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Commercial Pharmacy Spending Rate Eclipses Five-Year Average

Analysis  |  By Jack O'Brien  
   February 19, 2019

Medicare per-member-per-month spending more than doubled its five-year average while Medicaid actually declined by 2%. 

The commercial per-member-per-month (PMPM) spending rate increase on medical pharmacy totalled 18% between 2016 and 2017, 4% higher than the five-year average, according to a new report from Magellan Rx Management released Tuesday morning.

Spending trends between Medicare and Medicaid markets were split, as Medicare spending grew by 12% in the previous two years of reporting, more than doubling the 5% annual average since 2013. Meanwhile, Medicaid spending grew at -2% between 2016 and 2017, well behind the same five-year average of 5%.

The average medical pharmacy allowed amount PMPM in the last two reported years rose to $29.97 for the commercial market, a $4.48 increase; $52.19 for Medicare, a $5.63 increase, and $8.29 for Medicaid, a $0.17 decrease.

In all three categories, specialty drug spend accounted for more than 91% of overall drug spend, while the payer cost share was above 92%.

Related: Rising Prices Lead to All-Time High Healthcare Spending

Oncology and immunotherapy are cited in the report as the most significant drivers of higher spending, though oncology's impact is felt the largest. It accounted for between 43% to 58% of PMPM spending among all three categories and substantially impacts the biosimilars market. 

Payers have reacted strategically to the recent spending trends, with 51% requiring their members to use a biosimilar prior to accessing the reference product. Additionally, 64% of payers stated that the price of biosimilars impacted reimbursement decisions the most.

According to the report, three of the largest oncology spend agents, Rituxan, Herceptin, and Avastin, are expected to launch biosimilars this year.

Additional highlights from the Magellan report:

  • In 2017, 15% of patients drove 94% of commercial PMPM medical pharmacy spending.
  • During the same period of time, 21% of Medicare patients contributed to 95% of PMPM spending, while 14% of Medicaid patients drove 91% of spending.
  • The number of billion-dollar drugs is expected to rise from 34 drugs in 2017 to 43 drugs in 2022.
  • Over that five-year stretch, autoimmune PMPM spending is expected to increase 90%.
  • Growing exponentially faster will be CAR-T, which is expected to increase by 530%.

Jack O'Brien is the Content Team Lead and Finance Editor at HealthLeaders, an HCPro brand.


Commercial per-member, per-month spending increased at 18% between 2016 and 2017, eclipsing the five-year trend of 14%.

Oncology leads the way with the highest spend rate.

According to the report, 64% of payers stated that the price of biosimilars impacted reimbursement decisions the most.

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