Although the overall medical trend rates covering all services have continued to be modest in the S&P data through the 3rd quarter of 2014, the prescription drug trends have been more volatile but modest prior to mid-2013, but have continued to accelerate since then through September 2014. On a 3-month basis they have climbed to 11.7% by September (before deductibles, copays, etc.). Cost pressure on generics and brand drugs (perhaps generated by price concessions on Medicare by the pharma companies) have shown an uptick in the last year, however, the introduction of Sovaldi and other new and expensive drugs in early 2014 (which are now incorporated in our economic forecasts) are further pushing up drug costs. Furthermore, the impact of deductible/fixed dollar copay leverage can be quite substantial on drug plans and have pushed drug trends to insurers even higher than shown in our forecast worksheet. The impact of more new and expensive drugs for cancer, cardiovascular and cholesterol in 2015 can be expected to potentially push trends higher than the economic forecasts in our models until it gets completely factored into the data. Recent anecdotal data seems to indicate that Sovaldi growth may have peaked in the short term, while patients are waiting for the new alternative product Harvoni. In addition to the high cost of Sovaldi, there are issues about the required additional drugs, and the somewhat higher drug regimen termination rates than in initial trials of the drug that could be causing a slowdown in its prescription rate. A number of combination drugs for Hepatitis C were expected to become available starting in 2015 that help reduce some of the negative effects mentioned, and some patients may be holding off for these new options.
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 We track the LG/ASO trends as representative of underlying trends, since Individual and Small Group are impacted more significantly by the Affordable Care Act (ACA). Keep in mind that actual trends experienced by plans are likely to be higher than as reported in S&P data. Trends experienced by large employers on plans that have not changed in the previous year could be higher by as much as 2% or more on bronze level plans and higher by 1% or more on gold level plans due to the effects of deductible and copay leverage. So risk takers need to take this into account. In addition, the S&P Indices do not reflect the impact of benefit buy-downs by employers (i.e., higher deductibles, etc.), since the indices are based on full allowed charges. As noted above, actual trends experienced by employers and insurers in the absence of benefit buy-downs can be expected to be higher than reported S&P trends due to plan design issues such as deductibles, copays, out-of-pocket maximums, etc. Benefit buy-downs do not represent trend changes since they are benefit reductions in exchange for premium concessions, but they can have a dampening effect on utilization due to higher member copayments, and this can have a dampening effect on measured S&P trends compared to plans with no benefit changes, further pushing up experienced trends relative to those reported in the indices.