Generic Drugs Slow Rise in Prescription Drug Costs, Saving $5.2 Billion in 2007

Greater use of generic drugs dramatically slowed the growth in prescription drug costs during 2007, saving an estimated $5.2 billion for commercially insured Americans and benefit plan sponsors. During 2007, the average cost of a prescription increased by only $1.09 to $54.34, up from $53.25 in 2006, according to pharmacy benefit manager Express Scripts. Otherwise, without the "generic effect,” the cost per prescription would have increased $3.58 to $56.83. The cost-lowering power of generic drugs had its biggest impact with drugs used to lower cholesterol, the nation’s most-used drug category. These drugs, known as statins or anti-hyperlipidemics, cost 15.5% less in 2007, averaging $67.32 per prescription versus $79.48 in 2006. Even after accounting for a 7.5% increase in utilization, the "generic effect” reduced total spending on cholesterol-lowering drugs by 9%. Last year was the first full year to reap the benefit of a significant shift to generics among cholesterol-lowering drugs in 2006, when both Pravachol® and Zocor® went generic. By the end of last year, 48.9% of all prescriptions for a cholesterol-lowering drug at Express Scripts are for a generic. Overall, 63.7% of all prescriptions at Express Scripts were for a generic. "Express Scripts dramatically grew the use of generic cholesterol-lowering drugs by providing consumers with personalized savings information timed to coincide with new savings opportunities. This changed behavior one consumer at a time,” said the company’s chief medical officer, Steve Miller. Total spending on prescription drugs during 2007 grew 4.7%, the slowest drug trend rate-of-growth Express Scripts has ever reported versus 5.9% in 2006 and a high of 15.9% in 2000 and 2001. In calculating drug trend, Express Scripts includes both member copayments and plan sponsor costs to evaluate total cost. This is instead of focusing solely on plan cost, which can be reduced simply by shifting costs to members in the form of higher copayments. The company also accounts for changes in utilization, the relative rates at which brands and generics are used, price inflation, units per prescription and changes in the mix of chemical entities and dosage forms used. Although the average cost of a prescription increased by $1.09 – or 2% -- the total spending increase was also influenced by a 2.5% increase in utilization and a 7.4% increase in the average price of a brand drug. The average price of a generic drug decreased 3.1%. On a per-member-per-year (PMPY) basis, spending in 2007 increased from $762.76 to $798.76, including both plan costs and co-payments. Had generic utilization remained constant, spending would have been higher by $32.53 for each of the nation’s 158.5 million commercially insured. Drug spending on a plan-sponsor level varied depending on the programs implemented by each Express Scripts’ client to control spending. In particular, employer, union, government and managed care plan sponsors actively managing their trend by requiring first-use of a generic – called step therapy -- decreased their drug costs dramatically. Plan sponsors, which implemented step therapy for cholesterol-lowering drugs, cut spending in the class by 13% versus 4% for those that did not use step therapy. For drugs used to treat insomnia, plan sponsors with step therapy reduced spending in the class by 17% versus 4% for clients that did not adopt step therapy. A more comprehensive review of prescription trends during 2007 will be available when Express Scripts releases its annual Drug Trend Report. In 2007, Express Scripts managed pharmacy benefits for more than 55 million Americans, representing thousands of plan sponsors in all 50 states. The data set used by the company includes a sample of clients who were served by the company in 2006 and 2007. Included in the sample were plan sponsors offering funded, fully integrated prescription benefits within the commercially insured market whose enrollment did not change by more than 50% between 2006 and 2007. Excluded were members receiving prescriptions through Medicaid and Medicare Part D. From the sample of clients, researchers randomly selected approximately three million members among those enrolled at any time in 2006 or 2007 for analysis. Express Scripts, Inc. (Nasdaq: ESRX) is one of the largest pharmacy benefit management (PBM) companies in North America, providing PBM services to 55 million patients through facilities in 13 states and Canada. Express Scripts serves thousands of client groups, including managed-care organizations, insurance carriers, third-party administrators, employers and union-sponsored benefit plans. Express Scripts is headquartered in St. Louis, Missouri. More information can be found at http://www.express-scripts.com.