Express Scripts’ 2011 Drug Trend Report (Part 2 of 3): Real Cost Savings Generated by Independent Community Pharmacies


Zachary French

Generics Matter…Mail Order Not So Much. That’s another lesson from the recently released Express Scripts Drug Trend Report.

(Note: this is the second in a three-part series on the topic. The first post was “Express Scripts’ 2011 Drug Trend Report: The Hammer and the Nail”)

According to the report on the fluctuation in prescription drug benefit costs, or trend:

“Trend for traditional drugs fell to a record low of 0.1%, with downward pressures associated with a higher generic fill rate offsetting other factors.” – Express Scripts 2011 Drug Trend Report

The 2012 Express Scripts (ESI) Trend Report affirms what every practicing retail pharmacist has known for years: increasing the appropriate utilization of generics has had the most favorable impact on controlling pharmacy benefit cost. Retail pharmacies year over year continue to out-perform mail order pharmacies relative to dispensing generic drugs.

NCPA has long held the position that the unproven economies of mail order, with its associated copay schemes which large PBMs regularly pitch to plan sponsors, can potentially undermine more effective cost saving strategies such as improving adherence and increasing generic utilization. Studies have also shown that these schemes can increase plan sponsor cost, and while only ESI can fully explain why it doesn’t consider the effect of channel use in its trend calculations, a skeptic might suggest that there is no proof to indicate that channel has much of an effect on trend control.

No Sign of Synergies

“In general, market factors moved trend upward. However, patent expirations showed negatives across the board; this is expected to continue as a number of widely used brand drugs lose patent protection in 2012. Following the pattern of the last few years, the single market factor driving positive trend was cost per unit due to price increases.” – Express Scripts 2011 Drug Trend Report

Generally, mega PBMs like ESI assert that they control trend through leveraging their volume of drug purchases to drive down the cost of drugs for their clients. However, since the company’s trend report clearly states that the single market factor driving cost increases was the “increase in per unit price”, and the patent cliff and its associated increase in generic fill rates was the primary factor driving down costs, how exactly did ESI control costs for the 2011 plan year?

ESI spent much of 2011 touting the synergies of its merger with Medco. Indeed, leveraging the combined companies’ purchasing power was one of the most ballyhooed synergies. Most analysts assumed that this specific synergy would be additive post-merger, not something achieved from a virtual standing still position. Patent loss and retail pharmacies’ ability to switch patients to appropriate generics were clearly the critical driver to reducing cost during 2011 for ESI clients.

Hard Ball with Retail Pharmacy, Slow Pitch to Big Pharma

“Compared to 2010, the percentage increase in cost per unit slowed a little for specialty drugs but nearly doubled for traditional drugs. This finding for 2011 was not unexpected, because manufacturers continued to put price pressure on the market for products nearing loss of patent protection.” – Express Scripts 2011 Drug Trend Report

No doubt the ESI Trend Report is spot on with the above description to a serious problem. But the ESI solution to stop the year-over-year near doubling of the cost per unit of traditional drugs is missing. Yet, this falls squarely under the banner of pharmacy benefit management.

News accounts have chronicled how aggressively ESI has attacked its own retail pharmacy network, including Walgreens, when the PBM’s profits are believed to be threatened by fair pharmacy reimbursement. Nevertheless, the ESI/Big Pharma relationship appears as placid as still waters even as Big Pharma practices threaten to limit savings from the patent cliff for ESI clients’. Some experts predict that there is approximately $80 billion in savings that payers can realize as a direct result of the patent cliff. In its trend report, ESI did not mention retail pharmacy network reimbursement as being a key contributor to trend escalation.

“However, affected drug makers will not sit idly by as plan sponsors and their pharmacy benefit managers (PBMs) drive waste out of the system.”Express Scripts 2011 Drug Trend Report

Plan sponsors would likely feel better if both the PBMs and the “affected drug makers” were not realizing financial gains from thwarting plan sponsor efforts to reduce cost. Yes, PBMs can financially benefit from Big Pharma end-of-patent practices that drive up drug cost. Just for laughs, do a web search on “Express Scripts Fights Eli Lilly…” and then do a search on “Express Scripts Fights Walgreens…”

“One retail pharmacy chain, Walgreens, was unwilling to offer rates and terms consistent with those of the market, and instead opted to leave our pharmacy network at the beginning of 2012.” – Express Scripts 2011 Drug Trend Report

In this year’s trend report, ESI very clearly calls out a specific retail pharmacy chain that ESI accuses of attempting to drive up plan sponsor cost. In the same manner, if ESI is similarly troubled by a particular drugmaker, shouldn’t hey at least call out the specific drug manufacturers by name that are engaging in tactics that limit ESI clients’ savings?

2 Responses to “Express Scripts’ 2011 Drug Trend Report (Part 2 of 3): Real Cost Savings Generated by Independent Community Pharmacies”


  1. 1 Brad Brennan May 2, 2012 at 4:39 pm

    PBMs lose profits when new generics come out single source. Until their “exclusivity” runs out they are still higher priced.
    1) The patient now pays their lower generic copay which increases the spread between actual cost and copay. Until multiple players enter the market the PBM suffers this spread profit loss. But PBM often will charge a higher copay during this period which seems contrary to their agreement with the insureds.
    2) The PBM loses manufacturer rebates as their drugs go multisource. They can still enjoy them if they force their mail order patients to take brand. They can also force retail pharmacies to use brand by rejecting generic drug claims. I still have not figured out what DAW code we are supposed to use for “PBM prefers brand”. Once it goes true multi-source and the price drops then they allow generic to be covered – at a significantly low MAC

    • 2 kathy rothrock elliott May 2, 2012 at 11:09 pm

      AND, the FTC is NO HELP allowing PBMs to merge- what a joke! PBM contracts force you to reveal everything, such as “have you ever committed a felony?” HELL NO, but PBMs rip off the federal govt daily, and just pay a little fine. NO JUSTICE for Independent pharmacy, and no light at the end of the tunnel. I am totally disgusted with EVERYTHING!


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