Projected Drug Increases

Managed Care Outlook

Six therapeutic categories account for most drug costs

Over the next three years, more than 85 percent of drug costs will be driven by six broad theapeutic categories, according to Medco's Drug Trend Report. The PBM expects drug costs for plan sponsors to increase between 3 percent and 7 percent annually during the next three years.

The projection, interestingly, is based on the ingredient costs rather than the average wholesale price (WAP), which was used by Medco in past years. Ingredient cost is the AWP costs for the drug minus any brand or generic discounts (i.e., the maximum allowable cost for the generic drug) that the health plan receives.

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