Rx spending drops as use of generics rises

Total spending on prescription drugs declined last year as more Americans filled prescriptions for lower-cost generics and some filled fewer prescriptions in general, according to a new study.

The annual study conducted by the IMS Institute for Healthcare Informatics (PDF) found that both the utilization and cost of medicines declined last year.

The report cites declining use of branded drugs, availability of generics, lower levels of price increases and reduced spending on new drugs as reasons that total spending on medicines on a per capita basis fell 3.5%. Total spending fell to $325.8 billion in 2012, down 1% compared with $329.2 billion in 2011.

The authors went on to say that the slowdown in drug spending may indicate two things: appropriate disease management and the possibility that patients are self-rationing their treatments.

“The cost curve for medicines was clearly bent in 2012, for better or for worse,” Murray Aitken, executive director of the IMS Institute for Healthcare Informatics, said in a news release (PDF). “To some extent, this is a harbinger of more efficient use of our healthcare resources, but it also reflects a decline in utilization that may be the result of undertreatment and an imbalance between prevention and care.”

Separate studies, published in Health Affairs this month, sought to explain record slow growth in health spending. After citing the recession, the authors said the spending slowdown may also have been aided by fewer brand-name and new drugs, which usually have a higher price than generic or older drugs, as well as greater out-of-pocket spending and efforts by providers to be more efficient.

However, as generic drugs replaced branded products facing patent expirations—84% of dispensed prescription drugs are now generics—new treatments for rare or orphan diseases came to market with, in some cases, prohibitively high price tags.

At least seven of the 35 new drugs approved by the Food and Drug Administration in the agency's fiscal 2012 cost $9,000 or more per month.

Oncology drugs reported the highest amount of spending per drug class at $25.9 billion in 2012, a 7.8% increase that is attributed to the costs stemming from new targeted therapies. The increase, according to IMS Health, was also offset by patent expirations of other cancer drugs.

And, even as the overall costs of deductibles and copays go up, the costs of pharmacy benefit copays are going down. About 72% of retail prescriptions had a copay of $10 or less, while 3% of prescription drugs had a copay that cost more than $70.

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