11 July 2011

Meds responsible for high healthcare costs

Expenditure on medicines in the South African private healthcare industry continues to increase and remains a contributor to the high cost of private healthcare in the country.


Expenditure on medicines in the South African private healthcare industry continues to increase and remains a contributor to the high cost of private healthcare in the country.

Christo Rademan, Managing Director of pharmaceutical benefit management (PBM) company, Mediscor PBM, was commenting on the findings of the 2010 Mediscor Medicines Review (MMR), which examines and analyses the use of medicines among a large sample of the medically insured section of the population of South Africa. Rademan observed that medicine expenditure increased by 7.6% for the period 2009 to 2010, compared to the 17.6% increase recorded for the period 2008 to 2009. The 10% reduction in growth is significant and a most pleasing observation.

Item cost was the largest contributor to medicine expenditure, increasing by 5.8% in 2010 compared to 11.7% in 2009. Two single exit price (SEP) increases were allowed by the Department of Health for the period under review. The SEP for a set basket of medicines increased on average from January to December of each year by 5.9% in 2010 and 9.7% in 2009. The utilisation of medicine among scheme members, on the other hand, only increased by 1.7% in 2010, indicating that the use of medicine is managed more effectively by schemes.

Year-on-year increase in the use of generic medicines

Another positive development is the year-on-year increase in the use of generic medicines among the medically insured population. Madelein Bester, Manager: Benefit Management of Mediscor PBM notes that an increase in generic utilisation can result in substantial cost savings for healthcare consumers and the sector as a whole. Half of all members are now using generics when they are available (newer medicines remain under patent and cannot be reproduced until patents expire). This compares to a usage rate of 48.1% in 2007, 48.7% in 2008 and 48.8% in 2009.

"These figures demonstrate an increasing acceptance of generics among the insured population and a greater awareness amongst doctors and their patients of the advantages of using them. Medicine formularies and reference pricing are also encouraging people to use generics while more generic alternatives are being made available as medicines lose their patent protection," adds Bester.

Let's continue educating the healthcare consumer

Rademan suggests that the industry should continue to educate healthcare consumers about generics and encourage their use. "It is in everyone's interests that healthcare consumers use generics whenever they are available," he points out. "This is one area where we can continue to make inroads and achieve savings without the concern about a reduction in the level of care."

Aging medical scheme population a challenge

The Council for Medical Schemes 2009/10 Annual Report states that the average age of the medical scheme population is 31.6 years of age and that 6.5% of that population is made up of pensioners. The average age of the populations included in this analysis was 35.1 years and 10.7% of beneficiaries were 65 years and older. This represents a relatively high proportion of older members who tend to claim much more often for medicines than younger individuals.

According to Bester four of the top five therapeutic groups in terms of expenditure in 2010 were for medical conditions that are commonly age related and reflects the age profile of the study population, e.g. anti-hypertensives, cytostatics (cancer treatment), anti-diabetic agents, and anti-cholesterol (hypolipidaemic) agents. These are also an indication that many South Africans continue to live unhealthy lifestyles.

Top five therapeutic groups according to expenditure

1.  Anti-hypertensives  11.0%
2.  Cytostatics (cancer treatment)  6.2%
3.  Anti-depressants  4.8%
4.  Anti-diabetic agents  4.6%
5.  Hypolipidaemic agents  4.5%

The problem of life-style related diseases is of course not an easy one to solve, and Rademan believes that medicine management is not the only answer. More needs to be done to address unhealthy lifestyles. The continued development of managed care solutions that can provide meaningful benefits in the most cost-effective manner possible is vital. There should also be an even greater emphasis placed on preventative care and on efforts to promote healthier living, according to Rademan.

Biologics – high cost, new drugs

Effective new treatments are being developed every year to treat diseases such as cancer, many of which are biologics. Whereas conditions such as breast cancer had a very poor prognosis a few years ago, today the prognosis is generally good if the disease is detected early. For many patients the new treatments that are being developed every year are the reason for these improved outcomes.

The dilemma is that new treatments, especially the biologics, have been years in the making and testing and are often very expensive. High cost biologics were responsible for 6.2% of the total medicine expenditure, but only for 0.08% of the total volume of claims. On average, biologics cost R10,824 per item and R72,371 per patient per annum for 2010. Although the use of these agents is not extensive, they are contributing more to medicine expenditure each year.

"For medical schemes the challenge remains to balance the needs of the scheme itself with the need to provide the individual member with the best possible care. Just how does the medical scheme provide meaningful and sometimes even lifesaving health benefits to its members then? This of course is the million-dollar question and one that all of the players in the field are trying to come to terms with."

Effective benefit design - the key to success

"The keys to success would appear to lie in effective benefit design, the strict management of the benefits themselves and in the forming of partnerships that can help keep costs contained," continues Rademan.

"We at Mediscor remain committed to tackling the challenges of keeping healthcare costs contained, while always bearing in mind that medical scheme members must be taken care of," he concludes. We will continue doing this by identifying cost drivers through research, such as that presented in the MMR, and through actively working with our clients to stem the tide of medicine costs in order to safeguard this industry and those that we serve." - (Health24, July 2011)

Press release issued by Martina Nicholson Associates (MNA) on behalf of Mediscor PBM.


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