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Generics, Unemployment Soften Rise In US Drug Spending -Report

04/15/2012 | 09:15pm US/Eastern
   By Jon Kamp 

U.S. spending on prescription drugs last year rose 2.7%, the smallest increase in nearly two decades of tracking such data, as cheaper generics hit the market and economic turmoil slowed visits to doctors' offices, according to a pharmacy-benefit manager.

Express Scripts Holding Co.'s (ESRX) annual drug-trend report said the increase in prescription drug spending was down from a 3.6% climb in 2010. The St. Louis-based company expects this trend to continue in upcoming reports, despite signs drug makers are boosting prices of brand-name drugs to maximize revenue before they lose U.S. market exclusivity.

"We are forecasting that trend will be less next year," said Sharon Frazee, the company's vice president of research and analysis, in an interview.

PBMs like Express Scripts manage drug benefits for health plans and employers. The company recently closed on the acquisition of former competitor Medco Health Solutions Inc., making the combined firm the industry's biggest.

The drug-trend report reflects stand-alone data for Express Scripts, which processed about 751.5 million prescription claims last year, or roughly one-sixth of total claims.

The report divides medication into a traditional category, which includes pills for issues like high cholesterol, and specialty drugs, which includes injectable treatments for diseases like cancer and multiple sclerosis.

There was a pronounced jump in spending for specialty drugs, up 17% last year with a big push from two newly approved treatments for the liver disease hepatitis C. Express Scripts has a somewhat limited view of specialty trends, however, because nearly half of all costs for these drugs are billed under medical benefits, rather than drug benefits.

Spending for traditional drugs was essentially flat, in contrast. And yet there was a near doubling from the prior year's rate--to a 6.9% increase--in the cost per unit for these drugs. This finding wasn't unexpected because drug makers "continued to put price pressure on the market for products nearing loss of patent protection," Express Scripts said.

But price increases were balanced by an increased use of generics, which typically cost health plans and patients less. This trend took off late last year when Pfizer Inc.'s (>> Pfizer Inc.) blockbuster cholesterol drug Lipitor lost U.S. market exclusivity, and is speeding up this year as major drugs like the blood thinner Plavix, co-marketed by Bristol-Myers Squibb Co. (>> Bristol Myers Squibb Co.) and Sanofi SA (SNY, SAN.FR), also go off patent.

"As a result, cost per unit is expected to decline in 2012 and 2013--due not only to the availability of more generic medications, but also to continued reductions in the cost per fill for generics," Express Scripts said. The company anticipates the cost per unit will increase slightly by 2014.

The shaky economy has also mitigated the rise in U.S. drug spending. The health-care sector has reported a broad trend of patients putting off health-care visits to avoid expenses, and "if you're not seeing your physician, you're also not getting prescriptions for your medication," Frazee said.

Meantime, America's expanding waistline made diabetes treatments the biggest area of drug spending last year, Express Scripts said, eclipsing cholesterol-lowering pills.

The drug-trend report also highlighted the rampant problem of patients' poor adherence to their prescriptions. Express Scripts estimated this cost the U.S. health system about $317 billion last year because poor treatment can lead to expensive complications.

The company announced the launch of a new tool called ScreenRx that uses more than 400 factors to predict patients who are most likely to quit taking their drugs.

-By Jon Kamp, Dow Jones Newswires; 617-654-6728;

Stocks mentioned in the article : Pfizer Inc., Bristol Myers Squibb Co.
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