Costly drugs to weigh on U.S. employers' expenses in 2018: survey

[September 18, 2017]   By Divya Grover

(Reuters) - U.S. employers are bracing for higher health care expenses in 2018 as spending on new drugs to treat diseases such as cancer, multiple sclerosis and hepatitis C is expected to rise more than 7 percent, according to consultancy firm Mercer.

Between 40 and 50 new specialty drugs are set to hit the market each year in the next five years, which could increase costs by $25 billion annually, Mercer said.

The survey's preliminary findings suggest that spending on specialty drugs had risen by about 15 percent compared with prices that were factored into 2017 health plans. These types of drugs continue to push up overall costs of prescription drugs.

"It's not so much that the cost of any one drug is going up, but that new drugs are being introduced," Beth Umland, Mercer's research director for health and benefits, told Reuters.

There are presently 2,320 drugs in active development, the consultancy said.

Last month, Novartis AG <NOVN.S> won U.S. approval for the first of a new type of potent gene-modifying immunotherapy for leukemia, a $475,000 treatment that marks the start of a potential new treatment paradigm for some cancers.

"With so many new specialty drugs in the pipeline and few well-known brand-name drugs going off-patent in the near future, the drug cost problem will certainly get worse before it gets better," Mercer's U.S. health reform leader Tracy Watts said.

A person holds pharmaceutical tablets and capsules in this picture illustration taken in Ljubljana September 18, 2013. REUTERS/Srdjan Zivulovic

Companies anticipate average per-employee health costs to increase by 4.3 percent in 2018, the highest rate since 2011.

Early responses from the survey suggest that 46 percent of employers would take steps to cut costs with new strategies such as high-deductible health plans - which shift the burden of initial medical costs to patients, but have lower monthly premiums.

These plans are becoming increasingly popular among employers as they try to keep a lid on medical costs. However, this trend has contributed to higher out-of-pocket spending on healthcare for employees.

The average per-employee cost growth is estimated to rise 6 percent, if companies make no changes to their medical plans, according to the survey.

(Reporting by Divya Grover in Bengaluru; Editing by Martina D'Couto)

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