Small group of branded drugs like Nexium, Copaxone make up huge part of Medicare spend

It's a good thing for Medicare that AstraZeneca's ($AZN) Nexium has gone generic and Teva's ($TEVA) Copaxone is headed that way. That is because they are among about 10% of the drugs covered by Medicare which account for about 25% of the cost.

According to the 2013 data, the Wall Street Journal reports, 400 out of the 3,500 drugs covered by the drug program accounted for about a quarter of drug spending. The biggest single seller in the 2013 data, the Wall Street Journal reports, was heartburn drug Nexium, alone costing the program $2.53 billion, while GlaxoSmithKline's ($GSK) asthma drug Advair was close behind at $2.26 billion. In fact, NPR reports,14 branded drugs cost the federal government and Medicare beneficiaries in excess of $1 billion each, about a quarter of the spending, NPR reports

The Centers for Medicare and Medicaid Services, which released the information, cautioned that the data did not include rebates paid by pharmaceutical companies, a fact that the Pharmaceutical Research and Manufacturers of America said makes the information "misleading." PhRMA pointed out in a statement that insurers often negotiate discounts that will cut 20% to 30% off the cost of branded medications.

The data hits as concerns have grown over the high cost of drugs, particularly specialty drugs that often cost well beyond $100,000 a year for patients. Spending on the federal drug program has grown consistently from its start in 2006 when it cost the government $47.4 billion. Much of the growth has come as baby boomers have aged and entered the program. Last year a report said that while healthcare costs had been growing at about 5.7% a year for 7 years, in 2014 they went up only 0.5% on a per-enrollee basis. Some of that has to do with generic drugs hitting the market. Generics make up the bulk of the prescriptions the program funds.

Hydrocodone acetaminophen combo pain drugs were the most prescribed drugs in the program, a controversial issue unto itself, while generics of Pfizer's ($PFE) cholesterol-lowering drug Lipitor were second and generic blood pressure med lisinopril was third.

As for Nexium, it went generic last year, which Teva was approved to sell. Generics of Copaxone, while approved, have been put off so far by litigation that Teva has doggedly pursued to protect is number one seller even as it has steadily raised the price of the multiple sclerosis med.

But even generic drug pricing has gotten controversial as some companies have pushed up the price of generics to offset falling demand. The Department of Health and Human Services (HHS) said last month it would investigate the cause of soaring generic drug prices amid congressional concern.

- read the WSJ story (sub. req.)
- here's an NPR story