Non-pharmacy drugs drive big spending, state report finds

The cost of medications provided to patients in hospitals, outpatient clinics and other medical settings is growing faster than those dispensed in pharmacies, according to a new state report.

The finding is important, researchers say, because most drug cost surveys have looked at just pharmacy claims, without factoring the cost of pharmaceuticals administered in doctor offices, dialysis clinics, surgery centers and other health care centers.

The issue is of growing importance to large Minnesota employers that have been struggling with increased pharmaceutical costs in worker health plans. Much of the pain stems from "specialty pharmaceuticals" that often are administered in medical settings.

"Employers are very concerned about the pressure that both the unjustifiable cost and rate of increase in price and use of 'specialty drugs' have on their ability to provide affordable benefits," said Carolyn Pare, president and CEO of Minnesota Health Action Group, in a statement. Her group is a coalition of large employers that provide health insurance via group plans.

The Minnesota Department of Health released the report Monday based on its analysis of billing records in a database that includes claims for about 89 percent of Minnesotans with health insurance coverage.

Drugs dispensed in health care settings often are provided by injection or infusion, and provide treatment for conditions such as cancer, multiple sclerosis, rheumatoid arthritis and autoimmune disease. In many cases, the medications are newer, innovative and lack price competition by way of generic rivals, said Stefan Gildemeister, the state's health economist.

The study looked at claims from 2009 to 2013 and found that growth in spending on drugs administered in health care settings was nearly three times the growth rate for medications dispensed in pharmacies.

"Drugs administered in medical settings account for about 19 percent of all drug claims," Gildemeister said. "But if we look at the five years we've studied for this paper, more than half of spending growth in prescription drugs is driven by these drugs."

"We need to understand this part of health care delivery, look at trends and look at pricing," he said.

Drug prices and drug utilization increased during the five-year period. Both factors can drive overall cost increases, but price played a bigger role during the period, Gildemeister said.

Total spending across the two categories was $7.4 billion in 2013, up by about 20.6 percent compared with five years earlier. The growth rate in medication costs was twice the rate of inflation, the study noted.

The Pharmaceutical Research and Manufacturers of America, a trade group for drug companies, took issue with the report.

Overall, Minnesotans average 15 prescription drug claims per year, each with an average cost of $90. A claim could be a one-time administration of a drug in a doctor's office or hospital, or a monthly refill of an ongoing prescription.

"Given the complexity of the prescription drug market and the overall scarcity of detailed data about it, prescription drug spending reports are often limited to assessments of spending in retail pharmacy settings, with little detail available on spending for prescription drugs in medical settings," the report states. "Drug spending and use in these medical settings has been increasing substantially in recent years. ... Yet details about this trend, particularly at the state level, are not generally available."

The report is based on the state's "All Payer Claims Database," which was created by the Minnesota Legislature in 2008 to fill information gaps related to health care cost, quality and usage. The health department conducted the analysis in conjunction with researchers from the Prime Institute at the University of Minnesota.

Christopher Snowbeck • 612-673-4744