Rx Drug Spending Begins To Slump; Health Care Costs Remain on the Rise

U.S. prescription drug volume has "fallen steadily" since early 2007 and in recent months have "slipped in and out of negative territory" because of a "troubled economy and the growing burden of out-of-pocket health care costs," the Wall Street Journal reports.

Preliminary data gathered by IMS Health and Wall Street analysts show that the growth rate prescriptions for branded medications began to decline early last year. Between January and May this year, the growth rate of brand-name medication declined to 1.5%, the lowest rate since 1996, compared with an average growth rate of 3% between 2003 and 2007.

In May, prescription drugs accounted for 30.6% of all dispensed medications, down from 45.9% in 2003, IMS found.

Kevin Schulman, a health economics specialist at Duke University, said rising out-of-pocket prescription drug costs for medications and the increasing number of uninsured U.S. residents have made the economic downturn challenging for the health care industry.

Schulman said, "The last couple months have gotten worse, and that's going to continue," adding, "The health care industry thinks it's immune from these macro forces, but at some point, it can't be."

The Journal reports that the "development also comes as employers and insurers have shifted a larger share of health care costs to consumers in a bid to tame growth of the $2 trillion health care system."

Jeff Goldsmith, president of the consulting firm Health Futures, said, "We don't have a real track record for understanding how the health care system will respond to this new economic model where people are exposed significantly to the cost of care."

However, the Journal reports that consumers "appear to be skimping on medications as a result" of increased cost sharing. A Kaiser Family Foundation poll released in April showed that 23% of U.S. residents did not fill a prescription because of costs, compared with 20% in 2005, and 19% skipped doses or cut pills in half.

According to the Journal, slowing prescription growth "comes at a period of particular vulnerability for the drug industry."

Patent protections for several blockbuster drugs have expired in the past two years and others are facing expirations, while at the same time there are "few new drugs in late-stage development to take up the slack," the Journal reports. Safety concerns about drugs also "could be turning off demand," the Journal reports (Wang/Johnson, Wall Street Journal, 7/16).