Thank pharma's patent cliff for helping to depress health-spending growth

U.S. healthcare spending is on the rise. But for the fourth year in a row, in 2012, those increases were comparatively modest, a new report says. As to whether it's the Affordable Care Act or lingering effects of the recession that's principally responsible for the slower spending growth, officials are divided. One thing they agree on: Falling drug prices had something to do with it.

According to a new report from the Centers for Medicare and Medicaid Services (CMS), U.S. healthcare spending rose 3.7% in 2012 to reach $2.8 trillion. That's right in line with spending increases since 2009, which have ranged from 3.6% to 3.8%, CMS said.

And as the report shows, generics makers did their part to keep the spending growth rate in that ballpark. As some of the biggest blockbusters out there lost patent protection, generics companies stepped in to take down their sales. The report's authors point to Pfizer's ($PFE) Lipitor, Bristol-Myers Squibb ($BMY) and Sanofi's ($SNY) Plavix and Merck's ($MRK) Singulair, to name a few.

As a result, generic drugs made up 77% of all 2012 prescriptions, up from about 70% the year prior, the report said. And those generics, in turn, put a damper on overall prescription drug spending, which inched up just four-tenths of one percent in 2012 to $263 billion, down from 2011's 2.5% increase. Nearly three-fourths of prescriptions filled in 2012 cost $10 or less.

As The New York Times reports, the White House Monday touted the new data as a victory for the Affordable Care Act, while others chalked the totals up to a post-recession trend. But if that trend does continue into the future, it's unclear how big a role slow drug spending growth will play going forward. IMS Health has said generics utilization was at its highest ever in 2012, figuring the rate could increase by only a few more percentage points before hitting its ceiling. And while 2013 saw a few key patents expire--with 2014 holding more in store--most companies for now have the worst of the patent cliff behind them.

Still, generics uptake is not the only damper on prescription drug spending. PBMs, for one, recently began to make a bigger mark. This fall, Express Scripts ($ESRX) revised its formulary for 2014 to exclude some of Big Pharma's newest and shiniest growth prospects, including Pfizer's ($PFE) rheumatoid arthritis treatment Xeljanz and GlaxoSmithKline's ($GSK) respiratory med Breo Ellipta.

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