Trends in pharmaceutical expenditures: the impact on drug benefit design

Annual national spending for pharmaceutical agents was increasing at a rapid pace during the late 1990s and early part of the 21st century, outpacing increases in spending on hospital care and on physician services, which had dominated the industry in the 1970s. In the past few years, however, this trend has shifted, resulting in a lower growth rate in 2005. The reasons for these trends of increases and subsequent declines are explained in this article, including the slower pace of increase in generics and the increasing role of biologic agents in the rate of pharmaceutical price inflation. The sharp increases in drug spending led to changes in prescription drug benefit designs that have not been fully tested. The recent decline creates an opportunity for health plans to evaluate the value of current and new strategies and implement value-based benefit designs in accordance with the shifting focus in healthcare toward value-based patient care.