Is Caremark really better than Express Scripts at managing drug trend?

Last week, CVS Caremark (NYSE:CVS) released the 2013 Insights Report, its drug trend report for 2012. I review the comparable Express Scripts (NASDAQ:ESRX) report in Insights from the 2012 Express Scripts Drug Trend Report.

The numbers appear to show a clear advantage for CVS Caremark in managing drug trend—the change in prescription drug expenditures of a third-party payer. For commercial plan sponsors in 2012, overall trend for CVS Caremark customers was 0.3%, while trend for Express Scripts customers was a comparatively lofty 2.7%. The gap was especially large for traditional (non-specialty) drugs.

So, is CVS Caremark really better? Probably not, but who really knows? A deeper looks highlights hidden methodological discrepancies that make it impossible to determine the best PBM.

A PBM’s drug trend report is the bikini of pharmaceutical economics. What it reveals is interesting, but what it conceals is essential. Read on and see if you agree.

Here is a summary of 2012 drug trend for commercial plan sponsors, as reported by each company.

Express Scripts appears to be the big loser, with an overall trend rate that is nine times as large as CVS Caremark’s overall rate.

To see what’s really going on, let’s take a look at the methodology behind the numbers.

HOW EXPRESS SCRIPTS DOES IT

Here is an overview of Express Scripts’ 2012 methodology, which changed compared to previous years.

• “Total trend measures the rate of change in plan costs, which include ingredient costs, taxes, dispensing fees and administrative fees. Rebates are not included as a component of cost.” (emphasis added)

• In 2012, all metrics reported represent the combined Express Scripts book of business, i.e., both Express Scripts and legacy-Medco covered lives. In previous years, the metrics were based on a random sample of members who had prescription-drug coverage in the previous two years. Thus, the 2012 Express Scripts sample is much bigger than prior years.

• Express Scripts computes the figures separately for commercial, Medicare, and Medicaid plans. The chart above shows the commercial plan results.

• Express Scripts measures trend on a per-member, per-year (PMPY) basis. In 2012, Express Scripts made a minor arithmetic change from member-years (total months of eligibility divided by 12) to member-months (total months of eligibility). This shouldn’t affect the result, because trend represents the year-over-year rate of change.

HOW CVS CAREMARK DOES IT

On page 16 of its report, CVS Caremark provides a few skimpy details about its 2012 methodology.

• As in past years, CVS Caremark does not specify the components of trend. It also does not explain the difference between “Gross Trend” and “Net Trend.” 

• CVS Caremark computes trend on a per-member, per-month basis, but doesn’t provide any computation details.

• In 2012, its metrics represent “a trend cohort group,” which is defined to include “funded clients with retail claims for the calendar year.” CVS Caremark further specifies: “To be included in the trend cohort, clients need to have at least 24 months of continuous claim activity.” In other words, CVS Caremark only computes trend for clients that have used CVS Caremark in both 2011 and 2012.

• CVS Caremark computes the figures separately for Employer, Health Plan, Third-Party Administration (TPA), Medicaid, and Medicare Part D. The chart above shows the combined “Employer+Health Plan,” which seems most comparable to Express Scripts’ commercial plan results.

LINES IN THE SAND

A few notable differences jump out:

• Different samples—Express Scripts pools member-level data across plan sponsors for the available months of eligibility. In contrast, CVS Caremark includes plan sponsor-level data and only includes sponsors that used CVS Caremark during 2011 and 2012.

• Different trend computations—Express Scripts excludes rebates from trend computations. I suspect that this exclusion resulted in higher trend for traditional drugs, due to larger rebates in the period following loss of exclusivity. Express Scripts also includes “taxes, dispensing fees and administrative fees.” CVS Caremark doesn’t disclose its treatment of rebates, taxes, or fees.

• Different definitions—We don’t know if each company is using the same list of specialty vs. non-specialty drugs. CVS Caremark includes drugs on the mysterious “universal specialty drug list.” (Huh?) Express Scripts includes “injectable and noninjectable drugs that are typically used to treat chronic, complex conditions and may have one or more of the following qualities: frequent dosing adjustments or intensive clinical monitoring; intensive patient training and compliance assistance; limited distribution; and specialized handling or administration.” All other drugs are non-specialty.

So, what can we conclude? These reports, while chock full o’ interesting data, are primarily marketing documents, not peer-reviewed research studies. They still provide valuable insights. Just cite them with caution.

Despite the limitations, I typically cite Express Scripts figures, primarily because I respect the more complete methodological disclosure and the longer (but perhaps inconsistent) time series. YMMV.

P.S. Long time readers may realize that today’s article updates Is Caremark really better at managing drug trend?, a Drug Channels classic from 2011.