Transcript Rohan Bhalla`s Presentation

U.S. Drug Costs Dropped in
2012, but Rises Loom
Presented by: Rohan Bhalla
Katie Thomas
The New York Times
March 18, 2013
http://www.nytimes.com/2013/03/19/business/use-of-generics-produces-an-unusual-drop-in-drug-spending.html?ref=health
Decrease in Spending
• Spending on prescription drugs nationwide has been
slowing for years because of the increasing use of lowcost generics.
• In 2012, money spent on prescription drugs dropped
by 1 percent, to $325.7 billion.
• First time the research firm IMS Health had recorded a
decrease in U.S. drug sales since the company began
tracking these numbers in 1957.
• This past month, Express Scripts (pharmacy benefit
manager) reported a 1.5% drop in spending on
commonly used pills (high BP and cholesterol).
The “Golden” Era
• U.S. in the midst of “golden” period
• Warning: use of generics has masked a growing
problem for the government, insurers and others
who pay the bill for prescription drugs
• Problem: the rising cost of complex specialty
medicines that treat cancer, rheumatoid arthritis,
and other diseases.
• Potential for higher spending on drugs comes as
the nation is struggling over how to contain the
cost of health care - a major threat to the
country’s fiscal condition.
“Patent” Cliff
• Despite recent slowdown in the growth of spending on overall
health care, rising health costs will eventually overwhelm the
federal budget and make basic health care unaffordable for
many Americans.
• Not a major cause of rising costs, but drugs account for ~15% of
nation’s health care expenditures.
• Sources say the forces that have been holding down drug costs
are beginning to subside.
• Dozens of brand-name products, like anticholesterol drug Lipitor,
and Plavix (which prevents blood clots) have lost their patent
protection, a phenomenon called the “patent cliff”.
Saturation of Generic Drugs
• Use of generic drugs may also be nearing
saturation point.
• In 2012, 84 percent of all prescriptions were
dispensed as generics, according to IMS, the
highest rate in history.
• Estimate - use of generics may reach 86 or 87
percent
• Slowdown in health care spending also attributed
to the weak economy - patients cut back on visits
to the doctor and filling prescriptions.
The Economics
Effects of the “Patent” Cliff
Supply and Demand for Generic Drugs
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The Economics
Future Steps
• Several insurers and drug-benefit managers say they are
already taking steps to try to rein in the cost of specialty
drugs.
• Requiring prior approval for high-price drugs or asking
patients to try older, less expensive treatments first.
• Many are placing their hopes in biosimilars, what many
consider to be the generics of the future.
• Biosimilar drugs would have the same effect in the body as
the original biologic drug.
• They will not be cheap. Estimated that the drugs will sell from
30 percent to 50 percent less than the brand-name price
• In comparison, traditional generics can be discounted as much
as 80 percent.
References
• http://www.nytimes.com/2013/03/19/business/use-of-genericsproduces-an-unusual-drop-in-drug-spending.html?ref=health
• http://www.nytimes.com/2013/03/19/business/questions-for-public-privatepact-that-led-to-xeljanz.html?ref=health&_r=0
• http://www.drugtrendreport.com/trend-drivers/price-index-ppi