Generics take over prescription market, causing overall drug spending to slow

Doctors and pharmacists are increasingly writing and filling prescriptions for generic drugs — while scripts for patent-protected pharmaceuticals are declining — according to a study released this week by the IMS Institute for Healthcare Informatics.

According to the report, generic drugs made up 78% of prescriptions dispensed in the US in 2010, up from 63% in 2006. The list of top 25 drugs by prescription volume includes mostly non-branded generic products and was topped by hydrocodone plus acetaminophen (the generic version of Abbott Laboratories’ painkiller Vicodin), anti-cholesterol drug simvastatin (the knockoff of Merck’s Zocor), and lisinopril (a version of AstraZeneca’s high blood pressure med Zestril).

Only three brand-name pharmaceuticals make an appearance the list: cholesterol drug Lipitor (Pfizer), blood thinner Plavix (Sanofi-Aventis and Bristol-Myers Squibb), and asthma medication Singulair (Merck). Ironically, all three of those medicines are on the verge of losing patent protection, which means that in a couple of years the list could consist entirely of generics — that is, if newer blockbuster drugs don’t move up to take a top 25 spot, which seems unlikely in the near future as drugmakers’ development pipelines are largely failing to produce innovative new drugs for chronic ailments.

The report also shows that generics are taking over a majority of a drug’s customer base swifter than in previous years — 80% within 6 months during 2010, compared to 55% in 2006. In addition, a larger percentage of generic substitutes are available to patients — 84% compared to 70% four years ago — due to the rapid rate of drugs falling off-patent.

The rise in generic prescriptions is also fueled by economic factors such as rising levels of unemployed or uninsured patients — such patients are more likely to put off doctor visits, and when they do go, they are most likely to request generics. Insurance companies are also influential as generic products fill their preferred drug lists.

All of these factors are also causing overall prescription spending levels to grow at a slower pace each year. The therapeutic areas experiencing the highest levels of spending growth are cancer, asthma, cholesterol, diabetes, and depression.

The ranking of top selling drugs by sales volume still consists of high-priced branded prescriptions. Lipitor is still tops (for now), followed by Nexium (acid reflux pill by AstraZeneca), Plavix, Advair (asthma medication by GlaxoSmithKline), and Abilify (depression drug from BMS and Otsuka). But again, as patents expire and insurers and patients become more cost-conscious, spending on these products will slow as well.

Overall, the report is great news for generic manufacturers (as well as insurers and consumers), but brings terrible tidings to prescription drugmakers, which are already desperately seeking ways to defend their profit levels against the effects of patent losses. However, before you scoff too loudly at big pharma for getting their due over selling high-priced medicines, remember that these companies use a big chunk of those profits to fund the majority of research into advanced medicine. So while the generic trend is a positive for the inflated US health care market at the moment, unless the way that new drugs are developed and sold is overhauled, it could cause trouble in the future.

Anne Law

Anne Law has been a member of the D&B editorial department for more than a decade, providing content for the Hoover's and First Research products. She currently covers the health care and insurance industries for First Research. For industry news, follow Anne on Twitter.

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