There's a great article that came from the AP today on KGW.com. We wanted to share it with you.

Drug prices to plumment in wave of expiring patents


The cost of prescription medicines used by millions of people every day is about to plummet.

The next 14 months will bring generic versions of seven of the world's 20 best-selling drugs, including the top two: cholesterol fighter Lipitor and blood thinner Plavix.

The magnitude of this wave of expiring drugs patents is unprecedented. Between now and 2016, blockbusters with about $255 billion in global annual sales will go off patent, notes EvaluatePharma Ltd., a London research firm. Generic competition will decimate sales of the brand-name drugs and slash the cost to patients and companies that provide health benefits.

Top drugs getting generic competition by September 2012 are taken by millions every day: Lipitor alone is taken by about 4.3 million Americans and Plavix by 1.4 million. Generic versions of big-selling drugs for blood pressure, asthma, diabetes, depression, high triglycerides, HIV and bipolar disorder also are coming by then.

The flood of generics will continue for the next decade or so, as about 120 brand-name prescription drugs lose market exclusivity, according to prescription benefits manager Medco Health Solutions Inc.

"My estimation is at least 15 percent of the population is currently using one of the drugs whose patents will expire in 2011 or 2012," says Joel Owerbach, chief pharmacy officer for Excellus Blue Cross Blue Shield, which serves most of upstate New York.

Those patients, along with businesses and taxpayers who help pay for prescription drugs through corporate and government prescription plans, collectively will save a fortune. That's because generic drugs typically cost 20 percent to 80 percent less than the brand names.

Doctors hope the lower prices will significantly reduce the number of people jeopardizing their health because they can't afford medicines they need.

Dr. Nieca Goldberg, director of The Women's Heart Program at NYU Langone Medical Center in Manhattan, worries about patients who are skipping checkups and halving pills to pare costs.

"You can pretty much tell by the numbers when I check the patient's blood pressure or cholesterol levels," that they've not taken their medications as often as prescribed, she says.

Even people with private insurance or Medicare aren't filling all their prescriptions, studies show, particularly for cancer drugs with copays of hundreds of dollars or more.

The new generics will slice copayments of those with insurance. For the uninsured, who have been paying full price, the savings will be much bigger.

Daly Powers, 25, an uninsured student who works two part-time jobs at low wages, says he often can't afford the $220 a month for his depression and attention deficit disorder pills. He couldn't buy either drug in June and says he's struggling with his Spanish class and his emotions. He looks forward to his antidepressant, Lexapro, going generic early next year.

"It'd make all the difference in the world," says Powers, of Bryan, Texas.

Generic medicines are chemically equivalent to the original brand-name drugs and work just as well for nearly all patients.

When a drug loses patent protection, often only one generic version is on sale for the first six months, so the price falls a little bit initially. Then, several other generic makers typically jump in, driving prices down dramatically.

Last year, the average generic prescription cost $72, versus $198 for the average brand-name drug, according to consulting firm Wolters Kluwer Pharma Solutions. Those figures average all prescriptions, from short-term to 90-day ones.

Average copayments last year were $6 for generics, compared with $24 for brand-name drugs given preferred status by an insurer and $35 for nonpreferred brands, according to IMS Health.

Among the drugs that recently went off patent, Protonix, for severe heartburn, now costs just $16 a month for the generic, versus about $170 for the brand name. And of the top sellers that soon will have competition, Lipitor retails for about $150 a month, Plavix costs almost $200 a month and blood pressure drug Diovan costs about $125 a month. For those with drug coverage, their out-of-pocket costs for each of those drugs could drop below $10 a month.

Jo Kelly, a retired social worker in Conklin, Mich., and her husband, Ray, a retired railroad mechanic, each take Lipitor and two other brand-name medicines, plus some generic drugs. Both are 67, and they land in the Medicare prescription "doughnut hole," which means they must pay their drugs' full cost by late summer or early fall each year. That pushes their monthly cost for Lipitor to about $95 each, and their combined monthly prescription cost to nearly $1,100.

Generic Lipitor should hit pharmacies Nov. 30 and cost them around $10 each a month.

"It would be a tremendous help for us financially," she says. "It would allow us to start going out to eat again."

For people with no prescription coverage, the coming savings on some drugs could be much bigger. Many discount retailers and grocery chains sell the most popular generics for $5 a month or less to draw in shoppers.

The impact of the coming wave of generics will be widespread — and swift.

Insurers use systems that make sure patients are switched to a generic the first day it's available. Many health plans require newly diagnosed patients to start on generic medicines. And unless the doctor writes "brand only" on a prescription, if there's a generic available, that's almost always what the pharmacist dispenses.

"A blockbuster drug that goes off patent will lose 90 percent of its revenue within 24 months. I've seen it happen in 12 months," says Ben Weintraub, a research director at Wolters Kluwer Pharma Solutions.

The looming revenue drop is changing the economics of the pharmaceutical industry.

In the 1990s, big pharmaceutical companies were wildly successful at creating pills that millions of people take every day for long-term conditions, from heart disease and diabetes to osteoporosis and chronic pain. The drugs are enormously profitable compared with drugs that are prescribed for short-term ailments.

The patents on those blockbusters, which were filed years before the drugs went on sale, last for 20 years at most, and many expire soon.

In recent years, many drug companies have struggled to develop new blockbuster drugs, despite multibillion-dollar research budgets and more partnerships with scientists at universities and biotech companies. The dearth of successes, partly because the "easy" treatments have already been found, has turned the short-term prognosis for "big pharma" anemic.

"The profit dollars that companies used to reinvest in innovation are no longer going to be coming," warns Terry Hisey, life sciences leader at consultant Deloitte LLP's pharmaceutical consulting business. He says that raises "long-term concerns about the industry's ability to bring new medicines to market."

But pharmaceutical companies can save billions when they stop promoting drugs that have new generic rivals, and U.S. drug and biotech companies are still spending more than $65 billion a year on R&D.

Drug companies have received U.S. approval for 20 drugs this year and expect approval for other important ones the next few years. Eventually, those will help fill the revenue hole.

For now, brand-name drugmakers are scrambling to adjust for the billions in revenue that will soon be lost. Typically, they raise prices 20 percent or more in the final years before generics hit to maximize revenue. Some also contract with generic drugmakers for "authorized generics," which give the brand-name company a portion of the generic sales.

Brand-name companies also are trimming research budgets, partnering with other companies to share drug development costs and shifting more manufacturing and patient testing to low-cost countries.

Pharmaceutical companies have cut about 10 percent of U.S. jobs in four years, from a peak of about 297,000 to about 268,000, according to Labor Department data. Nearly two-thirds of the cuts came in the last 1 1/2 years, partly because of big mergers that were driven by the need to bulk up drugs in development and boost profits in the short term by cutting costs.

Drug companies also are trying to grow sales by putting more sales reps in emerging markets, such as China and India, and by diversifying into businesses that get little or no generic competition. Those include vaccines, diagnostic tests, veterinary medicines and consumer health products.

As the proportion of prescriptions filled with generic drugs jumped to 78 percent in 2010, from 57 percent in 2004, annual increases in prescription drug spending slowed, to just 4 percent in 2010. According to the Generic Pharmaceutical Association, generics saved the U.S. health care system more than $824 billion from 2000 through 2009, and now save about $1 billion every three days.

The savings are only going to get greater as our overweight population ages. People who take their medicines regularly often avoid costly complications and hospitalizations, says AARP's policy chief, John Rother, which produces even bigger savings than the cheaper drugs.

In addition, many patients taking a particular brand-name drug will defect when a slightly older rival in the same class goes generic.

Global sales of Lipitor peaked at $12.9 billion in 2006, the year Zocor, an older drug in the statin class that reduces bad cholesterol, went generic. Lipitor sales then declined slowly but steadily to about $10.7 billion last year. That still will make Lipitor the biggest drug to go generic.

For patients, it's a godsend.

Samuel H. Fleet: Mass. health insanity

Albert Einstein famously said that insanity is doing the same thing over and over and expecting a different result. But it is ObamaCare that will bring this truism to life for people as they watch their health care evaporate and wonder why.

The answer will be simple. Congress and the Obama administration modeled the majority of their reforms after Massachusetts, ignoring all of its danger signs.

The similarities are clear. In 2006, Massachusetts enacted a sweeping health-care reform that promised affordability through lower costs, coverage for all through employer and individual mandates, and accessibility through Medicaid expansion and a state-run exchange. By 2014, across the nation the federal government will fine companies that don’t provide insurance; tax individuals who don’t buy it; expand Medicaid and Medicare eligibility, and establish health-insurance exchanges.

As for promises of lower costs and greater access, perhaps someone in Washington should have stopped to ask how the reforms have played out in Massachusetts.

After three years of living with reform, the state has the highest average health-insurance premiums in the nation. An analysis by the highly reputable Rand Corporation estimates that total health-care spending in the state will nearly double to $123 billion by 2020. Original estimates of the people needing subsidies for insurance have been disastrously low. The state expected to cover 215,000 at a cost of $725 million; The Boston Globe recently reported that by 2011 the total will be 342,000 at a cost of $1.35 billion.

The proliferation of regulations, plan-design restrictions and minimum-coverage guidelines has resulted in fewer alternatives, and it could get worse. The state’s regulators recently rejected most proposed health-insurance-rate increases, despite the rising medical-care costs that insurers must cover and that four of the five major health plans had operating losses last year. An internal memo by the state official in charge of monitoring insurer solvency warns that rates the regulators want to impose “have no actuarial support” and could lead to a “train wreck” in the industry. In April, several insurers boycotted the state’s exchange, refusing to sell insurance at a loss.

What has gone wrong in Massachusetts?

First, there has been little attempt to rein in medical costs. The supposed “savings” from giving the uninsured regular coverage instead of treating them in emergency rooms was never going to be enough to make up for the added costs of providing them care.

Second, there has been no move toward transparency to enable consumers to make wise economic choices for health care. Not only do they have no way of finding out which hospital’s X-ray costs $120 and which costs $1,200, they also have little incentive to shop for the best value as they would when buying a car or flat-screen TV.

Third, health insurers are still able to hide data instead of opening them up to analysis that would lead to more competitive plans and better health outcomes. In short, what we have in Massachusetts is insanity. And now, thanks to ObamaCare, we are about to do the same thing at the national level. Don’t expect a different outcome.

Milliman Report on Medical Spending Highlights Role of Unit Cost Increases

AHIP HI-WIRE
May 20, 2010

Milliman recently issued its 2010 Milliman Medical Index (PDF) (MMI), examining the total annual medical spending for a typical American family of four covered by an employer-sponsored PPO program.

According to the Milliman report, the total medical cost for a typical American family of four is $18,074 in 2010, representing a 7.8 percent increase over last year's total. The report states: "Most of the hospital and physician cost increases identified in this year's MMI have been driven by average unit cost, not utilization, which frames the coming effort to control costs. Provider/payor negotiations will be more visible and intense in the reform environment and as regulators put more pressure on the premium rate-setting process."

Other key findings include:

• The 2009 to 2010 hospital inpatient annual rate of increase grew from 7.7 percent to 9.8 percent, and the hospital outpatient annual rate of increase grew from 10.2 percent to 11.6 percent. These increases are driven largely by higher average unit costs.

• Approximately 17 percent of this year's increase in pharmacy spending is attributed to increased utilization, and the remaining 83 percent is due to average unit cost increases.

• The components of medical spending in 2010 for a typical family of four are: $6,062 for physician care; $5,586 for inpatient hospital care; $3,094 for outpatient hospital care; $2,635 for pharmaceuticals; and $697 for other services.

• Of the $18,074 total medical cost for a typical family of four in 2010, the employer pays about $10,744 (59 percent) toward the premium, while the employee pays $4,325 (24 percent) toward the premium and $3,005 (17 percent) in out-of-pocket costs.