Fewer doctor visits, an increase in generic drugs and a decrease in initiating chronic therapy all contributed to a slower rate of growth in spending on medicine in the United States in 2010, according to IMS Institute for Healthcare Informatics, in Parsippany.
In a recent report, IMS Institute said prescription-drug spending increased 2.3 percent last year, a much smaller increase than the 5.1 percent jump registered in 2009.
“From the perspective of all consumers and the health care spending — which is nearly one-fifth of our economy now — a slowing of health care cost increases, particularly at a time when wages have been fairly depressed, is a good thing,” said David Finegold, dean of Rutgers University’s School of Management and Labor Relations. But for pharmaceuticals companies, “one of our state’s most profitable and largest sectors and bigger employers, that represents a squeeze on their profitability, as well. It’s a challenge.”
According to IMS Institute, the number of visits to doctor offices was down 4.2 percent in 2010, a figure driven by high unemployment levels and rising health care costs.
“There’s been pressure to limit the rise in insurance premiums, and one of the ways the industry has responded is by pushing up the contribution that individuals need to make — in terms of larger not just co-pays, but where you keep your premium down by bearing a lot of the initial costs first,” Finegold said. “We have good evidence to suggest that when you ask consumers to do that, they get much more price sensitive, but they also cut down on things like preventative care, like regular doctor’s visits.”
Also due to the poor economy, IMS Institute reports the number of patients starting new treatments for chronic conditions declined by 3.4 million in 2010. Of the number of new chronic therapies began in 2010, 3.2 million more patients chose generic prescriptions over brand names.
Overall, generic prescription drugs and branded generic drugs increased 26.2 percent, while brand-name prescriptions decreased by 0.7 percent.
“That’s your single biggest contributor,” Finegold said. “This has been a long-term trend, but with a weak economy and pressure focused on health care costs accelerating, what we have is 22 percent of the scripts that are written are accounting for the vast majority of all the profits of this industry, but as the replacement happens, that’s how you control overall cost. You use the expensive drugs where they’re really needed.”
Finegold said New Jersey pharmaceutical giants should focus on developing their generic portfolio, as well as researching and developing “best-in-class” therapeutics.
“If you can find those, people are still willing to pay,” Finegold said, adding that a new therapy for conditions like Parkinson’s could drive annual profits in the tens of billions of dollars because of the willingness for people and insurers to pay and the cost of alternative treatments.
Finegold said a lot of major companies were exiting generics a few years ago, but some are rethinking that strategy as more big-name drugs come off of patent and spending on branded drugs decreases.
“Around the rest of the world, where most of these other medicines are not affordable, having (generics) is not a bad thing from a societal perspective, but it challenges their business models,” Finegold said. “The only way to get entrance to the really biggest growth market in the world — namely, China, India and a lot of the developing world where we’re seeing all the growth — is to have a strong generic portfolio, because that’s what a vast majority of their countries can afford. So they become an entry strategy to those markets.”
E-mail Melinda Caliendo at mcaliendo@njbiz.com
