An Rx Tsunami?

Lately, the best thing that can be said about prescription drug benefit costs is that they haven't been increasing as fast as they were a few years ago. But that is likely to change over the next few years. Indeed, when it comes to prescription drug costs, companies face a classic good news/bad news scenario. The good news is that thepatents on several major blockbuster drugs, like Zoloft and Zocor, have expired or will expire soon, which means that lower-cost generic versions are now or soon will be available. Considering that these drugs accounted for tens of billions of dollars in prescription drug spending, the savings for companies' prescription drug benefit plans promises to be considerable.

Now for the bad news from a cost perspective. The biotechnology revolution promises to bear significant fruit in the coming years as a host of new and extremely expensive biotech drugs come onto the market. Estimates of the size of the market for specialty and biotech drugs range from $70 billion to $80 billion or more in 2008, compared with $30 billion to $40 billion in 2004.

And when you look at the potential cost of biotech drug usage per patient, the sums seem even more staggering. "The costs of these drugs can range from $5,000 to $50,000 per month per patient," says Michael Jacobs, Atlanta-based national clinical practice leader with benefit consulting firm Buck Consultants. "They have the potential to change the way health care is delivered and certain diseases, like cancer, are treated. But what happens if five or six percent of your employee population needs these drugs?" Moreover, these drugs require long-term usage, which can further affect costs.

What's more, these costs could be just the tip of the iceberg. "Once a drug is approved for use for one condition, it is easier for it gain approval for use for other conditions," notes Helen Darling, president of the National Business Group on Health, a nonprofit association of 250 large employers in Washington, D.C.