Pharma spending increase slowed in 2012, according Centers for Medicare and Medicaid

The rate of increase in spending on prescription drugs declined in 2012 compared with 2011, which was a key factor in why the cost of healthcare is not rising as fast as it once was, according to new analysis from the Office of the Actuary at the Centers for Medicare and Medicaid Services (CMS). The analysis was published in the January 2014 issue of Health Affairs.

The annual study estimated that health care spending in the United States grew at a rate of 3.7 percent in 2012 to $2.8 trillion. CMS said the level of annual growth is similar to spending growth rates since 2009 (between 3.6 percent and 3.8 percent), meaning that growth during all four years has occurred at the slowest rates ever recorded in the fifty-three-year history of the National Health Expenditure Accounts. Healthcare spending accounted for 17.2 percent of gross domestic product, a slight decline from the 2011 figure of 17.3 percent.

“The low rates of national health spending growth and relative stability since 2009 primarily reflect the lagged impacts of the recent severe economic recession,” Anne B. Martin, an economist in the Office of the Actuary at CMS and lead author of the Health Affairs article, said in a statement. “Additionally, 2012 was impacted by the mostly one-time effects of a large number of blockbuster prescription drugs losing patent protection and a Medicare payment reduction to skilled nursing facilities.”

Martin and her colleagues estimated that $263.3 billion was spent on retail prescription drugs in 2012, with the rate of growth slowing by .4 percent. They attributed the decline to a batch of blockbuster drugs - which are great for drugmakers, but expensive for those paying for them - losing patent protection. Martin mentioned three of the biggest moneymakers that lost patent protection recently: Lipitor, Plavix and Singulair.

Lipitor is made by Pfizer, which is based in New York and has a big operation in Collegeville. Plavix is made by Bristol-Myers Squibb, which is based in New York and has several facilities in New Jersey. Singulair is made by Merck, which is based in Whitehouse Station, N.J. and has a large operations in West Point and Upper Gywnedd in Montgomery County.

When those drugs lost patent protection, and thus market exclusivity, it meant generic competitors could sell their versions. The competition lowered the prices and, thus, the overall rate of increased spending - a point not lost on the Generic Pharmaceutical Association.

“As 2014 witnesses extensive changes in the health landscape, the role of generic medicines in providing patient savings and access to affordable care is critical and unquestionable,” Ralph G. Neas, President and CEO of the Generic Pharmaceutical Association, said in a statement. “A large proportion of patient and consumer savings is attributable to the increased use of generic medicines, and a decrease in overall spending on prescription drugs. So, it is more important than ever to make sure policy and practice align so that patients, state and federal government, the nation’s business community and others can continue to rely on generic medicines for relief from the high cost of health care.”