Research finds persistent prescribing of risky medications to older adults with dementia

A JAMA study using Health and Retirement Study data linked to Medicare fee‑for‑service claims (2013–2021) reports that central nervous system (CNS)–active medications were prescribed to 17% of older adults with normal cognition, ~22% with cognitive impairment without dementia and ~25% with dementia, and that one in four Medicare beneficiaries with dementia received these potentially inappropriate drugs. Overall prescribing among Medicare FFS beneficiaries fell from 20% to 16% over the period; benzodiazepine prescribing declined to 9.1%, non‑benzodiazepine hypnotics fell from 7.4% to 2.9%, antipsychotics rose from 2.6% to 3.6%, anticholinergic antidepressants held at 2.6%, and barbiturate use remained near 0.3%; clinically justified prescriptions edged down from 6.0% to 5.5% while likely inappropriate prescribing dropped from 15.7% to 11.4%. The paper—limited to Medicare FFS and potentially missing some clinical indications—highlights persistent inappropriate use and safety risk among vulnerable older adults, a development that may modestly pressure manufacturers of sedatives and sleep medications but is unlikely to be market‑moving.

Analysis

Market structure: The data (overall CNS prescribing down from ~20% to 16% 2013–2021; ~25% of dementia patients still receive CNS-active drugs and ~2/3 lacked documented indication) shifts value away from high-volume generic sedatives and toward clinical services, EHR/decision-support, PBMs and payers that can reduce downstream hospitalization. Expect pricing power compression for commodity generics (volume decline of ~20% in some classes) and modest revenue tailwinds for insurers and specialty players that lower adverse-event rates.

Risk assessment: Tail risks include a regulatory crackdown (CMS guidance or FDA labeling changes) or class-action litigation against prescribers/nursing homes — low probability but high impact on nursing-home operators and branded antipsychotic makers within 6–24 months. Hidden dependency: Medicare Advantage patterns are unobserved; if MA already deprescribes faster, fee-for-service improvements may plateau. Catalysts: CMS quality measures, large insurer deprescribing pilots, or new FDA safety communications (any within next 3–12 months) could accelerate re-pricing.

Trade implications: Tactical winners are managed-care (UNH), PBM/retail-clinic integrators (CVS), EHR/clinical-CDS (ORCL/Cerner) and telehealth (TDOC) — these can capture margin from fewer hospitalizations; tactical losers include generic pharma (TEVA, VTRS) and publicly traded nursing-home operators (ENSG, BKD). Implement 2–3% long allocations to insurers/PBM names with 3–12 month horizons, small shorts in generics and select operators to be sized 0.5–1%.

Contrarian angles: Consensus underestimates demand for nonpharmacologic and tech-enabled deprescribing: smaller clinical-CDS vendors and home-care consolidators could re-rate if they deliver measurable reductions in falls/hospitalizations (target: >5% reduction). Conversely, reduced prescribing could paradoxically raise acute-care usage if behavioral symptoms go untreated — a risk that would benefit short-duration hedges in insurers over 1–3 quarters.

Key Decisions for Investors

• Establish a 2–3% long position in UnitedHealth Group (UNH) within 2–8 weeks to capture lower utilization and improved Medicare margins; hedge with a 3-month 5% OTM put if downside protection desired. Rationale: even a 0.5–1.0% reduction in hospitalizations among elderly could improve combined medical margin by 20–50 bps over 6–12 months.
• Initiate a 2% long in CVS Health (CVS) to play PBM/retail-clinic capture of deprescribing programs; accompany with a 6-month call spread to limit capital and realize upside if PBM interventions scale across Medicare (catalyst window: 3–9 months).
• Take a 0.5–1% short position in Teva Pharmaceutical (TEVA) and/or Viatris (VTRS) to reflect ~20%+ volume decline risk in benzodiazepines/nonbenzodiazepine hypnotics over 12 months; set stop-loss at 12% and target 12–18% downside if CMS guidance tightens prescribing.
• Establish a 0.5% long in Teladoc Health (TDOC) and a 0.5% short in Ensign Group (ENSG) as a pair trade (long telehealth, short nursing-home operator) over 3–12 months; increase longs if CMS or major MCOs announce deprescribing pilots in next 60 days.