Prescription drug spending down

Prescription drug spending down

Posted: Updated:
TRENTON, NJ (WFLA) -

Spending on prescription medicines in the U.S. fell for the first time in decades last year, slipping as cash-strapped consumers continued to cut back on use of health care services.

Patients also benefited from a surge of new, inexpensive generic versions of widely used drugs for chronic conditions like high cholesterol, according to a new report.

Total spending on medications dipped 1 percent, to $325.8 billion last year from $329.2 billion in 2011. Likewise, average spending per person on medicines fell by $33, to $898 last year, according to the report from the IMS Institute for Healthcare Informatics.

"That's the first time IMS has ever measured a decline in the 58 years we've been monitoring drugs," Michael Kleinrock, director of research development at the institute, told The Associated Press.

Kleinrock said that while total drug spending fell by just 1 percent, the decline was 3.5 percent after accounting for population growth and economic expansion.

Factors behind last year's drop in drug spending include positive trends such as more use of cheap generic pills and flukes such as a fairly mild cold and flu season in early 2012. But there also was a big negative: people rationing their own health care.

IMS found affordability of health care remains a big problem for many Americans, with growing out-of-pocket costs forcing people to go without needed doctor visits, medicines and other treatments.

For some, that was because they lost jobs or homes during the worst recession in decades. But higher costs also are hitting many employed people who have health insurance.

Employers have been raising health costs for their workers well above the inflation rate, through higher co payments, premiums and deductibles. Many commercial insurance plans now have annual deductibles - the amount a patient must pay before insurance kicks in - that exceed $1,000, Kleinrock said.

The number of insured people with consumer-directed plans, where patients face very high deductibles and sometimes pay 20 percent of costs after that, has jumped from about 8 percent in 2008 to 19 percent last year. Now many folks insured through their jobs have such plans, not just young, healthy people buying insurance on their own.

"Even patients with insurance are feeling the pinch and have been reducing their use of health care," Kleinrock said.

The report notes that out-of-pocket costs, which exclude monthly health plan premiums, are now three times higher than they were five years ago, on average. They're seven times higher for those with consumer-directed plans.

That's one reason the number of doctor visits, planned hospital admissions and outpatient treatments each dipped by a half-percent to 1 percent last year, compared with 2011.

At the same time, the number of patients admitted to hospitals after coming to the emergency department spiked for the second straight year, climbing nearly 6 percent in 2012. That's a sign some people are waiting until they are very sick to seek medical help.

Meanwhile, the number of prescriptions used per person last year edged down just 0.1 percent. At the same time, the percentage of all prescriptions filled with a generic medicine hit 84 percent last year, up from 80 percent in 2011 and just 54 percent a decade ago. Nearly three-quarters of prescriptions filled in 2012 cost patients $10 or less in co payments.

A big reason was new generic versions of some of the pharmaceutical industry's biggest-selling drugs of all time: Lipitor for high cholesterol, Plavix for preventing blood clots and strokes, Singulair for allergies and asthma, Diovan for high blood pressure and several others.

Those brand-name drugs all lost patent protection during 2012 or late 2011, enabling generic drug companies to flood the market with copycat pills costing up to 90 percent less.

Those new generics reduced spending on medicines by $28.9 billion last year. That savings was partly offset by the introduction of a big number of breakthrough drugs that are very expensive, drugmakers raising prices on existing medicines and population growth.

Spending on cancer treatments, fueled by new medicines considered major advances, hit $25.9 billion, making it the top-selling category. That was followed by treatments for mental illnesses, respiratory disorders, diabetes and pain, all garnering more than $18 billion in 2012. Cholesterol drugs, the top category a few years ago, fell to sixth place at $16.9 billion, thanks to generic competition.

IMS, based in Parsippany, N.J., compiles and analyzes data from pharmacies, hospitals, nursing homes, drug wholesalers and other groups to produce its annual report on health care spending trends.

Back in 1957, the first year IMS studied, total U.S. drug spending was only $1.9 billion. That's risen each year since, generally climbing more in years when the economy is strong.

For now, IMS is forecasting that overall spending on health care will continue to grow faster than spending on medicines at least through 2017. That's due to factors including the increasing number of elderly patients and those with very expensive chronic conditions such as diabetes, psychiatric disorders, severe heart disease and various cancers.

"The sickest people drive most of our health care spending," Kleinrock said, noting that just over half the total spending by private health insurance plans last year was for just 5 percent of their members.

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