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Branded Drug Prices Rise Sharply in U.S.

Generic prices continue to drop.

Vinay Singh

The Burrill Report

“Patients choosing a market basket of brand name medications instead of clinically equivalent generics are being charged a higher premium than ever before.”

The price of marketed brand name medications is increasing at an accelerated rate in the United States while generic drug prices continue to drop, according to a new report by Express Scripts’ Research and New Solutions Lab. The pharmacy benefits manager found that prescription drug prices have risen much faster than overall price inflation of consumer goods.

Highly used brand name prescription drug prices increased 13.3 percent from September 2011 to September 2012. That compared to overall price inflation of consumer goods of only 2 percent. But over that same period, generic drug prices fell nearly 22 percent, creating more than a 35-percentage point difference. That differential, Express Scripts says, is the largest widening of the gap between brand and generic drug prices since the pharmacy benefits manager began its prescription price index in 2008.

The study highlights the dilemma that government and private insurers deal with as they attempt to curb healthcare spending. Total U.S. drug spending increased to $314 billion last year—a 4 percent increase over the previous year—and it is expected to rise again in 2012, according to drug researchers.

“Patients choosing a market basket of brand name medications instead of clinically equivalent generics are being charged a higher premium than ever before,” according the Express Scripts.

“Despite drug companies taking bigger price increases, we’re able to take advantage of the huge number of generics,” Steve Miller, Express Scripts’ chief medical officer said.

The Pharmaceutical Research and Manufacturers of America, a trade group representing the brand name manufacturers, criticized the report for not taking more into account the uptick in high-priced specialty brand name drugs in the last year as the reason for the increasing cost of branded drugs.

“Cost savings attributable to generic drugs represents one stage of the prescription-drug life cycle,” says Josephine Martin, executive vice president of the trade group. “Without the development of new medicines by innovator companies, there would be neither the new treatments essential to progress against diseases nor generic copies.”

The report did cite a substantial growth in specialty drugs in the first three quarters of 2012 as a reason for the increase in spending of brand name drugs. Spending on specialty medicines increased nearly 23 percent in the first nine months of 2012, compared to the same period in 2011. And all but one of the drugs approved by the U.S. Food and Drug Administration in the third quarter of 2012 was a specialty drug.

Spending on traditional drugs, which treat more common illnesses like high cholesterol or blood pressure, actually fell .6 percent during the study period, according to the report.

November 30, 2012

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