Spending on Specialty Drugs Soars as More Blockbuster Brands Go Generic

Express Scripts has released two separate analyses on drug spending in the United States in recent days. The first report suggested that U.S. consumers could save US$24.7 billion through increased generic drug use. The second study, carried out as part of the PBM’s 2006 Express Scripts Specialty Drug Trend Report shows that spending on specialty drugs – in particular on those used to treat inflammatory diseases - soared in 2005.

Huge Savings Available as Blockbusters Lose Exclusivity

According to Express Scripts’ report, published on Tuesday (6 June), U.S. consumers could save US$24.7 billion in 2006 if generic useage is maximised. The PBM attributes this huge potential saving to the fact that a number of blockbuster drugs were hit by generic copies entering the U.S. market this year – including the anti-cholesterol drug Zocor (simvastatin; Merck (U.S.)) and the most prescribed anti-depressant Zoloft (sertraline; Pfizer (U.S.)).

The report suggests that the biggest potential savings, at US$10.3 billion, will be available in the anti-cholesterol class of drugs. The PBM estimates that generic versions of three popular statins, lovastatin, pravastatin and simvastatin, could potentially fill around 85% of all prescriptions for anti-cholesterol drugs. This leads to a huge potential saving, given that only 18.8% of anti-cholesterol prescriptions are currently filled by generics.

The Express Scripts report also carried out a state-by-state analysis, ranking each state by its generic usage and savings potential. According to the PBM, New Mexico was the best U.S. state at capturing savings on a per capita basis in 2005, leaving only US$81 per capita unclaimed, while Kentucky was the worst, passing up US$163 per commercially insured life. New Mexico also had the highest overall use of generic drugs among the U.S. states at 60%, while the state of New Jersey – home of many of the world’s largest pharmaceutical companies - had the lowest at 45%.

Spending on Specialty Drugs Rockets

Express Scripts yesterday released its 2006 Express Scripts Specialty Drug Trend Report, highlighting spending trends for specialty biotech drugs. According to the PBM, spending in this area skyrocketed in 2005, and was boosted significantly by a massive33.9% increase in spending on the most popular class of biotech drug - those used to treat inflammatory disorders. The class only includes four members - the injectable biologics, Enbrel (etanercept; Abbott (U.S.)), Humira (adalimumab; Abbott (U.S.)), Kineret (anakinra; Amgen (U.S.)) and Remicade (infliximab; Centocor (U.S.)). The primary cause of this spending growth was increased utilisation rates, which rose by 24.5%, driven by the extended use in terms of the length of treatment and in use in additional indications. Inflammatory disorder drugs now account for around 19% of the total biotech drugs market. According to Express Scripts, each prescription of these four drugs costs an average of US$1,417, although Enbrel accounts for more than 75% of this cost and 77% of the prescriptions in this class.

However, the PBM also noted that sponsors of pharmacy benefit plans are finding success in their cost control strategies to contain the potentially enormous burden of specialty pharmacy costs. The PBM found that there was an increasing trend among its clients to use specialty pharmacy with enhanced patient-care models and management programmes. According to Steve Miller, chief medical officer of Express Scripts’ specialty pharmacy subsidiary CuraScript, this increased use of specialty pharmacy services has ‘encouraged therapy adherence, helping to improve outcomes while reducing overall treatment costs’.

The report also noted that plan sponsors have found that limiting the size of their pharmacy networks for dispensing drugs can also significantly reduce costs. The report finds that those plans which used an exclusive network made average savings of around 10% on specialty pharmacy costs.

Outlook and Implications

Aggressive cost containment strategies by health insurance plan sponsors are becoming a fact of life for branded pharmaceutical manufacturers. The demands on plan sponsors from third party payers to reduce the burden on prescription drugs spending continues to be a major factor, and the increasing use of cost-sharing is leading to steadily rising generic utilisation rates in the United States.

However, in the short-term the major target for health insurance companies is the anti-cholesterol statin market. These drugs – which will remain the mainstay of the cholesterol treatment market for the foreseeable future – are likely to see a massive erosion of their sales. Zocor is the most commercially successful powerful statin to fall off patent so far, and therefore represents a major threat to branded statins on the market. With branded drugs (including the world’s best-selling drug, Lipitor) only marginally different in clinical terms from generic simvastatin, it is likely that the whole class will suffer significantly in the year ahead.

However, branded manufacturers have managed to find considerable shelter from the buffeting of generic competition in the specialty biotech market. This area, although currently served by a relatively small number of drugs, is still providing significant growth opportunities. According to data from PharMetrics, a unit of IMS, around 10% of patients diagnosed with rheumatoid arthritis (RA) in 2005 were treated with either Enbrel, Remicade or Humira. There is still great potential for these drugs to expand their sales in the RA treatment market, and since many of these drugs are now multi-indicated they also have many other areas in which to target growth. According to IMS, around 26% of RA patients also have another auto-immune disorder.