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Drug prices to see modest increase

Generics and biosimilars to help moderate inflation

IRVING, TX - In its recently released Drug Price Forecast, supply contracting services company Novation projected an estimated weighted drug price inflation of 1.36 percent in the cost of pharmaceuticals from July 1, 2012, through June 30, 2013 in acute care hospital settings. The forecast is based on purchase history and data associated with Novation Pharmacy Program participant healthcare organizations.

“This is just a forecast of price … so we do not know what the actual price change will turn out to be,” said Steven Lucio, PharmD, director of pharmacy at Novation, adding that the three biggest factors that affect pricing are loss of patent for innovators, approval and adoption of new drugs and drug shortages.

The modest increase mirrors recent projections over the last two to three years and is substantially influenced by the continued introduction of numerous generic alternatives to commonly used branded pharmaceuticals.

With several blockbuster brand name drugs such as Lipitor, Zyprexa, Plavix and Enbrel losing patent exclusivity in 2011 and 2012, generic competition will play a major role in controlling overall drug expenditures through the middle of 2013.

A recent AARP Public Policy Institute price report on the 514 prescription drugs most commonly used by Medicare beneficiaries confirms the cost effectiveness of generics. In its “Rx Price Watch Report,” the institute found that while retail prices on brand name and specialty drug products increased by 8.3 and 8.9 percent in 2009, the cost of generics decreased by 7.8 percent.

“Older Americans take more prescription drugs than any other segment of the U.S. population, and many continue to struggle to afford their medications,” said Leigh Purvis, one of the report’s authors. “Considerably less expensive yet equally effective generic drugs are vitally important to consumers… (and) to federal programs like Medicare and Medicaid.”

According to Novation, another factor that could potentially impact drug prices in the near future are biosimilar products.

Biosimilars is a term used to describe officially-approved subsequent versions of innovator biopharmaceutical products produced by a different manufacturer after patent expiry. Biological products are therapies used to treat diseases and health conditions. They include a wide variety of products such as vaccines, blood and blood components, gene therapies, tissues and proteins.

Unlike most prescription drugs, which are made through chemical processes, biological products generally are made from human and/or animal materials.

The FDA released guidance information for biosimilars in mid-February and applications have yet to be submitted.

“However, we can estimate the anticipated impact based on the model seen in the European market where various biosimilars have been approved since 2006,” said Steven Lucio, PharmD, director of pharmacy at Novation. “In general, that market has seen a 20- to 30-percent decrease in price for biosimilar versions of innovator products.”

“(For example) it is expected that versions of Neupogen will be the first biosimilars marketed in the U.S., probably late 2013 or early 2014,” added Lucio. “The annual spend on Neupogen by the U.S. non-federal hospital market was approximately $373 million in 2011 (from IMS Health data). Therefore, a decrease in price of 20 percent would theoretically yield $75 million in savings.”

Lucio says it’s difficult to determine the exact financial effect of chronic drug shortages but notes that providers are commonly forced to purchase non-contract equivalents or therapeutic alternatives, all of which are generally more expensive.

“Labor costs associated with handling shortages and finding alternatives also increases costs,” added Lucio.

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