New Report: Unmanaged, Diabetes Drug Costs Could Surge Nearly 70 Percent Within Three Years

-- New drugs, obesity epidemic to drive spending higher, according to Medco analysis

FRANKLIN LAKES, N.J., May 17, 2007 /PRNewswire-FirstCall/ -- An epidemic of diabetes, along with more aggressive treatment, could result in a near 70 percent increase in spending on endocrine and diabetes therapies from 2007 through 2009, according to a study released today by Medco Health Solutions, Inc. , one of the nation's leading pharmacy benefit managers.

An aging population and a rising incidence of obesity are expected to push spending growth rates on diabetes medications upward 16 to 20 percent annually as use increases each year by 8 to 10 percent and patients more frequently use new drug combinations to reach blood sugar targets. This new forecast is revealed in Medco's 2007 Drug Trend Report, an analysis of prescription drug spending and utilization.

"Diabetes, and in particular, type 2 diabetes, is becoming much more prevalent among people of all ages, imposing a growing burden on health plan sponsors who pay for their care and creating a significant health care concern in America," said Medco Chief Medical Officer Dr. Robert S. Epstein. "While prevention of type 2 diabetes needs to be a national priority, drug treatments can help prevent the onset of complications from diabetes that lead to hospitalizations, more complex treatment and dramatically higher costs."

The Medco report finds that diabetes treatments were the second leading contributor in total dollars to prescription drug spending growth in 2006, trailing only cholesterol drugs. Spending on diabetes treatments increased 14.5 percent from 2005 to 2006 and the use of diabetes drugs increased 5.1 percent.

New treatments for diabetes are expected to drive unit costs higher as some newer drugs are increasingly prescribed as first-line therapy. New injectable treatments and oral diabetes medications that act upon new targets have hit the market in recent years. Novel diabetes treatments in the pipeline will also help push costs upward in the future. The analysis projects that by 2009, spending on medicines to treat diabetes could soar by 60 to 68 percent from 2006 levels.

Programs to encourage the use of lower cost generic drugs and health plan design initiatives that encourage the use of mail service could mitigate pricing pressures in this category. Health plan initiatives to encourage more preventive care can also curb spending growth.

"For those patients who depend on medications to avoid serious complications, compliance is paramount," said Epstein. "Lower-cost drugs help remove barriers to compliance, as do safety programs that identify non- compliant patients and provide additional counseling to modify the behaviors and foster more positive outcomes."

In addition to its efforts to make prescription care more affordable, Medco is addressing the needs of its two million diabetic members through two of the Medco Therapeutic Resource Centers(TM) (TRCs) specializing in diabetes care. In these Diabetes TRCs specialist pharmacists can monitor patient care more effectively, which could lead to better compliance. Additionally through Medco's collaboration with Healthways, Inc., the company offers its Optimal Health(R) program, which combines the integrated data and service capabilities of a PBM with disease management techniques, to engage patients with chronic conditions and provide a more personalized level of care.

Cancer drugs drive specialty drug spending

With drug regimens running $5,000 to $10,000 per month, cancer therapies have emerged as a leading driver of drug costs with more expensive niche medications displacing older products as standard treatment.

Specialty cancer treatments - both the injectable drugs that require unique handling requirements and the newer oral medications - experienced tremendous growth in 2006. Utilization of these cancer drugs grew 8.6 percent while the growth in spending reached almost 38 percent, overtaking rheumatologic drugs as the number one contributor to specialty drug trend.

Rapid adoption of new, higher cost therapies, such as Nexavar(R), Revlimid(R) and Sutent(R), contributed to the sharp increase in the average cost of treatment. Many of the newer drugs supplement existing cancer treatments, a factor that could also boost utilization in the coming years. Almost 25 percent of all new drugs and biologics approved last year were cancer treatments and more than 500 new cancer drugs and indications for existing drugs are under development.

"These breakthrough drugs are shifting cancer therapy from a short-term focus to a long-term maintenance treatment, making cancer a disease that, with increasing frequency, you can live with," Epstein said. "These treatments are still physically demanding and have some side effects, but they are better targeted to the cancer and better tolerated by the patient. In addition, advances in medicine, such as genetic testing, are allowing us to determine what drugs are most effective in patients. This new information can help get the patient to the right medication at the right dose faster, which can result in a better outcome for the patient while saving time and money."

Drug trend falls to 2.8 percent

Cancer treatments and diabetes drugs portend challenges for managing prescription drug spending, but despite these growth drivers, the report finds that 2006 drug spending in Medco's book of business grew by only 2.8 percent, largely due to the increased use of generic drugs and changes brought on by Medicare Part D.

Generic versions of blockbuster products such as Zocor(R) and Zoloft(R) hit the market last year, creating opportunities to better control prescription spending. Medco's report shows the overall generic dispensing rate in 2006 increased to 55.2 percent, a significant increase over the 51.5 percent rate in 2005. In the first quarter of 2007, the generic dispensing rate reached an all-time high of 58.2 percent, up 4.5 percentage points from the same period a year ago.

"The generic dispensing rate could exceed 60 percent this year acting as a countervailing measure to control pharmacy costs especially with our aging population, where use continues to rise," said David B. Snow Jr., Medco chairman and CEO. "This year alone, we've already seen billions of dollars worth of drugs such as Norvasc(R) and Ambien(R) facing strong generic competition. The availability of generic equivalents for these blockbuster brand-name drugs, combined with Medco's programs to promote the use of generic alternatives, will generate hundreds of millions of dollars in savings for our clients and their members annually."

The drug trend figure also reflects changes due to the 2006 introduction of Medicare Part D plans, which offered significant new options and subsidies for benefit plan sponsors.

About Medco

Medco Health Solutions, Inc. is the nation's leading pharmacy benefit manager based on its 2006 total net revenues of more than $42 billion. Medco's prescription drug benefit programs are designed to drive down the cost of pharmacy health care for private and public employers, health plans, labor unions and government agencies of all sizes, and for individuals served by the Medicare Part D Prescription Drug Program. Medco's technologically advanced mail-order pharmacies and award-winning Internet pharmacy have been recognized for setting new industry benchmarks for pharmacy dispensing quality. Medco serves the needs of patients with complex conditions requiring sophisticated treatment through its specialty pharmacy operation, which became the nation's largest with the 2005 acquisition of Accredo Health, Incorporated. Medco is the highest-ranked pharmacy benefit manager on the 2006 Fortune 500 list. On the Net: http://www.medco.com.

This press release contains "forward-looking statements" as that term is defined in the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties that may cause results to differ materially from those set forth in the statements. No forward-looking statement can be guaranteed, and actual results may differ materially from those projected. We undertake no obligation to publicly update any forward- looking statement, whether as a result of new information, future events, or otherwise. Forward-looking statements in this press release should be evaluated together with the risks and uncertainties that affect our business, particularly those mentioned in the Risk Factors section of the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission.

CONTACT: Ann Smith of Medco Health Solutions, Inc., +1-201-675-3709,; Janet Schiller or Bill Borden of Coyne PublicRelations, +1-973-316-1665, for Medco Health Solutions, Inc. Ann_Smith@medco.com

Web site: http://www.medco.com/

Ticker Symbol: (NYSE:MHS)

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Posted: May 2007


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