[Ip-health] Brand-Name Drug Prices Rise Sharply, Report Says

Sophie Mayer sophie.emma.mayer at gmail.com
Fri Nov 30 08:50:49 PST 2012

 The price of brand-name prescription medicines is rising far faster than
the inflation rate, while the price of generic drugs has plummeted,
creating the largest gap so far between the two, according to a
report<http://digital.turn-page.com/i/95262>published Wednesday by the
pharmacy benefits manager Express Scripts.

The report tracked an index of commonly used drugs and found that the price
of brand-name medicines increased more than 13 percent from September 2011
to this September, which it said was more than six times the overall price
inflation of consumer goods. Generic drug prices dipped by nearly 22

The drop in the price of generics “represents low-hanging fruit for the
country to save money on health care,” said Dr. Steve Miller, the chief
medical officer of Express Scripts, which manages the drug benefits for
employers and insurers and also runs a mail-order pharmacy.

The report was based on a random sample of six million Express Scripts
members with prescription drug coverage.

The Pharmaceutical Research and Manufacturers of America, the trade group
representing brand-name manufacturers, criticized the report, saying it was
skewed by a handful of high-priced specialty drugs that are used by a small
number of patients and overlooked the crucial role of major drug makers.

“Without the development of new medicines by innovator companies, there
would be neither the new treatments essential to progress against diseases
nor generic copies,” Josephine Martin, executive vice president of the
group, said in a statement.

The report cited the growth of specialty drugs, which treat diseases like
cancer and multiple sclerosis, as a major reason for the increase in
spending on branded drugs. Spending on specialty medicines increased nearly
23 percent during the first three quarters of 2012, compared with the same
period in 2011. All but one of the new medicines approved in the third
quarter of this year were specialty drugs, the report found, and many of
them were approved to treat advanced cancers only when other drugs had

Stephen W. Schondelmeyer, a professor of pharmaceutical economics at the
University of Minnesota, said the potential benefits of many new drugs did
not always match the lofty price tags. “Increasingly it’s going to be
difficult for drug-benefit programs to make decisions about coverage and
payment and which drugs to include,” said Mr. Schondelmeyer, who conducts a
similar price report for AARP. He also helps manage the drug benefit
program for the University of Minnesota.

“We’re going to be faced with the issue that any drug at any price will not
be sustainable.”

Spending on traditional medicines — which treat common ailments like high
cholesterol and blood pressure — actually declined by 0.6 percent during
the period, the report found. That decline was mainly because of the patent
expiration of several blockbuster drugs, like Lipitor and Plavix, which
opened the market for generic competitors. But even as the entry of generic
alternatives pushed down spending, drug companies continued to raise prices
on their branded products, in part to squeeze as much revenue as possible
out of an ever-shrinking portfolio, Dr. Miller said.

Drug makers are also being pushed by companies like Express Scripts and
health insurers, which are increasingly looking for ways to cut costs, said
C. Anthony Butler, a pharmaceuticals analyst at Barclays. “I think they’re
pricing where they can but what they keep telling me is they’re under
significant pressure” to keep prices low, he said.

Express Scripts earns higher profits from greater use of generic medicines
than brand name drugs sold through their mail-order pharmacy, Mr. Butler
said. “There’s no question that they would love for everybody to be on a
generic,” he said.

Dr. Miller acknowledged that was true but said that ultimately, everyone
wins. “When we save people money, that’s when we make money,” he said. “We
don’t shy away from that.”

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