Prescription Drug Spending Is Forecast To…

crystal-ballWhere is spending on prescription drugs headed? A group of economists in the Office of the Actuary at the Centers for Medicare and Medicaid Services dusted off a crystal ball and are projecting that, between now and 2013, growth will be faster than last year, which amounted to 3.5 percent, but will exceed the 5.3 percent rate notched in 2009.
To wit, spending on prescription drugs is forecast to average 5.7 percent, but this is based on the assumption that economic conditions will improve, according to their article in Health Affairs (read the abstract here). Given the wobbly state of the economy, such assumptions may be optimistic. You may recall that the recession prompted many people to abandon their prescriptions (see this).
In any event, the CMS actuaries note that whatever growth does occur will be offset somewhat by new generic competition to six of the top 50 brand-name drugs, which are losing patent protection this year. The Lipitor cholesterol pill sold by Pfizer is a notable example. This development will actually dampen spending growth the most next year.
By 2014, though, growth in prescription drug spending is expected to increase sharply to 10.7 percent, which is 5.1 percent and $15.8 billion higher than projected in the absence of the Patient Protection and Affordable Care Act, otherwise known as healthcare reform. This projected acceleration is driven mainly by an expectation that the newly insured will substantially increase their use of medicines.
Looking past the horizon, prescription drug spending growth is expected to average 7.2 percent between 2015 and 2020. Why is a decline forecast? The actuaries anticipate a lower dispensing rate for generics, which will cause an uptick in prices. And they expect higher spending for more new molecular entities and biologics that are expected to be approved by the FDA during this period.
For those wondering why spending growth slowed so much last year, the reason given was “continued slow growth in the use of drugs.” This refers to economic factors, such as a change in the mix of drugs that were purchased. “Through tiered copays and other mechanisms, health plans have continued to shift medication use toward less-costly generic drugs,” they write. “Thus, the generic dispensing rate is projected to have increased to 69 percent in 2010, up from 66 percent in 2009.”
crystall ball thx to outdated on flickr

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