FALL 2006
IN THIS ISSUE

    MESSAGE FROM THE CEO
    UP CLOSE
    MCO LIABILITY
    NEWS YOU CAN USE

 
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Ken Dowell, Pharmacy Practice Leader, Evergreen Rx




New Biotech Drugs on the Horizon
Breakthrough Treatments Pose Greater Financial Risk

While the pharmaceutical market in the U.S. reached an all-time high of $334 billion in 2005, it actually grew by only 10% during the same period, the lowest percentage gain in recent history. New generics, safety issues, lack of new blockbusters and the success of over-the-counter switches are attributed to the slowing in growth.

Among the factors that appear to be driving costs in 2006 are an aging population, increased prescription drug utilization and increased spending on diagnostic imaging.

But looming in the background and gaining speed quickly is the growing storm of biotech drugs which are expected to double within the next three years. Currently there are 90 biotech drugs available, representing 15 per cent of the drug spend. With more than 600 biotech drugs in the FDA approval process and more than 276 in development, the biotech genetic drug business is expected to become a $90 billion a year business by 2010.

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A Message from the CEO
by Charles Crispin, President & CEO, Evergreen Re

Outlook for 2007
 Changing Catastrophic Risk Requires New Reinsurance Strategies

Increasing severity and frequency of catastrophic claims has prompted many health plans to reconsider their reinsurance strategy. For example, advances in medical devices, pharmacy and biotechnology are rapidly driving trend on the cost per day of the most severe hospital admissions. And the same advances in the pharmacy and overall specialty categories are resulting in claims well over a million dollars without inclusion of any hospital related expenses.

Consequently, coverage for inpatient services only, with a per diem maximum associated with it would provide little protection from a 180 day hospital admission with an average cost of $16,000. Likewise, a plan would have virtually no coverage for a factor product claim administered in a home setting – which could easily cost a million dollars – if the plan’s coverage only includes either inpatient services or outpatient and sub acute settings with limits attached. While these may be extreme cases, they are the very claims for which reinsurance was designed to provide protection.

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