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CCH® BENEFITS — 05/6/11

Prescription Drug Spending Rose 2.3% To $307.4 Billion In 2010

from Spencer’s Benefits Reports: Spending for prescription drugs in the U.S. in 2010 rose by 2.3%, the lowest rate in years, while the volume of medicines used rose by just 0.5%, a new study from the IMS Institute for Healthcare Informatics revealed. In contrast, prescription drug spending rose 5.1% in 2009, for a total $307.4 billion (or $898 per person), the study, The Use of Medicines in the United States: Review of 2010, found.

“Last year, we saw the convergence of key dynamics leading to diminished growth in drug spending, which included the greater use of generics, loss of patent protection for major branded products, slower demand and less spending on new therapies,” said Michael Kleinrock, director of Research Development for the IMS Institute. “Moreover, fewer patients visited physician offices and initiated new chronic therapy treatments last year, likely the result of the slower economy.”

The IMS Health survey also found:

Volume of medicines consumed: The total volume of medicines consumed rose 0.5% in 2010, a 0.3% drop per person due to lower or declining demand in nearly every major therapy area. Medicines administered by injection or infusion increased 0.2% last year, a per person drop of 0.6%, primarily the result of reduced utilization in hospital settings.

Patient doctor visits and patients starting new treatments: The number of visits to doctor offices was down 4.2% in 2010, extending a declining trend that began in mid-2009, the IMS reported. Also, the number of patients starting new treatments for chronic conditions fell by 3.4 million last year. Factors contributing to these trends may include high unemployment accompanied by lost health care coverage, rising health care costs, and more careful health care spending. Spending on medications mainly prescribed by primary care doctors grew by 0.5%, while spending on medications mainly prescribed by specialists grew by 4.8%, just as spending for injectable drugs (which are mainly prescribed by specialists) rose by 5.7% compared with a 0.1% increase in spending for oral medications.

Patient payment for medicines: The average patient copayment was $10.73 in 2010, down 20 cents from 2009, mainly due to the increased use of generics. Commercial third-party insurance paid for 63% of dispensed prescriptions, down from 66% five years ago. Prescriptions filled under a Medicare Part D plan or through Medicaid coverage represented 30% of all prescriptions filled in 2010, compared with 22% in 2006, the first year of the Medicare Part D program.

Pricing of medicines: The average cost of oral or inhaled medicines, which represented 60% of overall spending last year, fell 0.1% due to changes in price as well as in the mix of generics and branded products. On the other hand, costs of medicines administered by injection or infusion (typically in a medical facility such as a doctor’s office), representing 28% of spending, rose 5.7% last year. Spending on protected brands (those with unexpired patents) rose by $16.6 billion in 2010 due to “invoice price” (prices paid by the dispensing entity) changes, compared with a $15.8 billion increase the prior year. Rising levels of “off-invoice” discounts and rebates negotiated by payers and intermediaries accompanied these increases, resulting in net growth from pricing of $12.1 billion, or 4.2% of total spending.

Retail channels used by patients: Of the 3.99 billion prescriptions filled through retail “channels,” chain drugstores were a growing source as chain drugstores continued to acquire independent stores, and boosted their market share by 0.5%.

New products: Forty-four new branded products became available to patients in 2010. Among the new products were an oral therapy for multiple sclerosis, a monoclonal antibody for osteoporosis and bone metastases, and a therapeutic vaccine for prostate cancer, as well as new options to patients with rheumatoid arthritis, prostate cancer, and meningitis. Average spending per new branded product—those available 24 months or less—was $62 million, down from $114 million in 2006.

Brands and generics: Spending on brands fell 0.7%, while spending on branded (off-patent prescription drugs that are sold to consumers under the label of a well-known and respected drug maker) and unbranded generics rose 4.5% and 21.7%, respectively. Generics now represent 78% of all retail prescriptions dispensed—“a result of the greater availability of molecules in generic form as patents expire, along with patients choosing lower-cost options.” On average, more than 80% of a brand’s prescription volume is replaced by generics within six months of patent loss. Average copayments for generics rose by 5.2% to $6.06 per prescription.

For more information, visit http://www.imshealth.com/deployedfiles/imshealth/Global/Content/IMS%20Institute/Static%20File/IHII_UseOfMed_report.pdf.

For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer's Benefits Reports.

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