By Donald Zuhn –-
A report issued by PwC's Health Research Institute (HRI) in June projects next year's medical cost trend (i.e., the projected percentage increase in the cost to treat patients) to be 6.5%, which is level to the medical cost trend for 2016 and comparable to the medical cost trend for the past three years. According to the report, entitled "Medical Cost Trend: Behind the Numbers 2017," the projected increase in the medical cost trend for 2017 will be due to increases in access to care, particularly primary and behavioral health services, and not to increases in drug spending.
With respect to drug costs, the report notes that by employing more aggressive strategies with drug makers, pharmacy benefit managers (PBMs) will help keep overall drug cost trends in check in 2017, and that "political and public pressure will tamp down the largest drug cost increases." In addition, the report points out that "[m]any of the new prescription drugs that are coming on market are not arriving alone but at close to the same time as competitors' drugs," and that such competition will help to keep drug prices down. The report also indicates that specialty drug costs, which outpace traditional drug spending, are not expected to grow as fast as in previous years.
Of significance to the pharmaceutical and life sciences industry, the report states that "[d]rug spending is still a relatively small portion of overall health spending and, as such, concerns of ever-increasing cost growth from new cures may trigger false alarms." More specifically, the report indicates that approximately half of all medical costs come from hospital spending, about 30% comes from physicians, and 17% from prescription drugs. The report notes that:
It is important to understand the weight of these components to put health spending in context. Prescription drug spending is a prime example since individual drug costs can be high enough to garner national media attention but, as a whole, are a relatively small portion of total health spending: a 10% jump in the growth in prescription drug spending would increase the overall medical cost trend by about 1.7%, for instance.
In explaining what the projections mean for various sectors of the health care industry, the report suggests that for the pharmaceutical and life sciences sector, "[t]he need for innovative, cost effective medicines continues to rise as regulators, payers, healthcare providers and patients demand greater value for money." The report also states, however, that "[t]he reputation of the pharmaceutical industry has been weakened as a result of the high-profile pricing strategies of some manufacturers during the past few years."
The full report can be obtained here.