Branded drug prices leap 13% in U.S., far outpacing inflation

While the pharma industry worries about drug spending cuts around the world, companies can still take heart from the good old U.S. of A. Drugmakers raised branded prices by 13.3%, more than 6 times the inflation rate. But it was the cost of specialty drugs, such as new hepatitis C meds, that saw the steepest climb.

According to a new study by pharmacy benefits manager Express Scripts, specialty drug spending was up 22.6% over the last 12 months, pushed mostly by price hikes. New, expensive products also contributed. Spending on recently introduced hepatitis C drugs Victrelis from Merck ($MRK) and Incivek from Vertex ($VRTX) fueled a 117.3% explosion in the cost of hep C treatment.

For all of those eye-popping numbers, Express Scripts Chief Medical Officer Steve Miller told Reuters that the big takeaway for him is the increasing gap between the price of branded drugs and generic medications, which reached 35.2%, the largest spread since the the company began tracking it in 2008. "What's really remarkable is the gap [between branded drug prices and generics] is getting larger because of the number of generics and the discounts on those generics are steep."

In fact, it was generics that kept the overall drug spending increase in relative check. Big discounts for generic drugs helped offset increases on branded meds, so that spending rose only 3.5% overall, two percentage points ahead of inflation.

No wonder, then, that nearly 80% of the drugs U.S. consumers take now are generics. Spending on "traditional" drugs fell 0.6% in the first three quarters of 2012 because of the growing use of generics. 

Of course, specialty drug costs are of big concern to pharmacy benefit managers and their clients since their use is increasing. The report says that in the first 9 months of the year, they accounted for 20.8% of total drug spending. The report did point out that the big jump in hep C drug spending is likely to taper off this year, as patients wait for approval of new interferon-free drugs which promise fewer side effects. It says the next big opportunity for dampening specialty drug costs will come when more biosimilars hit the market, creating similar price checks on many of the specialty drugs that generics have had on small molecules.

Still, there has been evidence of pushback on the high cost of some specialty drugs. Sanofi ($SNY) cut in half the price of its new colorectal cancer drug Zaltrap after just a few months on the market, after Memorial Sloan-Kettering Cancer Center announced in The New York Times that their hospital wouldn't be using Zaltrap because the price was too high and the benefits not as good as the standard treatment. And some members of Congress have been putting pressure on Gilead Sciences ($GILD) to discount the price of its four-in-one HIV treatment Quad because of what the $28,500 a year drug will mean to Medicaid budgets, which pays for much of the HIV treatments. 

- read the Reuters story
- here's the report
- here's the release 

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