• U.S. Drug Costs Dropped in 2012, but Rises Loom

    Posted on May 27, 2013 by in Breaking News

    Life Insurance, Medicare, CJB Insurance

    The New York Times by Katie Thomas

    March 18, 2013

    Spending on prescription drugs nationwide has been slowing for years because of the increasingly widespread use of low-cost generics. But in 2012, something unheard-of happened: money spent on prescription drugs actually dropped.

    The dip was small — 1 percent, to $325.7 billion — but it was the first time the research firm IMS Health had recorded a decrease in United States drug sales since the company began tracking such numbers in 1957. And this month, the pharmacy benefit manager Express Scripts reported that spending on commonly used pills — like those that treat high blood pressure and cholesterol — dropped by 1.5 percent, the first time that had happened since Express Scripts began following drug trends 20 years ago.

    But even as the United States is in the midst of what has been called a “golden” period in spending on drugs, some are warning that the ever-expanding use of generics has masked a growing problem for the government, insurers and others who pay the bill for prescription drugs: the rising cost of complex specialty medicines that treat cancer, rheumatoid arthritis and other diseases.

    “This is a charmed era that won’t last forever,” said Paul B. Ginsburg, the president of the Center for Studying Health System Change, a nonpartisan research group that studies health care trends. “When you talk to benefits managers at large employers or insurers, the trend of specialty pharma is very, very prominent. You might even say they regard it as their biggest problem.”

    The potential for higher spending on drugs comes as the nation is struggling over how to contain the cost of health care, which many experts agree is a major threat to the country’s fiscal condition.

    Despite a recent slowdown in the growth of spending on overall health care, Republicans and Democrats alike have warned that rising health costs will eventually overwhelm the federal budget and make basic health care unaffordable for many Americans. Drugs, while not the major cause of rising costs, nonetheless account for about 15 percent of the nation’s health care expenditures.

    Mr. Ginsburg and others said the forces that have been holding down drug costs are beginning to subside. Dozens of brand-name products, including widely used best sellers like the anticholesterol drug Lipitor, and Plavix, which prevents blood clots, have lost their patent protection in recent years, a phenomenon that has been called the “patent cliff.”

    That cleared the way for cheap generic alternatives. But fewer major drugs are set to lose their patent protection over the next several years, and many of the newer drugs are so complex that it is still unclear how or when lower-cost copies will be brought to market once those patents expire.

    The use of generic drugs may also be nearing its saturation point. In 2012, 84 percent of all prescriptions were dispensed as generics, according to IMS, the highest rate in history. IMS estimates that use of generics may reach 86 or 87 percent, but will probably not go higher than that. Some have also attributed the slowdown in spending to the weak economy as patients cut back on visits to the doctor and filling prescriptions.

    “The majority of the patent cliff is over right now,” said Kevin Host, the head of specialty pharmacy at OptumRx, the pharmacy benefit manager for UnitedHealth Group. “That’s been muting the real effect of specialty.”

    Express Scripts found that, among commercially insured patients, spending on specialty drugs, which account for about a quarter of all prescription drug costs, increased by 18.4 percent in 2012 even as the cost of traditional drugs dropped.

    Specialty drugs are often injected or infused and many are so-called biologics, complex proteins that are made in living cells that treat a range of diseases, from various types of cancer to rare hereditary diseases. Increasingly, they come with jaw-dropping price tags: four drugs approved in 2012 carry a yearly cost of more than $200,000 per patient, according to Forbes.

    The cost of some of these drugs can add up, even if only a handful of patients need them, said Judith P. Clark, the pharmacy director of Mississippi’s Medicaid program. “I do know if we don’t do something quickly, our budgets are going to be blown out of the water,” Ms. Clark told a gathering of generic pharmaceutical executives in February.

    The high prices have also led to a wide disparity in the out-of-pocket expenses paid by patients. Michael Kleinrock, director of research development at the IMS Institute for Healthcare Informatics, noted that while most drug-benefit plans ask for a small $10 co-payment for generic drugs, some patients who need specialty drugs can be required to pay more.

    “For the vast majority of patients, their share of costs and their out-of-pocket for costs may go down,” he said. But “those few whose medicines are specialty and complicated — their share of costs may well go up.”

    Still, some have questioned how quickly prices will rise, arguing that the pharmaceutical industry is no longer bringing as many blockbuster drugs to market. “I don’t see any return to the glory days,” said David Cutler, a health economist at Harvard.

    IMS Health has predicted that drug sales will rise by more than 4 percent in 2014, because of fewer brand-name drugs losing patent protection and also an influx of newly insured patients with the putting in force of the federal health care law. Sales growth will then dip slightly to just over 2 percent in 2015, another year in which several big drugs are expected to lose their patent protection, before rising faster again in 2016 to nearly 4 percent.

    IMS has not yet released figures for global sales in 2012, but spending on drugs is expected to rise more quickly internationally because of higher growth in markets like Brazil, India and China, where an expanding middle class is increasingly able to afford prescription drugs.

    But whether higher drug costs translate to increased health care costs overall is unclear, said Mr. Kleinrock, of IMS. That’s because many drugs are worth the investment if they lead to better outcomes for patients and fewer hospital visits, especially for complex diseases like diabetes.

    Many large employers and insurers are placing their hopes in biosimilars, what many consider to be the generics of the future. Biologic drugs, because of their complex nature, cannot be precisely copied. Biosimilar drugs would have the same effect in the body as the original biologic, but would not be exactly the same.

    Although biosimilars are already available in Europe, they are unlikely to be available in the United States for at least two more years, and it is still unclear whether they will be automatically substituted for the original drug.

    What is clear, however, is that they will not be cheap: several experts have estimated that the drugs will sell for anywhere from 30 percent to 50 percent less than the brand-name price, a far cry from the discounts of as much as 80 percent for traditional generics. Even so, those savings will be significant, said Dr. Steve Miller, chief medical officer at Express Scripts. “It won’t get us back to the lower single digits like we were, but it will keep us in the single digits” of spending growth, he said.

    Several insurers and drug-benefit managers say they are already taking steps to try to rein in the cost of specialty drugs. They are requiring prior approval for high-price drugs or asking patients to try older, less expensive treatments first.

    “I think they see the pain coming,” said Dr. Alan Lotvin, the head of the specialty pharmacy at CVS Caremark, the pharmacy benefit manager. “They know this dynamic is going to happen and they’re very concerned about it, and I think they’re looking for solutions.”

    Source: John & Rusty Report via Choice Admin

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