New Report: Forecasts for Specialty Medicines Have Been Overstated

According to a new report from actuaries Gabriela Dieguez, Bruce Pyenson and Jennifer Carioto, at Milliman, major pharmacy benefits managers (PBMs) often overestimate future spending on specialty medicines, sometimes by nearly 10 percentage points.

Government data on prescription drug spending show that overall growth in prescription medicine spending has been in line with health care spending in recent years. Similarly, published PBM reports have forecast low growth in total prescription drug spending in the last five years, although these reports tend to focus in on forecasts for a small subset of prescription medicines placed on a health plan formulary’s specialty tier” and not report the larger trend. This new analysis from Milliman focuses on the wide variation in published PBM forecasts of spending for these medicines, which typically treat complex or rare health conditions such as rheumatoid arthritis, multiple sclerosis and cancer and are used by less than five percent of patients in the U.S.     

Milliman’s report explains that in several major PBM trend reports, the term “specialty medicine” is not consistently defined, that methodologies, assumptions and conclusions are not fully supported or explained, and that multiple changes in forecasting methodologies make it difficult to interpret year over year changes for the same organization. The authors report that the approaches to selecting and defining the market basket of specialty medicines for analysis may overstate reported growth. 

Payers and policymakers rely on forecasts to budget for future health care spending, and it is crucial that they be as accurate as possible to inform premium growth, benefit design, and patient cost sharing.  Producing accurate forecasts is inherently challenging given significant uncertainties about the approval of drugs in development, the mix of available medicines, and the potential for changes in formulary coverage to drive large swings in treatment. But Milliman’s report points to what seem to be even greater difficulties in producing and interpreting forecasts for a shifting subset of medicines, especially when methodologies are not transparent and lack sufficient documentation. Given the findings of the Milliman report, it seems clear that PBM forecasts for selected subsets of prescription medicines should be interpreted with caution.