Express Scripts’ 2011 Drug Trend Report (Part 1 of 3): The Hammer and the Nail

Zachary French

An old sage once uttered an absolute truth, “If the only tool one owns is a hammer, by necessity all problems take on the characteristics of nails.”

This adage springs to mind when reviewing Express Scripts’ (ESI) 2011 Trend Report. This post is the first in a three-part series on the subject.

PBMs publish their drug trend reports annually, looking back at their previous efforts to control the rise in pharmacy benefit spending (trend) across their book of business or at least a representative sample of that book of business. Each PBM measures the so-call “trend” in a slightly different fashion, but any one PBM uses the same methodology every year so they are at least measuring outcomes in a like manner.

ESI over the last three years has taken a rather curious approach to its trend reports, organizing them around a central theme of “waste”. Not the widely recognized existence of mail order waste—ESI includes no acknowledgement of this reality. Instead, the Mega PBM focuses on what its marketing team has coined “pharmacy-related waste”. This particular type of waste, the company insists, occurs across three major categories: Non-adherence (patients not taking drugs as directed by their doctors), Drug Mix (brand vs. generics) and Channel Choice (ESI mail order vs. retail pharmacy).

Here’s the ESI marketing pitch, and anyone can see that it’s all about selling mail order. In ESI’s 2009 Trend Report, the PBM claims that there is “$106 billion wasted annually through patient non-adherence with medications, $51 billion wasted on drug mix alone and $6 billion wasted annually by patients choosing retail over home delivery” (home delivery is ESI’s term for mail order). In total for 2009, according to ESI, there was $163 billion in pharmacy-related waste and only 3.7 percent of the waste was attributable to channel choice.

Apparently, the Channel waste numbers were not large enough to compel enough payers to move their beneficiaries to mail order because in the 2010 ESI Trend Report the numbers had changed rather dramatically. According to ESI, non-adherence waste was suddenly $258.3 billion, Drug Mix waste remained fairly consistent at $56.7 billion, but pharmacy-related waste linked to Channel choice had skyrocketed to $88.3 billion. ESI claimed that total pharmacy related waste was a staggering $403.3 billion.

Fast forward to ESI’s 2011 Trend Report which reported total pharmacy related waste to be $408 billion and Channel waste to be $96.3 billion—up from $6 billion in 2009! That certainly makes the case for using mail order, right? Wrong! During the last two years, ESI manipulated the numbers by transferring some of the “waste” previously reported under Drug Mix and Non-adherence to its Channel waste numbers. ESI’s reasoning for this is more than a bit dubious—but apparently mail order is more than just a distribution channel, it addresses virtually all waste-related issues.

Of course, all three trend reports spend a disproportionate amount of commentary on the wonders of mail order. In all the reports, Channel waste is on the focus to the near exclusion of much more impactful savings opportunities. It is as though ESI has only one tool to control trend and it uses it to strike at the non-adherence nail, and it uses it to pound away at the drug mix nail, etc. It hammers way for one reason—mail order is darn profitable for the company.

If you are skeptical about this assertion, then look in the pages of this year’s report and you’ll find this notable comment:

“Although we do not track the effect of channel use (e.g., use of home delivery from the Express Scripts Pharmacy instead of retail for maintenance medications) for year-over-year trends, channel use is important.”—Express Scripts 2011 Drug Trend Report

The report says it’s important to the tune of nearly $100 billion annually across the pharmacy market, but not so important that the company would actually “track the effect of channel use”? It begs the question that if mail order has such a profound impact on cost control, where is the evidence?

Look for more on the ESI drug trend report in future posts on this blog.

3 Responses to “Express Scripts’ 2011 Drug Trend Report (Part 1 of 3): The Hammer and the Nail”

  1. 1 Gerry Purcell May 1, 2012 at 11:25 am

    Hammer it Zack! Another big PBM bait and switch.

  2. 2 adamjfein May 1, 2012 at 12:27 pm

    There is one ironic point that you omit. Like independent pharmacies, mail pharmacy continues to lose share of U.S. prescriptions to retail chains.

    See The data clearly show mail to be a decreasing part of both Express Scripts’ business and the U.S. market.

  3. 3 thoughts4rom May 1, 2012 at 11:42 pm

    What experience has shown me is ESI about pushing the independent community pharmacy out of business, upping their already huge profit AND taking away the freedom of choice from their insured.

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