Spending on drugs shows a rare drop

This article in the Los Angeles Times on 5/9/13 discusses the drop in pharmaceutical spending as a result of more generic medication coming to the market. The article also attributes the slowdown in spending to other factors.

The 1% decline in consumer costs in ’12 is attributed mostly to new generics.


An explosion of cheap generic substitutes for widely used prescription drugs last year helped drive the first decline in pharmaceutical spending in the U.S. in nearly six decades.

Drug makers often lament what they call the patent cliff, which is when patent protections on their drugs expire and cheap substitutes come to market. For pharmaceutical companies, it cuts into sales and forces prices down.

But their loss is the consumer’s gain, according to a report being released Thursday by a leading pharmaceutical research group.

Pharmacy shelves are being stocked with less-expensive generic versions of top-selling drugs such as Lipitor and Plavix, offering savings to consumers, employers and health insurers, according to the report by IMS Institute for Healthcare Informatics.

The rise of generics cut the nation’s tab for prescription medications 1% in 2012 to $325.8 billion — the first decline since IMS began tracking the data in1957. Adjusted for inflation and population growth, the decline was 3.5%. That means average spending per person was $898 last year, down $33from2011.

“The largest driver of this slowdown,” said IMS research director Michael Kleinrock, was the “unprecedented cluster of very popular and effective medicines losing patent protections and facing generic competition at the same time.

“We’ve often called it the ‘patent dividend’ for the health system and for patients,” Kleinrock said.

Consumers this year will see new generic medications at the pharmacy as a number of patents are set to expire .

The slowdown in prescription drug spending was also driven by some less predictable factors, such as a weaker-than-usual cough, cold and flu season, the report says.

But the slowdown in spending wasn’t necessarily all good news for consumers. Although U.S. pharmacies filled more prescriptions overall, there was a slight decline on a per capita basis. That could mean that some people avoided needed treatment and skipped the drugs, Kleinrock said. But it could also be a signal that consumers are getting more efficient healthcare, he said.

The dip in the use of medications mirrored a drop in visits to doctors’ offices for the third year in a row, a trend experts associate with the sagging economy. At the same time, emergency room visits increased, driven primarily by people with health insurance coverage.

Such trends may add fuel to fears that rising out-of-pocket expenses for insured consumers may have unintended side effects, the report said.

When consumers face high deductibles and copays, they may avoid filling a prescription or seeking preventive care at the doctor’s office to save money, only to resort to the emergency room when illnesses get worse.

In the long run, Kleinrock said, “that could result in higher costs.” lisa.girion@latimes.com


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