products are not a meaningful market-share contributor. Macrolides Market-Share Trend Percent of Prescriptions Zithromax $42.75 Biaxin XL $78.90 Biaxin $84.07 Generics $ express scripts drug trend report 2004

99 LOOKING AHEAD While we expect utilization trends to bounce back to nearly 4% in 2005, overall trend for the macrolides is not expected to out pace the market. In 2006, when generics for Biaxin and Zithromax are on the market, expect trend to drop under 1%, remaining at that level in 2007 and beyond. Macrolides Projected Trend Cost Prescriptions Percent therapy class review Macrolides Pipeline Brand Generic Proposed Use Availability Zithromax SR azithromycin, sustained release Bacterial infections 2005 azithromycin and chloroquine Drug-resistant malaria 2006 Macrolides Patent Expirations Brand Generic Patent Expiration Biaxin clarithromycin May 23, 2005 Zithromax azithromycin Nov. 1, 2005 Generics to immediate-release Biaxin are expected in May 2005; but generics to the extendedrelease formulation, Biaxin XL, may not be launched until later because the XL formulation may carry additional patents. Although generic competition for the market leader, Zithromax, is expected in November, its manufacturer hopes to blunt the impact of generics by launching a sustained-release formulation, Zithromax SR, before the respiratory infection season. For most infections, Zithromax is taken for one, three or five days. Zithromax SR is designed for a one-time dose; however, its other potential clinical benefits are unclear. 95

100 therapy class review Notes 96 express scripts drug trend report 2004

101 4 pharmacy benefit guide Express Scripts Drug Trend Report 2004

102 Formulary Development: The Essential Element of Trend Management The first two editions of the Pharmacy Benefit Guide described the essential role of formulary development. It is still true that a welldesigned formulary optimizes a plan sponsor s ability to provide the most valuable clinical benefits at the least cost. When coupled with effective benefit tools, such as a three-tier copayment, the formulary helps guide the ways that physicians prescribe and the ways that members use their benefits. Over time, formulary decisions will have a tremendous impact on a plan s long-term cost. Express Scripts uses Generic Product Identifier (GPI) codes maintained by the Facts and Comparisons division of Wolters Kluwer Health to analyze the clinical value and cost of individual drugs. Currently, the list comprises 99 therapy classes of drugs with comparable effectiveness against certain diseases. pharmacy benefit guide Each of these therapy classes is further divided into subclasses of drugs with similar chemical structure and activity. For example, subclasses of anti-ulcer drugs include histamine-2 receptor agonists and proton pump inhibitors. After each drug is evaluated for relative safety, toxicity, patient convenience and overall cost, the most cost-effective agents are selected for formulary inclusion. Express Scripts continues to use four steps to select the formulary drugs for each therapy class: 1. Assess Clinical Benefit Through careful analysis of published literature, drugs in each therapy class are ranked according to the relative ability of each agent to achieve the goal of therapy. Side-effect profiles, potential toxicities and drug interactions are used to distinguish among the agents. The Express Scripts National Pharmacy and Therapeutics (P&T) Committee, an independent group of practicing physicians who are not employed by Express Scripts, makes the final decision on which drugs should be included on the formulary. P&T Committee members do not take cost into account when determining clinical benefit. 97

103 pharmacy benefit guide 2. Consider Cost Because prescription drugs within a therapy class usually have different average wholesale price (AWP) costs, those cost differences are considered for formulary selection when drugs are equal in benefit. Lower-cost drugs are selected only when their clinical benefits for a substantial group of patients have been established as equal to or better than other agents in the class. Formulary drugs may actually be higher in cost than other drugs in the class when their clinical benefits are superior to the lower-cost drugs. 3. Account for Market Share A drug s market share is important for two reasons. Eliminating a widely-used drug (one with a high market share, for example) from the formulary may create unacceptable levels of disruption for patients, physicians and participating (retail) pharmacies. In addition, market-share considerations may have a significant impact on total costs for the therapy class. For instance, if drugs with high negotiated discounts are made nonformulary in favor of potentially lower-cost drugs that have little market share, costs for the therapy class may actually increase, depending on the market-share movement. 4. Account for Market Dynamics Over an Extended Time Frame Patent expirations and expected introductions of new drugs within a class can have a significant impact. A heavily-prescribed but more expensive brand drug that will lose patent protection relatively soon may stay on formulary to make rapid conversion easier once genericallyequivalent products are introduced. Such conversions have little potential for member and physician disruption. See the Therapy Class Review section of this Report for our forecasting on how market dynamics likely will affect the top 25 therapy classes over the next five years. For a complete description of the Express Scripts formulary development process, refer to: ourcompany/news/formularyinformation/development/formulary Development.pdf. 98 express scripts drug trend report 2004

104 IS THERE ONLY ONE FORMULARY? Since no one formulary can meet the needs of all plan sponsors, Express Scripts builds its formularies on a class-by-class basis. Using a priority approach based on the contribution of each class to total drug spend, Express Scripts consults with each plan sponsor to analyze its members prescription utilization patterns. The result is a cost-effective formulary that meets the needs of the plan. Exhibits 20 and 21 show how a plan sponsor can select a few, most or all prescription drugs within a class for its formulary. First, each drug is rated based on its relative clinical benefit and cost. Exhibit 20 Clinical Benefit vs Cost HI Relative Clinical Benefit LO $0 Drug D Drug F Drug A Drug B Drug C Drug E Cost of 30-Day Supply (AWP) pharmacy benefit guide A plan can take a passive approach and include all drugs on formulary. In an active formulary approach, a plan includes many but not all drugs on the formulary (in this example, drugs A through D would be formulary). A plan that takes a low-cost approach covers the generics and lowest-cost brands that meet clinical needs, which would include Drugs D and A in the example shown in Exhibit 21. Exhibit 21 Clinical Benefit vs Cost HI Relative Clinical Benefit INCREASING COST-EFFECTIVENESS Low Cost (Two drugs on formulary) Active (Four drugs on formulary) Passive (All drugs on formulary) LO $ Cost of 30-Day Supply (AWP) 99

105 pharmacy benefit guide IMPLICATIONS Formularies are developed by determining clinical value, considering cost, and analyzing market share and market dynamics. Express Scripts uses this effective method for building formularies that meet the needs of varying plan-sponsor populations. These formulary-building steps allow Express Scripts to develop multiple formularies that help plan sponsors balance the goals of maximizing cost-savings opportunities and minimizing member, prescriber and dispenser disruption. 100 express scripts drug trend report 2004

106 GenericsWork SM : NEW LEARNINGS RESULTS: LOW TRENDS WITHOUT COST-SHIFTING TO MEMBERS What s not to like about a formulary program that can hold annual trend growth below 5% without shifting costs to members or negatively affecting member health? And what client wouldn t be interested in potential savings of $25 million (per 100,000 lives) in the first three years of the program? GenericsWork demonstrates that waste can be taken out of the system. GenericsWork is a complete package of clinical tools built around the Express Scripts High Performance Formulary (HPF), a comprehensive formulary focused on generics. About 25% of the drugs on the HPF are low-cost brands. Designed to ease member and physician transition to a mostly-generic formulary, GenericsWork includes: Copayment guidelines Grandfathering (exempting members on existing drug regimens from new requirements that may affect their therapy) Step therapy with automated prior authorization and RapidResponse letters Zero Dollar Copay waiver, a member-friendly solution that encourages members to shift appropriate drug utilization from higher-cost brand drugs to lower-cost generic drugs. Drug benefits are not changed, but generic copayments are waived for a short time for specific drug classes. pharmacy benefit guide GenericsWork comes with a comprehensive communication package that includes information for both patients and clients. For patients, educational materials may be distributed as letters, in interactive voice response (IVR) messages or through online programs such as Express Preview SM. GenericsWork helps plan sponsors achieve and maintain low per member per month (PMPM) prescription-drug trend. Some clients using the HPF actually are seeing negative trends. At the end of 2004, ingredient costs for plan sponsors using the HPF averaged 54% of those seen for clients with three-tier benefits. 101

107 pharmacy benefit guide Some plan sponsors use the CoreRx product for a more gradual application of the GenericsWork concept. CoreRx allows proactive management of therapy classes that contain brands expected to go generic or OTC in the near term by locking out me-too drugs and higher-cost brands with low market share. Clients using CoreRx choose which classes to target. CoreRx then funnels utilization in these drug classes to OTCs, generics and low-cost brands. The result is a step-by-step process that results in a high-performing formulary. More than 5 million Express Scripts members are now in plans using CoreRx. On average, the generic fill rate for plan sponsors using CoreRx is five percentage points higher than our three-tier clients. Exhibit 22 PMPM Ingredient Cost Spend Express Scripts Book of Business 2004 $ Jan Feb March Apr May Jun Jul Aug Sep Oct Nov Dec Three-Tier CoreRx HPF 102 express scripts drug trend report 2004

108 The key reason for the negative trend that results from using the HPF is the generic fill rate (Exhibit 23). Exhibit 23 Generic Fill Rate Express Scripts Book of Business 2004 Percent HPF CoreRx Three-Tier pharmacy benefit guide Jan Feb March Apr May Jun Jul Aug Sep Oct Nov Dec Savings opportunities from increased use of generic drugs have never been greater. Moreover, the opportunities are expected to continue through 2010 as more than $55 billion in brand drugs are scheduled to lose patent protection over the next six years. 24 The savings from generic use accrue to both plan sponsors and members. On average, a generic drug costs approximately $45 less than a brand drug, and each 1% increase in generic fill rate is estimated to decrease pharmacy spend by nearly 1%. Members also pay a lower copayment for a generic, saving an average of $10 per prescription compared with brands Express Scripts analysis of information from Drug Topics, J.P. Morgan Securities, Inc. Industry Update. Prescription Pad and manufacturer press releases. Express Scripts, Inc. February 25, Geographic variations in generic fill rate. Express Scripts. No date given. Available at: ourcompany/news/outcomesresearch/onlinepublications/regionalgenericvariation/regionalgenericvariation.pdf. Accessed February 28,

109 pharmacy benefit guide Geographic Variation in Generic Fill Rate: NEW LEARNINGS To better understand variations in generic fill rate, Express Scripts researchers analyzed generic fill rate by state for a random sample of approximately 3 million commercially-insured members during KEY STUDY FINDINGS The generic fill rate ranged from a low of 39.5% in New Jersey to a high of 51.3% in Massachusetts. The extent of generic-drug use varied 1.3-fold across states. The variation in generic use exceeded the variation in overall prescription-drug use. Possible explanations for the variations include the differing use of cost-sharing and other clinical programs that encourage greater use of generics. For example, the generic fill rate was highest for Massachusetts, where Express Scripts clients have been aggressive in adopting low generic copayments, using step therapy and physician consultation programs, and locking out me-too drugs. Mandatory generic substitution laws do not appear to be a key driver of geographic variation. The generic fill rate for states with such laws mirrors that of states without such laws (45% and 45.3%, respectively). IMPLICATIONS Significant variations in the use of generic medications exist across states, even greater variation than that seen previously for overall prevalence of prescription use (Exhibit 24). These findings suggest that opportunities exist to achieve greater savings through adoption of programs designed to increase generic use in states with lower generic fill rates. Exhibit Age-Gender Adjusted Fill Rate 39.5%-41.8% 41.9%-44.2% 44.3%-46.5% 46.6%-48.9% 49.0%-51.3% 26 Geographic variations in generic fill rate. Express Scripts. No date given. Available at: ourcompany/news/outcomesresearch/onlinepublications/regionalgenericvariation/regionalgenericvariation.pdf. Accessed February 28, express scripts drug trend report 2004

110 Principles for Plan Design While formularies are the cornerstone of pharmacy-benefit design, the strategies that best control trend incorporate a variety of programs all aimed at improving generic penetration. Likewise, a strategic trend plan should be a multi-year process of funneling utilization to over-thecounter (OTC) drugs (usually not included in the prescription-drug benefit), generics and low-cost brands. ENLIST A VARIETY OF TREND INTERVENTIONS It s time to debunk the old adage that benefits and plan designs can only be changed every few years. Well-managed clients continually add to and fine-tune their strategies to bring continuing trends into the single digits. pharmacy benefit guide A typical, well-managed client: Develops a strategic communication plan using Express Scripts tools including a variety from our Web site, Adopts a three-tier benefit design that uses Generics Preferred, our mandatory generic policy. Every dollar spent on brand drugs that have an equivalent generic is a dollar that could be spent on other important therapies (cancer drugs, for example). Employees expect a fair drug benefit, not an excessive one. Implements between one and three step-therapy programs yearly. Our average step-therapy client has seven step-therapy programs in place. Now in effect for about 35% of Express Scripts members, step therapy promotes the use of lower-cost generics before stepping up treatment to more-costly brand drugs. Consolidates the volume of drugs going generic or OTC by putting the brakes on potential brand competitors (me-too drugs, for example) with the Express Scripts CoreRx product. CoreRx targets therapy classes to lock out nonformulary drugs, focusing on those classes with brands that have generics and/or OTCs on the near horizon. The result is a more incisive approach a step-by-step process that results in a high-performing formulary. 105

111 pharmacy benefit guide More than 5 million Express Scripts members are now in plans using CoreRx. On average, the generic fill rate for clients using CoreRx is five percentage points higher than our three-tier clients. Incorporates member-friendly strategies such as the Zero Dollar Copay program, grandfathering and RapidResponse in the mix of programs. COMMUNICATE, COMMUNICATE, COMMUNICATE A plan sponsor can have the richest of drug benefits, but if member communication is not part of that plan s strategy, members will not appreciate the generosity of the plan. Watson Wyatt found that employers with rich benefits but poor communications had turnover rates five percentage points higher than employers that combined less-costly benefits with good, continuous communication. The combination of good benefits and good communications resulted in a further drop in turnover. 27 In the face of sometimes staggering promotional spending by pharmaceutical manufacturers for brand drugs, one consistent message is needed around generic drugs. Express Scripts designs formulary notifications to deliver this message to members: Generics and OTCs are safe, cost-effective alternatives. WHAT IS A FORMULARY NOTIFICATION? Formulary notifications are a practical and effective strategy to increase formulary adherence when drugs are being moved to a nonformulary status. Targeted letters alert members to future changes and encourage them to participate in drug-therapy decisions. Express Scripts formulary-notification letters: Explain the change in formulary status List alternative drugs, including generics and OTCs Identify the out-of-pocket implications of not switching to an OTC, generic or formulary brand 27 Communication plays critical role in improving retention power of health benefits. [Press release] Watson Wyatt Worldwide; February 23, Available at: Accessed March 24, express scripts drug trend report 2004

112 Member Communications: NEW LEARNINGS In late 2003, Express Scripts conducted a pilot with a large, Midwestern health plan to answer the question, Do formulary-notification letters impact members selections of drugs? The plan was changing formulary status for 30 maintenance drugs. Express Scripts researchers randomized plan members who were using a three-tier formulary and receiving any of the affected drugs to either an intervention group or a control group. Members who had at least one claim for a targeted drug between September and November 2003 were followed for the first five months of 2004 to determine whether they switched to a formulary alternative or called an Express Scripts Patient Care Contact Center. Proportions of patients changing to a formulary alternative were determined. Multivariate regression modeling was performed to adjust for baseline differences between the study groups. pharmacy benefit guide KEY STUDY FINDINGS Members who received the letter were 1.4 times more likely to switch to a formulary alternative than those who did not get a letter. Among those with a claim: n 36.3% of those with a letter switched to a formulary alternative n 21.8% of members who did not receive a letter switched to a formulary alternative Home-delivery users who received a letter were twice as likely to switch to a formulary alternative as home-delivery users in the control group. 107

113 pharmacy benefit guide The Express Scripts member Web site includes information about specific savings that members may realize by using generics. Price Check, our online price-comparison tool, gives members information to help them convert to generics. Our Web site also offers a For Your Physician Visit tool that provides materials that members can complete and use to discuss generics during their next office visit. Not surprisingly, doctors need communications, too. According to the results of one study, more than 65% of physicians responding to a survey were not even aware of the general price range for 50 commonlyprescribed medications. The prices of brand drugs were underestimated almost 90% of the time, and generic-drug prices were overestimated more than 90% of the time. 28 Recently, another physician survey was conducted online by the American Association of Retired Persons (AARP). Weekly visits from representatives of brand pharmaceutical manufacturers were reported by 80% of the respondents. Ninety-six percent of the physicians who answered the AARP survey said that pharmaceutical representatives had given them brand-drug samples. Despite the pressure to prescribe brands, the pendulum appears to be swinging in favor of generics. In the AARP survey, 69% of the participating physicians reported that patients asked for generics frequently or sometimes. 29 In the Express Scripts Physician Consultation program, clinical pharmacists update physicians on the latest generic opportunities and treatment guidelines. When surveyed for comments, the majority (94%) of prescribers who consulted with an Express Scripts clinical pharmacist said they found the information useful in their practice, and 93% were interested in meeting with the clinical pharmacist again. Physician Consultation is used by some of our clients to support their physician-incentive programs. 28 Ernst ME, Kelly MW, Hoehns JD, et al. Prescription medication costs: a study of physician familiarity. Archives of Family Medicine. 2000;9(10): Barrett LL. Physicians attitudes and practices regarding generic drugs. AARP Knowledge Management. March Available at: Accessed April 8, express scripts drug trend report 2004

114 Express Scripts is committed to providing doctors with information that supports the appropriate use of generics. Communications appear to have a major impact on physician-prescribing behavior. In the AARP survey, 84% of physicians acknowledged being encouraged frequently or sometimes by pharmacy benefit managers (PBMs) to prescribe generics. 30 COST SHARING Overall, plan sponsors should develop a trend strategy that gives members confidence that they will continue to be able to afford maintenance drugs. Surveys indicate that members do not yet have that confidence. In fact, 26% of employees worry that they will not be able to afford the prescriptions they need. 31 pharmacy benefit guide Express Scripts recommends that plan sponsors set overall member financial contributions between 20% and 35% of drug-ingredient cost. As shown in Exhibit 25, average copayments for members using our two-tier, three-tier and CoreRx formularies are well within those guidelines. However, plan sponsors should consider annual caps on member payments (member stop-loss) to protect the sickest patients from very high out-of-pocket spending. Exhibit 25 Average Copayment per Prescription Express Scripts Book of Business 2004 $ Jan Feb March Apr May Jun Jul Aug Sep Oct Nov Dec CoreRx Three-Tier Two-Tier 30 Barrett LL. Physicians attitudes and practices regarding generic drugs. AARP Knowledge Management. March Available at: Accessed April 8, Employer health benefits 2003 survey. Kaiser Family Foundation and the Health Education and Research Trust. September 9, Available at: Accessed February 8,

115 pharmacy benefit guide EMERGING PLAN DESIGNS Highly-publicized prescription-drug withdrawals due to side effects not recognized during the drug s development have focused attention on safety issues. The recent caution on new drugs could also be applied to some of the new plan designs currently being promoted. Before clients bite, they should consider all aspects of the proposed plan design, including whether the new design really lowers the cost of drug therapy, creates adverse selection or merely shifts costs to the member. Exhibit 26 Member Impact of Plan Design and Trend Programs Cost-Effective Use Higher High Performance Formulary SM Express Choice Four-Tier Reference Pricing Three-Tier Defined Contribution High Deductible Two-Tier Reverse Copayment Lower Lower Member Risk and Cost-Shift Potential Higher Reference Pricing. The plan sponsor pays only the cost of the lowestprice drug (the reference drug) in a therapy class; the member pays the full difference between the cost of the reference drug and the ingredient cost of any higher-priced drug prescribed. High Deductible. Copayment benefits are designed for members to assume annual deductibles of $1,000 or more. Reverse Copayment. The plan sponsor defines an amount it pays for each tier; the member pays the difference between the ingredient cost and the plan contribution. Defined Contribution. The plan agrees to pay a limited annual amount. Ingredient costs above the plan-stipulated annual contribution are borne by the member. 110 express scripts drug trend report 2004

116 Point-of-Service Programs Generally, point-of-service (POS) programs are the most effective and most efficient way to optimize prescription utilization because they are based on financial incentives, occur at the time the prescription is dispensed and usually do not require additional resources to implement. Accordingly, plan sponsors should ensure that they have taken advantage of all POS programs before implementing retrospective programs, which typically involve more effort and less savings. The following section examines key POS programs, including: Generic Policy Prior Authorization Step Therapy Quantity Limits pharmacy benefit guide GENERIC POLICY For a generic drug to receive an A rating from the U.S. Food and Drug Administration (FDA), it must have the same efficacy, safety and purity profile as its brand-name equivalent. Given the typical $39 ingredient-cost difference across the Express Scripts book of business between multisource brands (brands with a generic equivalent available) and their generic counterparts, promoting the use of generics represents an important trend-management tool. Generics Preferred is Express Scripts mandatory-generic plan design. It requires a member to pay the price difference between a brand and generic if the member chooses to get a brand medication when an FDAapproved generic equivalent is available. The rationale behind this approach is that the generic is an FDA-approved equivalent to the brand; thus the plan sponsor has no clinical reason to pay for the more expensive brand medication. Clients can also implement a restricted generic policy (Generics Preferred-Physician s Choice) in which the member does not have to pay the price difference between the brand and generic when the physician issues a dispense-as-written order. 111

117 pharmacy benefit guide DO CONSUMERS TRUST GENERICS? A study by AARP in the fall of 2002 found that 95% of survey respondents are familiar with generics. Of those, most (65%) think there is no difference between generics and brand-name prescription drugs. 32 Exhibit 27 Type of Generic Policy: Express Scripts Clients Fourth Quarter 2004 Generics Preferred- Physician, s Choice 47.8% 33.9% None (Voluntary) 18.3% Generics Preferred PRIOR AUTHORIZATION With a prior authorization (PA) program, approval from the plan sponsor (or its agent) is required before the drug is covered. Typically, approval is contingent upon one of the following: A relevant clinical characteristic or risk factor that makes the drug medically necessary Documentation of a specific diagnosis (such as hypopituitarism for growth hormone) Participation in a wellness program (such as educational and exercise classes for anti-obesity medications) 32 Barrett LL. Prescription drug use among persons age 45+: a chart book. AARP Knowledge Management. June Available at: Accessed February 28, express scripts drug trend report 2004

118 PA is often used to manage the dispensing of drugs that are relatively expensive and that also may have a significant potential for inappropriate use. Simply being high-cost is not sufficient reason to place a drug on PA. However, PA can be used to limit coverage of drugs to those patients for whom no alternative drug is appropriate, while disallowing coverage for patients for whom other, less-expensive treatments are suitable. Clinical reasons may also affect a drug s PA status. For example, a drug that requires close monitoring because of potentially serious side effects could be placed on PA to facilitate the monitoring. The cost-effectiveness of PA for prescription drugs has been questioned. 33 For such programs to be cost-effective, the cost of the program to the plan sponsor must be less than the resulting drug savings. One way to help achieve cost-effectiveness for PA is to automate approval criteria when appropriate. Defining medical conditions by well-established drug markers can help automate the approval process through online adjudication. During prescription adjudication, the system checks the patient s claims history for specific medications. If one of the drug markers is found in the drug profile, the claim is paid. Automated assessment for age limits or gender-specific drugs is also common. The following NEW LEARNINGS section describes an automated PA. pharmacy benefit guide Exhibit 28 Drugs Commonly Placed on Prior Authorization Alpha-1 Antitrypsin Replacement Antifungals Botulinum Toxin Diabetic Foot Ulcer Medication Epilepsy Medications (Frequently Used Off-Label for Pain or Migraines) Growth Hormone Injectable Arthritis Drugs Injectable Asthma Treatment Injectable Osteoporosis Treatment Narcolepsy Drugs Psoriasis Treatments Red Blood Cell Enhancers Topical Tretinoin and Tazarotene 33 Reissman D. What is the real cost of prior authorization? Drug Benefit Trends. 2000;12(10):22,

119 pharmacy benefit guide Automated PA for Erectile Dysfunction: NEW LEARNINGS An Express Scripts study published in the International Journal of Impotence Research reported that use of Viagra (sildenafil) was growing fastest among younger men. 34 Between 1998 and 2002, the number of men under the age of 46 who received a prescription for Viagra increased as much as threefold. Recently, new medications for treating erectile dysfunction (ED) Cialis and Levitra entered the marketplace. To limit inappropriate use while still assuring that essential prescriptions were filled and member disruption was minimal, Express Scripts developed an automated PA program to identify drug markers that cause erectile dysfunction. Examples of medications that cause erectile dysfunction include drugs that treat depression, prostate hypertrophy and Parkinson s disease. In reviewing results for plan sponsors that have adopted various types of management strategies for ED drugs, we compared four strategies: No program Limiting the quantity dispensed to six tablets per prescription Limiting the quantity dispensed to six tablets per 30 days Automated PA with a quantity limit of six tablets per prescription 35 RESULTS The automated PA combined with a per-prescription quantity limit produced the greatest savings at $0.61 PMPM. Somewhat lower was a quantity limit per 30 days at $0.28 PMPM, followed by a quantity limit per prescription at $0.23. The slightly higher PMPM savings for a quantity limit per 30 days was due to the small number of members who obtained more than two fills within a 30-day period. A member s ability to circumvent quantity limits that are based on a specified number of days depends upon what the pharmacist enters for days supply given that drugs for ED are often dosed on an as-needed basis. Exhibit 29 PMPM Client Savings From Automated Prior Authorization $ Quantity Limit Per Prescription Quantity Limit Per Day, s Supply Automated Prior Authorization With Quantity Limit 34 Delate T, Simmons VA, Motheral BR. Patterns of use of sildenafil among commercially insured adults in the United States: International Journal of Impotence Research. 2004;16(4): Trend management strategies for management of erectile dysfunction therapy. Express Scripts. No date given. Unpublished. 114 express scripts drug trend report 2004

120 STEP THERAPY What Is Step Therapy? Step therapy is designed to encourage use of therapeutically-equivalent, lower-cost alternatives (first-line therapy) before stepping up to more expensive therapy (second-line therapy). Administered at the point of service, step therapy involves real-time checks of the member s prescriptionclaims history for prior use of a first-line agent, as well as for previous use of brand agents (a practice known as grandfathering). In both of these instances, a plan automatically will provide coverage for the brand agent. A study published in Health Affairs analyzed data from the 2000 Medicare Current Beneficiary Survey for enrollees aged 65 years old and older who participated in fee-for-service plans. 36 The study concluded that increasing risk of gastrointestinal problems is associated with greater odds of being prescribed a cyclooxygenase 2 inhibitor (COX-2). However, it also found that generous drug coverage has a much larger impact. All else being equal, patients with the most generous insurance coverage had more than double the chance of getting COX-2s compared with those having no third-party coverage. If a step-therapy program had been in place for COX-2s, their use could have been channeled more appropriately in both clinically-sound and cost-effective ways. pharmacy benefit guide Exhibit 30 How Step Therapy Works If history is present, claim pays Doctor and patient visit Rx written RPh System checks for history of first-step drug(s) PBM If no history, claim rejects Prior authorization required. Call MD. Must try first-step drug first. 36 Doshi JA, Brandt N, Stuart B. The impact of drug coverage on COX-2 inhibitor use in Medicare. Health Affairs. Web Exclusive. February 18, Available at: Accessed February 25,

121 pharmacy benefit guide In early 2005, 27% of employers surveyed had either implemented step therapy or were adopting it for one or more therapy classes. An additional 38% were considering step-therapy programs for their employees. 37 From December 2002 to January 2005, the number of members enrolled in a plan with at least one step-therapy program grew from 4.5 million to 13.2 million at Express Scripts. Additionally, the average number of step-therapy modules per client using step-therapy programs increased from 2.5 to 7.2 modules (Exhibit 31). Exhibit 31 Members Enrolled in Plans With Step Therapy Average Number of Step-Therapy Modules Members (In Millions) 0 December 2002 January 2005 The growth in step-therapy programs is being fueled by the growing number of therapeutically-equivalent treatment alternatives available for many health conditions. However, it is important to point out that having a less expensive generic product in the therapy class does not automatically make a drug category an appropriate candidate for step therapy. The first-line drug must be therapeutically equivalent to second-line drugs. Therapy classes that are candidates for a step-therapy program are shown in Exhibit Employer health care expectations. Future strategy and direction Hewitt Associates. November 17, Available at: Accessed February 9, express scripts drug trend report 2004

122 Exhibit 32 Step-Therapy Opportunities DRUG CLASS OR SUBCLASS FIRST-LINE DRUG OR SUBCLASS (EXAMPLE) SECOND-LINE DRUG OR SUBCLASS (EXAMPLE) Agents for Allergic Rhinitis Oral NSAs (loratadine) Leukotriene pathway inhibitors (Singular ) Agents for ADHD Generic stimulants Strattera (methylphenidate) Aldosterone Blockers spironolactone Inspra TM Antiasthmatics albuterol Xopenex Antidepressants Generic SSRIs (fluoxetine) Brand SSRIs (Zoloft ) Brand SNRIs (Effexor XR, Cymbalta ) Antidepressants bupropion SR Wellbutrin XL TM Antidiabetics metformin Glucophage XR Antihypertensives Generic ACEIs (lisinopril) Brand ACEIs (Altace ) ARBs (Diovan, Cozaar ) Anti-inflammatory Agents Generic NSAIDs (ibuprofen) Brand NSAIDs COX-2s (Celebrex ) Antipsychotics Atypical antipsychotics Symbyax TM (Risperdal ) Antivirals Generic acyclovir Brand antivirals (Valtrex, Famvir ) Anxiolytics Generic benzodiazepines Brand benzodiazepines (Xanax SR) (diazepam) Bile Acid Sequestrants cholestyramine, colestipol oral Welchol TM suspensions and micronized tablets Calcium Channel Blockers Generic CCBs Brand CCBs (Norvasc ) Cholesterol-lowering agents Minimum-dose statins Zetia TM Generic statins (lovastatin) Brand statins (Zocor, Lipitor ) Gastrointestinals Generic PPIs (omeprazole) Brand PPIs (Nexium, Prevacid ) Topical corticosteroids Generic topical steroids Brand topical steroids (augmented betamethasone (Aclovate, Elocon, Halog ) dipropionate) Topical Immunomodulators Generic corticosteroids Elidel (augmented betamethasone Protropic dipropionate) pharmacy benefit guide Abbreviations NSAs Non-sedating antihistamines ADHD Attention-Deficit/Hyperactivity Disorder SSRIs Selective serotonin reuptake inhibitors SNRIs Selective norepinephrine reuptake inhibitors ACEIs Angiotensin-converting enzyme inhibitors ARBs Angiotensin-2 receptor blockers NSAIDs Non-steroidal anti-inflammatory drugs COX-2s Cyclooxygenase 2 inhibitors CCBs Calcium channel blockers PPIs Protron pump inhibitors 117

123 pharmacy benefit guide Step Therapy for Statins: NEW LEARNINGS Historically, some clients were concerned that lovastatin, the generic first-line statin, may not decrease low-density lipoproteins (LDL) as much as some of the brand statins. However, statins are used for multiple purposes. For primary prevention, they are taken to help keep patients with high cholesterol but with no coronary heart disease from having their first cardiovascular events, such as heart attacks or strokes. Patients taking a statin for secondary prevention have already experienced a cardiovascular event. These patients are trying to reduce the chance of additional events. While several of the brand statins are both cost effective and warranted for secondary prevention, clinical research has shown that their general use for primary prevention is not cost effective at brand prices. 38, 39, 40 In addition, the average cholesterol-lowering results achieved with lovastatin are well within the recommended levels for primary prevention defined by the National Cholesterol Education Program. 41 For primary prevention, generic lovastatin is usually the most cost-effective statin choice. 42 Therefore, Express Scripts developed our statin step-therapy program to target members with new prescriptions for a low-dose, brand statin. We found that 51% of these new low-dose statin users were probably using the statin for primary prevention, because they had no other drug markers indicating secondary prevention. Accordingly, these members were good candidates for the use of generic lovastatin, and their prescriptions triggered a message to the dispensing pharmacist. Of those targeted during the analysis period, 52.5% switched to lovastatin. 38 Moghadasian MH, Mancini GB, Frohlich JJ. Pharmacotherapy of hypercholesterolaemia [sic]: statins in clinical practice. Expert Opinion in Pharmacotherapy. 2000;1(4): Prosser LA, Stinnett AA, Goldman PA, Williams LW, Hunink MG, Goldman L, Weinstein MC. Cost-effectiveness of cholesterollowering therapies according to selected patient characteristics. Annals of Internal Medicine. 2000;132(10): Pickin DM, McCabe CJ, Ramsay LE, Payne N, Haq IU, Yeo WW, Jackson PR. Cost effectiveness of HMG-CoA reductase inhibitor (statin) treatment related to the risk of coronary heart disease and cost of drug treatment. Heart. 1999;82(3): National Cholesterol Education Program (NCEP). Third Report of the NCEP Expert Panel on Detection, Evaluation, and Treatment of High Blood Cholesterol in Adults (Adult Treatment Panel III). Executive Summary. Bethesda, MD: NIH; 05/01. NIH Pub No Perreault S, Hamilton VH, Lavoie F, Grover SA. Treating hyperlipidemia for the primary prevention of coronary disease are higher dosages of lovastatin cost-effective? Archives of Internal Medicine. 1998;158: express scripts drug trend report 2004

124 Step Therapy for Calcium Channel Blockers: NEW LEARNINGS Calcium channel blockers (CCBs) represent another therapy class that has been dominated by brand presence. Norvasc (amlodipine) is by far the most prescribed member of a CCB subclass known as dihydropyridines (DHPs). Although direct generics for Norvasc are not scheduled to be available until 2007, lower-cost generic alternatives, such as extended-release nifedipine, are available currently. Generic DHPs are considered therapeutically equivalent to Norvasc for the majority of indications (angina, essential hypertension and hypertension in combination with certain other conditions). Yet Norvasc market share continues to grow, in part due to successful clinical differentiation in a subset of patients with congestive heart failure (CHF). When Express Scripts examined medical data and pharmacy claims for a large managed-care organization, we found that 6.2% of Norvasc users had a diagnosis of CHF, which would warrant the use of Norvasc. Further evaluations were done to discover the most effective ways to identify Norvasc users who are not diagnosed with CHF. We found that by identifying specific drug markers that indicate treatment for CHF, we exclude more than 70% of CHF patients from even receiving a step-therapy edit for Norvasc. As a result, we have been able to develop a clinically-sound steptherapy program that minimizes member disruption and channels the generic and brand alternatives to appropriate patients. pharmacy benefit guide 119

125 pharmacy benefit guide HOW MUCH DOES STEP THERAPY SAVE? Savings from step-therapy programs are significant. In Express Scripts experience, clients can save 10% or more on overall drug spend when implementing all of the step-therapy programs. Savings build over time because they result not only from initial prescriptions for new users, but also from refills for patients who received an edit and changed to a first-line drug in previous months. The amount of time needed to reach a steady level of savings varies by therapy class. As POS programs, step-therapy edits are delivered by computerized messages to the pharmacist who dispenses the prescription. Additionally, because step-therapy programs grandfather current users, their only impact is on new users of a medication. Therefore, educating members before they receive step-therapy edits is difficult. On the other hand, because step therapy affects a very small percentage of most groups, communicating to all members of the plan is not practical. Furthermore, even if steptherapy communications go out to all members of a group, most will not remember the details if they eventually receive a step-therapy edit. WHAT IS THE MEMBER RESPONSE? Express Scripts research in 2003 found some member confusion about step therapy and the options after receiving a step-therapy edit. Very few members, however, reported not receiving a prescription at all. Most members without a claim in our system reported obtaining the medication through another source including samples from the physician, paying out of pocket or obtaining OTC medication (Exhibit 33). 120 express scripts drug trend report 2004

126 Exhibit 33 Member-Reported Outcomes After a Step-Therapy Edit Percent Source: Motheral BR, Henderson R, Cox ER. Plan-sponsor saving and member experience with point-of-service prescription step therapy. American Journal of Managed Care. 2004;10(7) Based on these findings, Express Scripts developed a RapidResponse program specifically to educate members who do not have another claim within two days of receiving a step-therapy edit. We send the member a letter with information on step therapy, an explanation of the options, and a list of first- and second-line drugs. A controlled, randomized study, which we conducted in 2004, found that members receiving RapidResponse letters elected to fill a generic drug more frequently than those not designated to receive a RapidResponse letter. The client realized an additional savings of $0.10 PMPM, and members were better informed about their therapy alternatives. pharmacy benefit guide Exhibit 34 Outcomes After a RapidResponse Letter* GROUP BRAND GENERIC Treatment Group (N=3,689) 63.5% 36.5% Control Group** (N=3,672) 70.7% 29.3% *Among those with a prescription claim after the edit. ** Randomly assigned. QUANTITY LIMITS To minimize waste and stockpiling, prescriptions filled in local participating (retail) pharmacies frequently are limited to a defined amount per dispensing or a specified days supply typically a 34-day supply per fill. Beyond these standard supply limits, additional quantity limits can be used to ensure that quantities supplied are consistent with both clinical dosing guidelines and the plan sponsor s benefit design. 121

127 pharmacy benefit guide For example, quantity limits are sometimes used for inhalers and other drug-delivery devices that contain specific numbers of doses. Another obvious use of quantity limits is for lifestyle products, such as drugs that treat erectile dysfunction. Quantity limits can also be used to prevent billing errors. When the days supply figure keyed in by the pharmacist is unreliable (inhalers charged by the gram instead of by the device, for example), a quantity limit on the units dispensed can be used to ensure that errors are caught. Finally, quantity limits can be used to encourage dose consolidation the use of a single unit of one strength of a drug in place of two units that are half that strength. Manufacturers sometimes use a price parity structure meaning that their products have little or no difference in price among various strengths. In some cases, encouraging dose consolidation is appropriate. Lately, retrospective dose consolidation has received attention as a strategy for plan sponsors to control drug cost, 43 but Express Scripts research has shown that these programs are not as effective as they were originally thought to be. See the following NEW LEARNINGS section for more information. Drug classes for which quantity limits are frequently used include: Allergy Medications (oral and injectable) Erectile Dysfunction Agents Inhalers and Nasal Sprays Migraine Products Patches Vaginal Creams and Suppositories When a quantity exceeding the plan sponsor s limit is detected at the time of dispensing, a message indicating the quantity limitation is sent to the pharmacist s computer. The pharmacist may either contact the doctor to discuss a possible change in quantity that is consistent with the dosage guidelines, or dispense the prescription until the physician can be reached. The physician may also request an override if the quantity limit is not applicable to the patient and the condition being treated. 43 Calabrese DC, Baldiner SL. Dose-optimization intervention yields significant drug cost savings. Journal of Managed Care Pharmacy. 2002;8(2): express scripts drug trend report 2004

128 Dose Consolidation: NEW LEARNINGS In an article that received the 2004 Award for Excellence as the Paper of the Year from the Journal of Managed Care Pharmacy, Express Scripts researchers reported on a randomized, controlled research study designed to evaluate retrospective dose consolidation for a large mid-atlantic health plan. 44 Pharmacy claims were reviewed for three consecutive months (from November 2002 through January 2003) to identify inefficient (more than once-daily) regimens for any one of 68 strengths for 37 singlesource medications with a once-daily dosing recommendation. Prescribers were randomized to one of two intervention groups or a control group. In both intervention groups, prescribers received personalized letters outlining their patients regimens and suggesting dose-consolidation options. In one intervention group, patients also received a letter. In the control group, no interventions were done. Prescription-drug claims for patients in all three groups were examined 180 days after the date of the intervention to determine how many prescriptions were converted to a more efficient (once-daily) regimen. pharmacy benefit guide The rate of consolidation was highest (10.2%) for the group in which both physicians and patients received a letter. The physician-only group had a 7.3% conversion rate, compared with the control group s rate of 3.9%. Approximately 30% of the regimens identified for all three groups in the study were never refilled after being identified. Savings were found to be only $0.02 to $0.03 PMPM when they were calculated using realistic compliance rates. Factoring in costs to administer the program lowered the savings even more. Review of the therapy classes that were targeted in the study showed few opportunities to justify implementing a retrospective dose-consolidation program. Important points to consider when evaluating programs and reported results include: Did the study use a control group to factor out background rates of change? Was the control group equivalent to the treatment group? Were false assumptions made in modeling savings or effectiveness? Was the cost of the program taken into account? 44 Delate T, Fairman KA, Carey SM, Motheral BR. Randomized controlled trial of a dose consolidation program. Journal of Managed Care Pharmacy. 2004;10(5):

129 pharmacy benefit guide Consumer-Driven Healthcare Interest in healthcare consumerism has never been greater. As plan sponsors continue to look for strategies to better manage spiraling healthcare costs, many are looking to consumer-driven healthcare (CDHC) as a possible solution. At the core of CDHC is consumerism, which is defined in the healthcare context as approaches designed to inform, empower or provide incentives for consumers to play a more active role in making cost-effective decisions about their healthcare. While CDHC has been part of the U.S. healthcare delivery system for some time although more in theory than in practice two major factors contribute to the heightened interest it has received recently. First, consumers generally are more prepared to participate in decisions for themselves and their families. In particular, consumers are more aware of choices in the healthcare market. Typically, most healthcare decisions have been left up to a third party a doctor, an employer, an insurance company with little or no input from the member. With increasing Internet use, however, consumers are more proactive about seeking information on healthcare-coverage options, insurance carriers and potential treatments. According to results of a recent Harris Interactive study, approximately three-fourths of all Internet users (accounting for more than half of all adults in the U.S.) have researched health information online. 45 In addition, pervasive direct-to-consumer (DTC) advertising for prescription drugs and healthcare services also raises consumer awareness of treatments. Moreover, patients are more willing to discuss health information with their doctors even requesting specific drugs by name in many cases. In 2001, about 30% of the adults participating in a survey indicated they had talked with a doctor about a drug they had seen advertised, and 44% of the people who talked with a doctor received a prescription for the advertised drug. 46 Most importantly, an increasing number of employees have been given the choice of more options for their employer-sponsored health benefits. 45 Taylor H, Leitman R, eds. No significant change in the number of cyberchondriacs those who go online for health care information. Health Care News. Harris Interactive Health Care Research. 2004;4(7):1. 46 Kaiser Family Foundation. Understanding the effects of direct-to-consumer prescription drug advertising. November Available at: Accessed March 3, express scripts drug trend report 2004

130 Secondly, the idea of individual accountability for actions and decisions has begun to take hold among plan sponsors. Despite limited adoption of medical savings accounts in the mid-1990s due to their restrictive requirements, modifications in the accounts offered today have renewed interest in them. The Health Reimbursement Arrangement (HRA), introduced in 2002, has gained popularity among plan sponsors as an employer-funded spending account that unlike the use it or lose it provision of Flexible Spending Accounts (FSAs) allows for unspent funds to be rolled over from year to year. This flexibility gives members an incentive to limit discretionary spending so they have more funds available in future years. The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 established Health Savings Accounts (HSAs), which the current administration is promoting heavily. Extensive media coverage of HSAs, along with the tax advantages they offer (contributions, earnings and distributions are all tax-free), has caught the attention of plan sponsors and consumers, generating further interest in CDHC and the High Deductible Health Plans required with HSAs. pharmacy benefit guide According to a survey conducted by the trade publication Inside Consumer-Directed Care, approximately 3.2 million people were covered by an account-based, consumer-driven health plan (CDHP) on Jan. 1, This figure represents only 2% of the estimated 160 million Americans who have employer-sponsored health insurance. While the actual number of current enrollees in CDHPs is low, the demand for this plan design is growing among employers. Exhibit 35 on the following page differentiates the three main types of CDHP spending accounts currently available in the U.S. 47 Davis S, ed. CDH enrollment nearly triples to 3.2 million; traditional payers, new players tout gains. Inside Consumer-Directed Care. Atlantic Information Services. 2005;3(1):1. 125

131 pharmacy benefit guide Exhibit 35 CDHP Spending Accounts FSA HRA HSA Description Tax Break Employer I.O.U. Healthcare 401(k) Funding Employee Employer Both Rollover No Yes Yes Portable No No Yes Investments No No Yes Plan Restrictions No No Yes (HDHP) Stand-Alone Rx Plan Yes Yes No (HDHP) Substantiation for Payments Yes Yes No FSA: Flexible Spending Account; HRA: Health Reimbursement Arrangement; HSA: Health Savings Account CDHC includes much more than financial considerations, however. The true spectrum of CDHC is holistic it concerns the whole individual and emphasizes personal responsibility for all the factors influencing health. CDHC ranges from wellness programs and disease management to sophisticated online decision-support tools (Exhibit 36). While changes in benefit design may be one effective way to distribute costs more equitably between employers and employees, benefit designs must be combined with other elements of consumerism to create the kinds of long-term behavioral changes that will sustain both cost containment and the ability for employers to continue providing prescription-drug benefits. Exhibit 36 The Consumer-Driven Healthcare Spectrum Decision Support Member Education Custom Health Plan Wellness & Disease Management Financial Incentives Benefit Design 126 express scripts drug trend report 2004

132 EXPRESS SCRIPTS SUPPORTS CDHC Express Scripts addresses the holistic nature of CDHC through a variety of initiatives designed to encourage responsible consumer behavior at all points in the CDHC spectrum. Although the following discussion relates each program to a distinct sector of the spectrum, the programs are all interrelated, with considerable overlap among them. For members to make cost-effective decisions about their healthcare, they must have easy access to critical drug and benefit information. Express Scripts provides this information through a variety of online decision-support and member-education tools. Our online tools provide pricing information and describe cost-saving opportunities to help members manage their deductible and accurately estimate annual outof-pocket expenses. Plan sponsors can access a variety of informative materials for their members on our online Member Communications Catalog. Additionally, both clients and members can view noncommercial drug information at the evidence-based, consumeroriented Web site that Express Scripts maintains in cooperation with faculty from the St. Louis College of Pharmacy. pharmacy benefit guide An important goal of consumerism is to encourage members to take more active roles in managing their health especially members who are seriously ill or who have family members with serious health conditions. To educate members about health conditions, Express Scripts offers care-management programs with patient interventions that range from Web service to letter-based communications. For member populations that would benefit from individualized health consultations, Express Scripts works directly with LifeMasters to provide diseasemanagement services. When authorized, Express Scripts also shares claims data with clients and their approved vendors that want to conduct their own disease-management programs. In addition to helping members manage their conditions, Express Scripts offers online healthrisk assessments, which are available through 127

133 pharmacy benefit guide Research consistently demonstrates that consumers who have choices are more satisfied with the outcomes, especially with medical- and prescription-benefit plan choices. The goal of custom health plans is to let consumers select the benefit structure that best suits their needs. Express Scripts offers customization through Express Choice SM, a product that allows plan sponsors to offer multiple prescription-drug plans with varying degrees of aggressiveness. Members select the most appropriate plan for their given situations. Then, throughout the plan year, members experience the effects of their own decisions regarding cost, coverage and flexibility while the plan sponsor continues to manage drug expenditures. Express Choice provides an opportunity for plan sponsors to promote consumerism without moving completely away from traditional benefit designs. In addition, because members have been given the freedom of choice, plan sponsors can manage trend aggressively without sacrificing member satisfaction. In fact, one client using Express Choice reduced its PMPM drug spend by 20% while keeping member satisfaction above 90%. To help members make decisions, an online tool is available during open enrollment. This tool presents the prescription-drug plan choices in a personalized way that demonstrates how each plan could affect the individual member s out-of-pocket costs. When applicable, it also shows members how they can get the most from their benefit dollars by using generics and home delivery. Plan sponsors that use Express Choice have demonstrated consistent and significant savings, as demonstrated in the following NEW LEARNINGS section. 128 express scripts drug trend report 2004

134 Express Choice: NEW LEARNINGS One health plan successfully used Express Choice to move members into more aggressive prescription-drug plans and to promote consumerism. When the client adopted Express Choice in 2003, member options expanded from one plan to three, adding two plans that were more aggressive than the original offering: Premium Plan: The client maintained its 2002 benefit as its richest offering. The plan offered low copayments, the broad Express Scripts National Preferred formulary and Express Scripts broadest participating (retail) pharmacy network. Standard Plan: The middle plan used the same pharmacy network but had slightly higher copayments, changed to the more restrictive Express Scripts Prime formulary and added Exclusive Home Delivery (mandatory-mail service) for selected maintenance medications. Basic Plan: The most restrictive plan also used the Express Scripts Prime formulary and Exclusive Home Delivery, but added even higher copayments and a limited participating pharmacy network. pharmacy benefit guide To reward members for choosing the more restrictive plans, the Standard and Basic Plans offered the lowest member premiums (previously, prescription-drug and medical premiums had been bundled). Thus, members had an incentive to choose a more tightlymanaged plan. The client still controlled costs while allowing those members who wanted a richer benefit to choose the Premium Plan at a higher cost. Over the next two years, the client made a few plan-design changes most notably adding several step-therapy modules and switching from retail copayments to coinsurance in 2004 (Exhibit 37). Exhibit 37 Summary of Client s Plan Design for 2005 BASIC STANDARD PREMIUM Formulary Narrow Narrow Broad Network Narrow Broad Broad Exclusive Home Delivery Yes Yes No Retail Coinsurance 30% 25% 20% Home-Delivery Copayment $25/$40/$80 $20/$30/$75 $15/$30/$70 Member Premium Low Medium High 129

135 pharmacy benefit guide PLAN SELECTION: MOVING IN THE RIGHT DIRECTION In addition to providing members with incentives to make more cost-effective decisions, Express Choice serves as an effective changemanagement tool by giving members the option to choose more restrictive plan designs if those designs suit their needs. As shown in Exhibit 38, the client has seen a significant move from the Premium Plan to the more aggressive Standard and Basic Plans since Enrollment in the more cost-effective plans grew from 55% in 2003 to 71% in Exhibit 38 Members, Choice of Plan Designs 2003 to 2005 Percent Premium Standard Basic Express Choice enabled the client to promote consumer choice while managing the prescription-drug benefit aggressively. In 2004, the client s PMPM cost declined by 6% compared with PMPM cost in When member premium contributions are factored in, the savings are even greater. In 2004, the client also saw home delivery grow by nearly a third and generic utilization grow by 15.9%. More movement from the Premium Plan to the Standard and Basic Plans, which both have Exclusive Home Delivery, may result in similar additional increases in Results Plan drug spend -6% Home delivery +32.6% Generic utilization +15.9% 2005 Projections 115,000 incremental home-delivery prescriptions (+40%) 15% increase in generic utilization 130 express scripts drug trend report 2004

136 When considering whether to implement CDHC, plan sponsors frequently focus on benefit design specifically on high-deductible plans with spending accounts. A benefit plan structured around coinsurance also fits within the consumerism framework because it exposes the member to the true cost of products and services. At the heart of CDHC are financial incentives that influence consumer healthcare decisions. Express Scripts supports the administration of spending accounts and high deductibles through data integration with health plans and debit-card vendors. EXPRESS SCRIPTS SUPPORTS CONSUMER-DRIVEN HEALTH PLANS Express Scripts exchanges data in two ways that support CDHPs. In the first process, pharmacy claims information that Express Scripts sends to health plans allows the administration of integrated medical and pharmacy CDHPs, typically HSA-qualifying, high-deductible health plans. Medical data are sent to Express Scripts and pharmacy data are sent to the health plans in a nightly batch process (Exhibit 39). Realtime data exchange is not relevant for integrated deductible management because pharmacy claims are already processed weeks, if not months, ahead of medical claims. Both the plan sponsor and Express Scripts track the integrated deductible and maximum out-of-pocket costs so that future claims can be processed using up-to-date totals. The process does not involve the movement of actual HSA or HRA funds; it is simply a mechanism for benefit administration. pharmacy benefit guide Exhibit 39 Integrated Deductible Claims Batch Process MEMBER Goes to doctor Fills Rx at pharmacy EXPRESS SCRIPTS Updates integrated deductible Adjudicates Rx claim based on integrated deductuble Sends Rx claim info (batch) PLAN SPONSOR Adjudicates medical claim based on integrated deductuble Sends medical claim info (batch) Updates integrated deductible 131

137 pharmacy benefit guide In the second process, Express Scripts sends data that support plan sponsors who choose to offer their members debit cards linked to FSAs or HRAs. Debit-card use is growing because it offers members convenient access to their HSAs without needing to file a paper claim for reimbursement. To offer a debit card, a plan sponsor must contract with a debit-card vendor through an FSA or HRA administrator. Express Scripts does not interface directly with the plan sponsor. Instead, Express Scripts sends real-time pharmacy-claims information to the debit-card vendors. The vendor can substantiate members purchases and deduct them automatically from FSAs and HRAs at the point of sale. Members are not required to substantiate payments from HSAs. By providing clients with tools that give their members healthcare options, inform them about the possible implications of different choices and allow them to make personal tradeoffs, the array of CDHC opportunities offered by Express Scripts promotes efficient use of the prescription-drug benefit, rather than imposing restrictions on it. 132 express scripts drug trend report 2004

138 Prescription Distribution Even though medical benefits including prescription-drug benefits are common, they have very personal implications. Decisions about providing drug coverage become clearer when viewed in the same way other products are procured. Many companies, for example, purchase supplies or equipment from a preferred vendor that provides the right balance of cost and service. The employer selects the vendor based on criteria important to the specific environment. A similar approach can be applied to providing medical benefits particularly prescription-drug benefits. Over the past few years, the focus for controlling prescription-drug cost has been on drug mix moving utilization from expensive brand drugs to generics or lowercost formulary brands. New mix opportunities exist for many clients, but managing mix may not be enough as trend continues to increase. In 2005 and beyond, focus is shifting to appropriate distribution of prescriptions through local participating (retail), home-delivery, specialty and other pharmacy channels. To manage prescription dispensing, some clients have even started building pharmacies inside or near their production facilities. Moving prescriptions to the appropriate distribution channel is crucial to finding the right balance for clients and members. pharmacy benefit guide Optimizing the distribution channel has numerous benefits. The primary advantage is savings; but convenience, service and the ability to continue offering benefits long-term are also prime considerations for many clients. HOME DELIVERY Home delivery (mail service) allows patients to have their prescriptions for maintenance drugs filled at an Express Scripts Pharmacy location, then delivered to their doorsteps. Home delivery is convenient and costeffective. The advanced technologies used by the Express Scripts Pharmacies help both clients and patients save money while maintaining high levels of service and quality. The challenge is that although home delivery of prescriptions is a standard offering in today s market, 43% of patients do not even know that their benefits include home delivery Roe C Mail order survey. Final report. Express Scripts, Inc. May 3, Unpublished. 133

139 pharmacy benefit guide With appropriate plan design, home delivery represents a fiscally-responsible solution for plan sponsors and members who use maintenance medications. On average, across the Express Scripts book of business, each prescription filled through home delivery costs up to 10% less than the same prescription filled at a local participating pharmacy. Currently, approximately 22% of our clients members are still filling their maintenance medications at local participating pharmacies. In total, 58% of all claims processed by Express Scripts are for maintenance medications, which have an average wholesale price of $120 per claim. To channel the appropriate prescriptions from retail to home delivery, clients are using two broad strategies: 1. Promoting home delivery through general and targeted patient-education materials 2. Implementing plan designs that encourage or require members to use home delivery In response to monthly patient surveys conducted by Express Scripts in 2004, 98% of patients using home delivery for their prescriptions said they used home delivery because it is less expensive than other options. In the same study, 84% of the respondents found home delivery more convenient than going to a local participating pharmacy. In fact, respondents over 55 years old cited convenience as their number one reason for choosing home delivery. In follow-up research, Express Scripts found that members often equate convenience with having to fill the prescription only four times per year. These findings are consistent with other Express Scripts research that showed the patient s age and copayment savings as primary drivers of home-delivery use. Other analyses, which looked at retention of home-delivery users, revealed that 90% of patients who used home delivery in the first half of the year continued to use home delivery in the following six months. Of the patients who stopped using home delivery: 2% were no longer taking maintenance medications 3% did not get a subsequent claim through either home delivery or a local participating pharmacy 5% continued to fill maintenance prescriptions at a local participating pharmacy 134 express scripts drug trend report 2004

140 COMPARING RETAIL AND HOME-DELIVERY PHARMACIES Given the cost savings associated with home delivery, comparing it with the retail channel is critical in three key areas: 1. Persistency 2. Generic Fill Rate 3. Waste Persistency Some controversy exists over the value that home delivery provides to employers when compared with local participating (retail) pharmacy use. During this debate, assertions have been made that consistency rates are considerably worse for patients who use home-delivery pharmacies compared with patients who use retail pharmacies. 49 pharmacy benefit guide To test this assumption, researchers at Express Scripts performed an analysis on medication use for more than 2 million randomly-sampled, continuously-eligible members from the Express Scripts book of business. 50 Researchers examined records for patients who started a maintenance medication in May, June or July Patients were followed for 11 months to determine their medication refill rates. Patients who used home delivery refilled their medications at a substantially higher rate than patients using local participating (retail) pharmacies (Exhibit 40). In fact, the researchers found that after results were controlled for age and gender, new users of maintenance medications who used local participating (retail) pharmacies were approximately 50% less likely to be refilling their medications 11 months after the first fill, compared with patients using home delivery. 49 PBMs push mail-order penetration rates, but employers should be wary of incentives. Managed Care Week. September 15, Delate T, Svirnovskiy Y. Compliance among retail pharmacy users lower than mail pharmacy users. Express Scripts, Inc. January Unpublished. 135

141 pharmacy benefit guide Exhibit 40 Persistency Among New Users of Local Participating (Retail) and Home Delivery (Mail) Percent Still Refilling Months of Therapy Home Delivery (Mail) Local Participating (Retail) These findings clearly show that among this sample, patients using home delivery are not less compliant than local participating (retail) pharmacy users. Generic Fill Rate Previous studies, some funded by the retail-pharmacy industry, have also pointed to disparities in the generic-dispensing rate between home-delivery and retail pharmacies as evidence that pharmacy benefit managers (PBMs) steer consumers toward more expensive brand drugs. In a fully-independent study, however, Harvard economists found that in reality, PBM-owned home-delivery pharmacies dispense and substitute generics at essentially the same rates as retail pharmacies. The authors differentiated generic dispensing (the number of claims that are filled with generics compared with the total number of drug claims whether or not the drug dispensed has a generic equivalent) and generic substitution (the number of generic claims compared with the number of opportunities to fill with a generic). The study, which was published online, examined 670 million prescriptiondrug claims that were processed by five large PBMs during the first six months of Although claims for home-delivery prescriptions represented only about 10% of the total number of prescriptions, they accounted for about one-third of the total days supply of drugs. 51 Wosinska M, Huckman R. Generic dispensing and substitution in mail and retail pharmacies. Health Affairs. Web Exclusive. July 28, Available at: =&HITS=10&hits=10&RESULTFORMAT=&author1=wosinska&andorexactfulltext=and&searchid= _ 4094&stored_search=&FIRSTINDEX=0&resourcetype=1&journalcode=healthaff. Accessed February 25, express scripts drug trend report 2004

142 Generic-dispensing patterns at PBM-owned home-delivery pharmacies were compared to those at retail pharmacies, controlling for differences in consumer use of the two types of pharmacies. Consumers typically use home-delivery pharmacies to obtain medication needed on a continuing basis for treating chronic conditions, such as high blood pressure. Medication used to treat acute conditions, such as infections, is typically obtained through local participating pharmacies because it is usually needed quickly. After correcting for these differences, the study found that the adjusted generic-dispensing rate at home-delivery pharmacies is 39%, nearly the same as the 40% adjusted generic-dispensing rate at local participating pharmacies. In the area of generic substitution, the researchers found that PBMowned home-delivery pharmacies actually have a slightly higher genericsubstitution rate (93%) than local participating pharmacies (92%). The authors suggest that home-delivery pharmacies may have more opportunity to request generics because they usually have prescriptions in hand for a longer time than participating pharmacies. pharmacy benefit guide Exhibit 41 Generic Dispensing and Generic Substitution Rates* Retail Pharmacies vs Home-Delivery Pharmacies 100 Percent Retail Home-Delivery 20 0 Generic Dispensing Rate Generic Substitution Rate *Adjusted to control for differences in the therapeutic mix of drugs dispensed by home-delivery and retail pharmacies. Source: Wosinska M, Huckman R. Generic dispensing and substitution in mail and retail pharmacies. Health Affairs. Web Exclusive July 28, Available at: 10&hits=10&RESULTFORMAT=&author1=wosinska&andorexactfulltext=and&searchid= _4094&stored_search= &FIRSTINDEX=0&resourcetype=1&journalcode=healthaff. Accessed February 25,

143 pharmacy benefit guide The Question of Waste Other questions that often arise are whether to offer a 90-day local participating (retail) pharmacy plan and whether that option creates additional waste. In 2004, researchers at Express Scripts examined the financial impact of a 90-day retail benefit for two plan sponsors 52 (Exhibit 42). Exhibit 42 Summary of Benefits for Two Plan Sponsors CLIENT RETAIL BENEFIT RETAIL COPAYMENT HOME-DELIVERY COPAYMENT Client A 90-day 90-day = 1 x 30-day 90-day = 1 x 30-day retail Client B 90-day 90-day = 3 x 30-day 90-day = 2 x 30-day retail To calculate waste from 90-day dispensing at local participating pharmacies, the number of 90-day prescriptions that did not have at least one refill was multiplied by two-thirds of the net cost of the prescription. This approach was based on the assumption that patients who did not have at least one refill used only the equivalent of a 30-day supply of their dispensed drug. In other words, they wasted the remaining 60-day supply. Empirical analyses of refill patterns for new retail-pharmacy users who received both 30-day and 90-day prescriptions supports this assumption (Exhibit 43). Exhibit 43 Waste: Retail 90-Day vs Retail 30-Day 120 Percent Still Refilling Waste Waste Waste Retail 90-Day Retail 30-Day Months of Therapy 52 Added prescription-drug cost of 90-day retail coverage. Express Scripts Unpublished. 138 express scripts drug trend report 2004

144 Offering a 90-day retail benefit resulted in significant drug waste for client A (Exhibit 44). Client A s waste occurred for two main reasons. First, a significant proportion of new prescription-drug fills including prescriptions with lowered discounts for acute medications for client A were dispensed as 90-day supplies. Secondly, approximately 40% of client A s members who purchased a 90-day medication supply apparently discontinued the medication after 30 days or less. Client A s increased drug waste was a direct result of using the same copayment for 90-day and 30-day supplies of medication. This copayment design encouraged members to fill a 90-day supply even if they were unsure they would continue taking the medication. Client A experienced additional financial loss due to reduced member cost-share. pharmacy benefit guide Client B also experienced financial loss due to waste, but its loss was smaller because it charged three copayments for a 90-day supply of the prescription from a local participating pharmacy. Therefore, the total waste was much less. Exhibit 44 Summary of Client Experiences With 90-Day Retail Benefits 90-DAY FINANCIAL LOSS/(GAIN) NET RETAIL COPAYMENT WASTE COST-SHARE DISPENSING FEE LOSS Client A 1 x 30-day $42.14 $54.59 ($11.13) $85.60 PMPY* (10.0% of net spend) Client B 3 x 30-day $ ($1.52) $4.31 PMPY (1.1% of net spend) *PMPY: per member per year Consequently, plan sponsors who contemplate offering coverage of a 90-day supply of medication through local participating pharmacies should consider the negative financial impact that results from medication waste and reduced member cost-share. These financial losses totaled 1.1% and 10% for the two clients studied. 139

145 pharmacy benefit guide An optimal plan design provides coverage for a 30-day supply at retail and allows for coverage of a 90-day supply only by home delivery. Waste in 90-day home-delivery plans is mitigated because approximately 80% of prescriptions are first filled as a 30-day prescription at a local participating pharmacy. The proportion of members who do not refill decreases. In addition, offering a 90-day supply through local participating pharmacies does not provide the advantages of deep discounts and reduced (or waived) fees found in home delivery. As a result, home delivery of 90-day supplies offers less waste and greater savings because it provides larger discounts and lower fees than 90-day supplies from local participating pharmacies. EXCLUSIVE HOME DELIVERY According to a Hewitt Associates employer survey in 2004, 22% of the employers surveyed had a mandatory-mail prescription program in place, and another 51% were considering adding some type of mandatory-mail offering. 53 To respond to these changing market dynamics, Express Scripts launched Exclusive Home Delivery, our recommended mandatory-mail prescription program. Using the best practices from clients that have been using this benefit design, Exclusive Home Delivery produces an average total PMPY savings of approximately $35. With percentages depending on the client s plan design, these savings are shared by patients, the plan sponsor or both. Exclusive Home Delivery maximizes savings while increasing homedelivery use by about 25 percentage points. The recommended offering has a standard drug list that includes approximately 10% fewer drugs than the First DataBank list of maintenance medications because it excludes seasonal drugs, controlled substances and other drugs for which home delivery may not be appropriate. We also recommend an edit at the point of sale after two retail fills of the same drug. Allowing two fills not only gives Express Scripts and the plan sponsor time to educate patients, it also minimizes the number of patients who receive reject edits. 53 Employer health care expectations. Future strategy and direction Hewitt Associates. November 17, Available at: Accessed February 9, express scripts drug trend report 2004

146 research studies Express Scripts Drug Trend Report