November 28, 2012 – Falling prices for generics have restrained overall U.S. spending on medicine, but there are monsters lurking in the attic.
Nothing is straight-forward when it comes to Big Pharma. A recent report by Express Scripts Holding, the largest pharmacy-benefit manager (PBM) by prescriptions handled, indicated that while prices for generics have kept overall U.S. spending on production drugs under control, prices for more popular brand-name prescription drugs have surged.
Reporting in the Wall Street Journal, Jon Kamp notes that, “Based on an index tracking the most highly-used branded drugs… prices grew 13.3% between September last year and this year, far outpacing overall economic inflation. At the same time, generic prices plunged about 22%. Overall, spending on prescription drugs rose a ‘relatively muted’ 3.5% over the first nine months of 2012.”
Interestingly, prices rose for some drugs that already face generic competition, such as Pfizer’s cholesterol drug Lipitor and Merck’s asthma treatment Singulair. Steve Miller, Express Scripts’ Chief Medical Officer noted that while competition should bring the market lower, “It is common for manufacturers to cut brand-name prices at first but them lift them later when it is clear who the loyal brand customers are.”
According to the Wall Street Journal, “The Express Scripts report also indicates falling generic prices have helped mask another influence on drug costs: the rise of expensive specialty drugs, which are typically injected treatments for diseases such as cancer and multiple sclerosis. Express Scripts saw a 22.6% spike in spending for such drugs over the first nine months of the year, mainly because of price increases.”
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