projecting future drug expenditures 2007

7/31/2019 Projecting Future Drug Expenditures 2007

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SPECIAL FEATURE Future drug expenditures

298 Am J Health-Syst PharmVol 64 Feb 1, 2007

S P E C I A L F E A T U R E

JAMES M. HOFFMAN, PHARM.D., M.S., is Medication Outcomes Co-ordinator, Pharmaceutical Department, St. Jude Childrens ResearchHospital, Memphis, TN, and Assistant Professor, Department ofClinical Pharmacy, College of Pharmacy, University of Tennessee,Memphis. NILAY D. SHAH, PH.D., B.S.PHARM., is Assistant Profes-sor of Health Services Research, Division of Health Care Policy andResearch, Mayo Clinic College of Medicine, Rochester, MN. LEEC. VERMEULEN, B.S.PHARM., M.S., FCCP, is Director, Center forDrug Policy, University of Wisconsin Hospital and Clinics, Madi-son, and Clinical Associate Professor, University of WisconsinMadison School of Pharmacy, Madison. GLEN T. SCHUMOCK,PHARM.D., M.B.A., FCCP, is Associate Professor and Director, Centerfor Pharmacoeconomic Research, College of Pharmacy, University ofIllinoisChicago, Chicago. PENNY GRIM, M.B.A., is Lead Business An-alyst, Supplier Management; ROBERT J. HUNKLER, M.B.A., is Director,Professional Relations, and KARRIE M. HONTZ, M.B.A., is Senior Direc-

tor, Business Development, IMS Health, Plymouth Meeting, PA.Address correspondence to Mr. Vermeulen at the University of

Wisconsin Hospital and Clinics, 600 Highland Avenue, M/C 9475,Madison, WI 53792 ([email protected]).

Mr. Vermeulen is a member of speakers bureaus or receivesresearch funding from Pfizer and Amgen. Dr. Schumock has con-sulted for or received research funding from Abbott, TAP, Scios,GlaxoSmithKline, Novartis, and Pfizer.

The ASHP Section of Pharmacy Practice Managers provided sup-port for the development of this article.

Doug Scheckelhoff, M.S., and several anonymous reviewers areacknowledged for their contributions.

Copyright 2007, American Society of Health-System Pharma-cists, Inc. All rights reserved. 1079-2082/07/0201-0298$06.00.

DOI 10.2146/ajhp060545

Projecting future drug expenditures2007JAMES M. HOFFMAN, NILAY D. SHAH, LEE C. VERMEULEN, GLEN T. SCHUMOCK, PENNY GRIM,

ROBERT J. HUNKLER, AND KARRIE M. HONTZ

Purpose. Drug expenditure trends in 2005

and 2006, projected drug expenditures for

2007, and factors likely to influence drug

costs are discussed.Summary. Various factors are likely to

affect drug costs, including drug prices,

drugs in development, and generic drugs.

In 2005, there was a continued moderation

of the increase in drug expenditures. Total

prescription drug expenditures increased

by 5.5% from 2004 to 2005, with total

spending rising from $239 billion to $252

billion. Through the first nine months of

2006, hospital drug expenditures increased

by only 3% compared with 2005. This

moderation of the growth of prescription

drug expenditures can be attributed to

three major factors: availability of major

prescription drugs in generic form, contin-

ued increase in cost sharing for employees

in employer-sponsored health plans, and

decreased use due to safety concerns. It

is expected that expenditures in 2007 will

be influenced by similar factors, with few

costly new products reaching the market,increased concern over product safety re-

ducing the use of older agents and slowing

the diffusion of newer agents that do reach

the market, and several important patent

expirations, leading to slower growth in

expenditures.

Conclusion. In 2007, we project a 57%

increase in drug expenditures in outpatient

settings, a 1416% increase in clinics, and a

46% increase in hospitals.

Index terms: Costs; Drug use; Drugs; Eco-

nomics; Health-benefit programs; Patents;

Prescriptions; Pricing; Product develop-

ment; Toxicity

Am J Health-Syst Pharm. 2007; 64:298-

314

Total prescription drug expen-ditures in the United Statesincreased by 5.5% from 2004 to

2005, with total spending rising from$239 billion to $252 billion.1 Thisrepresents a significant moderationof the growth of prescription drugexpenditures, compared with the9.2% increase in 2004 and the 12.3%increase in 2003 (Figure 1). While thisis a significant decrease in the growthrate compared with the 19.7% in-crease observed in 1999, various fac-tors, such as the implementation ofthe Medicare Part D drug benefit in2006, the emphasis on prescriptiondrug safety, and the introduction ofseveral high-profile generic drugs(e.g., simvastatin, clopidogrel), con-tinue to prompt widespread atten-tion to prescription drug costs.

This article projects drug ex-penditures by sector (outpatientprescriptions, clinics, and hospitals)for calendar year 2007. It discussesfactors related to drug utilization

and drug costs, including drugs indevelopment, the diffusion of ap-proved drugs, and factors affectinggeneric drug availability and pricing.

Other trends in health care likely toaffect drug expenditures are brieflyreviewed. The authors intent is thatthis information will aid health care


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299Am J Health-Syst PharmVol 64 Feb 1, 2007

Figure

1.

Annualgrowthindrugexpenditures,

19982006.

Diamonds=totalexpenditures,squares=expendituresfornonfederalhospitals,triangles=expenditures

forclinics.


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professionals in determining how fu-ture changes will affect drug-relatedexpenditures in their practice. Somedata in this article may not fully re-flect events that have occurred after

September 2006, when the article wasfinalized for publication.

General prescription drug trends

Figure 1 illustrates the growth oftotal prescription drug expendituresin the United States, as well as thegrowth in prescription drug expen-ditures for hospitals and clinics.Growth in expenditures has stabi-lized over the past two to three yearsfor total prescription drug expendi-

tures and clinic expenditures, whilegrowth in prescription drug expen-ditures in hospitals has continued todecrease. The growth rate for totaldrug expenditures in 2005 was lowerthan the 8% increase in prescriptiondrug expenditures projected by theCenters for Medicare and MedicaidServices (CMS).2 This slowdown ingrowth of expenditures can be attrib-uted to three major factors: availabil-ity of major prescription drugs ingeneric form, continued increasein cost sharing for employees inemployer-sponsored health plans,and decreased use of key drugs due tosafety concerns (e.g., cyclooxygenase-2[COX-2]-selective nonsteroidal anti-inflammatory drugs [NSAIDs]).

Recent publications have alsonoted a decrease in the growth ofprescription drug expenditures anda higher out-of-pocket burden forconsumers. Smith et al.3 estimatedan 8.2% increase in retail prescrip-

tion drug expenditures in 2004 andnoted that it was the first time thegrowth was less than 10% in over10 years. In the past, prescriptiondrug expenditures grew at a rateapproximately twice that of overallhealth care expenditures, but currentgrowth rates for prescription drugsand overall health care expendituresare now comparable. In a report onemployer-sponsored health insur-ance benefits, Gabel et al.4 found

that out-of-pocket expenditures forprescription drugs have continued toincrease through a variety of mecha-nisms, including more common useof multitiered copayment benefit

designs, coinsurance, and separatedeductibles for prescription drugs.Borger et al.5 projected an annualincrease of 8.08.4% for prescrip-tion drug expenditures between 2007and 2015. They expect much of thegrowth in prescription drug expen-ditures to be driven by increasedprescription drug use overall andincreased use of specialty pharma-ceuticals. Further, they do not expectthe Medicare drug benefit to have

a major effect on overall prescrip-tion drug expenditures after 2006,projecting that Medicare will pay for27% of all prescription drug spend-ing in 2006, after paying for only 2%in 2005. Initial evaluations suggestthat the rebates and discounts thatMedicare will receive for prescrip-tion drugs will be almost twice theinitial projection (27% versus 15%),resulting in lower than expected totalprescription drug expenditures.

Hospital expenditures continueto be the single largest componentof health care costs, accountingfor 30.4% of national health careexpenditures, despite continued de-creases in inpatient length of stay.2

Increases in outpatient service uti-lization slowed the rate of inpatientgrowth in the 1990s. Inpatient hos-pital utilization can be measured byinpatient days per 1000 populationand admissions per 1000 popula-tion.6 In 2004, hospital inpatient

days decreased slightly from 676 daysper 1000 population in 2003 to 673days per 1000 population in 2004,but hospital admissions remainedunchanged compared with 2003(119 inpatient admissions per 1000population). However, inpatient ex-penditures per patient day increasedin 2004 by 5.8% to $1450 per patientday. In a recent study, Strunk et al.7

estimated that the aging populationwill increase the use of hospital ser-

vices at a rate of 0.74% over the next10 years and that the highest growthin hospital utilization will be for or-thopedic procedures, cardiovascularservices, and respiratory conditions.

Technology growth, including thedevelopment of new pharmaceuti-cals, will also continue to contributeto increased hospital expenditures;thus, hospital drug expenditures areexpected to continue to be an im-portant target of cost-containmentefforts.8

The fastest growing category ofprescription drug expenditures wasbiological agents, which grew by17.2% between 2004 and 2005 to

$32.8 billion.

1

There was a 3.8% in-crease in the number of outpatientprescriptions filled between 2004and 2005, a significant increase com-pared with the 2.3% increase seen in2004 and the 2.6% increase in 2003.Growth in the number of prescrip-tions filled continues to decelerate,after growing by 9% in 1999.9

Summary of 2006 forecast

In our forecast of drug expen-ditures for 2006, we predicted agrowth rate of 57% for hospi-tal drug expenditures, 911% forclinic-administered drug expen-ditures, and 79% for retail drugexpenditures.10 During the first ninemonths of 2006, the actual growthrate for hospital drug expenditureswas 2.5%, significantly lower thanour projection. This lower growthwas driven by several factors, such asearlier-than-expected generic avail-ability of agents in two major drug

classes: antiinfectives (ceftriaxone)and anesthetics (sevoflurane). Thesetrends are discussed later in this ar-ticle. Actual drug expenditures forclinics increased by 18.2% in the firstnine months of 2006 (compared withthe same time period in 2005), afterincreasing by 22% between 2002 and2003. This growth is higher than ourprojection of 911%. This highergrowth rate for drug expendituresin clinics can largely be attributed to


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greater-than-expected increases inboth the price and use of oncologyagents, specifically the monoclonalantibodies bevacizumab, cetuximab,and trastuzumab. Drug expendi-

tures for outpatient and ambulatorycare settings (including mail order)increased by only 6.6% in the firstnine months of 2006.1 This growthis slightly lower than our forecast of79% for 2006 in this setting. Factorsthat contributed to the decelerationof outpatient prescription drug ex-penditure growth include significantpatent expirations in 2004 and 2005(e.g., azithromycin, metformin, ga-bapentin, ciprofloxacin, tramadol)

and reductions in the use of severalproducts for which safety issues haveemerged (e.g., hormone replacementtherapy, COX-2-selective NSAIDs,selective-serotonin reuptake in-hibitors in children). As previouslymentioned, higher prescription drugcost sharing for consumers remainsan important factor, resulting in asmaller increase in outpatient drugexpenditures in 2006.

Drugs in development

To understand and plan for drugexpenditures, it remains importantto monitor and evaluate drugs in de-velopment. Previously, we publishedmore extensive guidance on howto consider the potential influenceof new drugs on an organizationsfinancial planning for drug expendi-tures.11 Briefly, it is important for anorganization to first determine if anew drug is relevant to the organiza-tions patient population. New drugs

that are innovative therapies to treatdiseases that were previously untreat-able universally translate into higherdrug costs. However, in some situ-ations (e.g., when me-too agentsare approved), newly marketed drugscan be priced significantly lowerthan existing drugs.12 Finally, a drugthat enters the market and replacesan existing therapy may increase,decrease, or have no effect on drugexpenditures.

The substantial investment re-quired for drug development andthe time required for clinical trialsare often implicated as two of theprimary reasons for the high cost of

many medications. One widely citedestimate of the cost of drug develop-ment, published in 2003, suggestedthat the cost to successfully developand market a single new drug ex-ceeded $800 million.13 However, amore recent estimate suggested thatthe cost of new drug developmentvaries from $500 million to over $2billion.14 Further, a recent analysis ofdrug development times suggestedthat the time required for clinical

trials from 1992 to 2000 remainedstable, suggesting that clinical trialtime did not contribute to increasesin prescription drug costs.15

When considering the influenceof drugs in development on drugexpenditures, it is useful to reviewindicators of the drug pipeline size,the time it takes for new drugs toreceive approved labeling from theFood and Drug Administration(FDA), and specific drugs that couldreceive approval in 2007. Indicatorsused to estimate the size of the drugpipeline include the number of newmolecular entities (NMEs) approvedby FDA, the number of new drugapplications (NDAs) filed with FDA,and the number of investigationalnew drug (IND) applications filedand active with FDA.

Approvals and applications. Only20 novel medications received FDA-approved labeling in 2005 (18 NMEsand two new biologics),16 down from

36 approved in 2004 but similar tothe number of approvals in 2003 and2002 (21 and 17, respectively). Asin 2004, the new drugs approved in2005 are not likely to be widely usedor result in substantial drug expen-ditures, since 7 of the 20 approved in2005 were either me-too drugs ororphan drugs.17 However, it is impor-tant to note that while orphan drugsseldom have a widespread influenceon drug expenditures, if the orphan

drug is indicated to treat a conditioncommonly treated at a particularhospital, it may have a pronouncedinfluence on drug expenditures atthat institution.

Indicators of the early-stage drugpipeline for 2005 remained consis-tent with 2004.17 FDA received 116NDAs in 2005, similar to the 115received in 2004. A total of 637 com-mercial INDs, including therapeuticbiologics, were filed in 2005, upslightly from the 621 filed in 2004. Fi-nally, the total number of active com-mercial INDs (including therapeuticbiologics) increased from 4827 in2004 to 5023 in 2005.

The number of recent approvalshas been modest and mostly consistsof specialized drugs. Indicators of theearly-stage drug pipeline suggest it isgrowing at a slow rate. By compar-ing the number of NDAs in recent

years with the approval rate in themid 1990s, when as many as 53 novelmedications received approval in one

year, it is apparent that the limitedgrowth of the late-stage drug pipelinehas contributed to the moderation indrug expenditures.

Approval time. Although ap-proval time for new drugs was widelyexpected to increase in the wake ofsafety concerns, mean approval timeactually decreased to 14.4 months in2005, compared with 18.7 monthsin 2004 and 17.1 months in 2003.18However, 75% of the NMEs approvedreceived priority review, which con-tributed to the decrease in meanapproval time. When examiningapproval times by application type

(priority versus standard), it is evi-dent that approval time has remainedconsistent. In 2005, median total ap-proval time for priority reviews was6 months, the same amount of timeas in 2004, and median total approvaltime for standard applications de-creased slightly from 24.7 months in2004 to 23 months in 2005.16

Potential approvals. Selecteddrugs expected to receive FDA-approved labeling by the end of 2006


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pegylated epoetin product, which iscommonly referred to as CERA, orcontinuous erythropoietin receptoractivator, is under development.24,25

The initial development of CERAhas focused on use in patients withchronic kidney disease (CKD), andits efficacy in this patient population

appears similar to epoetin and darbe-poetin.26 An application for approvalof CERA in the United States wasfiled in April 2006, but patent chal-lenges are expected, which may delayits introduction. However, the manu-facturer maintains that the productis different from existing erythropoi-etin therapies, and it was successfulin an initial patent challenge.27 Addi-tional litigation is possible, but if themanufacturer of CERA continues to

prevail in patent disputes, the prod-

uct could reach the market by themiddle of 2007. In addition to CERA,other anemia therapies for cancerand CKD, including a small moleculefor oral administration, may becomeavailable over the next three to five

years, which would further changeand expand the market for erythro-

poietin products.24

Diffusion of recently approved

drugs

The diffusion of new drugs andother innovations that becomewidely accepted typically follows asigmoid-shaped curve.28 The initialuse of a new drug is often slow, butas familiarity and experience withthe drug expand, use increases rap-idly until the drug is widely used, and

then growth stabilizes. Therefore, in

the first several years that a drug isavailable, it may not necessarily havean appreciable influence on drugexpenditures; as the drugs use grows,the new drug could have importantfinancial implications.

While this typical diffusion pat-tern has occurred with some recently

approved drugs, a different diffusionpattern has emerged over the pastseveral years. Concerns regarding thesafety of newly approved medica-tions and heightened prescriber sen-sitivity to the high cost of many newmedications have delayed the initialdiffusion of many products after ini-tial approval.

Unlike previous years, 2006 wasrelatively quiet in terms of mediaattention to the emergence of new

drug-safety concerns. However, a

Figure 2. Quarterly expenditures for erythropoietin products. Squares = darbepoetin, diamonds = epoetin alfa, circles = total erythropoietinproducts.


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careful review of recent literatureindicates that safety concerns con-tinue for recently approved therapiesand that those concerns may have adirect impact on the diffusion of the

medications involved. For example,the link between dysglycemias andtherapy with the fluoroquinolonegatifloxacin was further elucidat-ed,29,30 and, in 2006, the manufac-turer discontinued the product.31

Another example is the reports ofsevere and sometimes fatal hepato-toxicity with the ketolide antibiotictelithromycin, which was approvedin 2004.32,33 This drug remains onthe market, but FDA strengthened

hepatotoxicity warnings in theproducts labeling.34

The heart failure drug nesiritide(Natrecor, Scios) is an example of ahigh-cost and widely used therapywhose diffusion has been limitedby safety concerns. Two systematicreviews published in 2005 showed arisk of worsening renal function andmortality within 30 days of therapyin patients who received nesiri-tide.35,36 These new data have con-tinued to limit the use of nesiritide(Figure 3). Based on expenditures,the use of nesiritide has decreasedsuch that the amount used in thesecond quarter of 2006 was less thanthe amount used in the last quarterof 2002, which was during the drugsfirst full year on the market. Despitethe dramatic decrease in the use ofnesiritide, it is important to remainvigilant regarding the use of thisdrug. The manufacturer is planningan extensive 7000-patient study that

will include renal function and mor-tality endpoints, and enrollment isexpected to begin in early 2007.37,38

Positive study results would likelyincrease use of this drug.

Antifungals continue to be atop expenditure for hospitals, andexpenditures for these drugs, par-ticularly voriconazole and caspo-fungin, continue to increase (Figure4). However, the antifungal marketis changing quickly and becoming

more competitive, particularly withthe introduction of micafungin andanidulafungin.39,40

The introduction of ranibizumab(Lucentis, Genentech) in late 2006

raised a particularly difficult policychallenge.41 The product, a frag-ment of bevacizumab (Avastin,Genentech), holds FDA approvalfor the treatment of wet maculardegeneration. During the final yearsof ranibizumab development, manyophthalmologists began using smallinexpensive doses of bevacizumabwith positive results (the cost ofthose small doses is under $50). Onedose of ranibizumab exceeds $2000

but holds the marginal advantageof both positive placebo-controlledtrial data and FDA approval.42 TheNational Eye Institute has called fora head-to-head trial comparing be-vacizumab and ranibizumab. In themeantime, hospitals must decidewhether to allow the off-label use ofa product that has quickly becomean accepted practice or pay thehigher price for a product that hasno compelling data differentiating itfrom other active treatment modali-ties available to treat the disease.43Careful evaluation of reimburse-ment for these agents will also becritical.

Generic drugs

The prompt availability and sub-sequent extensive use of genericformulations of widely used brand-name drugs can dramatically re-duce national and individual healthsystem drug expenditures. Recently,

the release of first-time generics fordrugs with substantial expenditureshas been an important reason formoderation in the increase in drugcosts. Key generic introductions overthe past several years include drugsprimarily used in ambulatory caresettings (e.g., fluoxetine, metformin,omeprazole, gabapentin) and drugsfrequently used in clinic and inpa-tient settings (e.g., milrinone, flucon-azole, carboplatin).

In 2006, this trend continuedwhen drugs relevant to both ambu-latory care and other settings lostpatent protection. For example, a ge-neric formulation of simvastatin has

become available, and the serotonin-receptor antagonist ondansetron isexpected to lose patent protectionbefore the end of 2006. Ondansetronhas consistently been leading drugexpenditures for hospitals and clin-ics. It was among the top 10 drugexpenditures for nonfederal hospitalsin 2004 and 2005.44 In particular, thispatent expiration is expected to mod-erate drug expenditure growth forhospitals and clinics.45 In addition, a

generic version of the high-use drugclopidogrel was released at risk inAugust 2006, but, a few weeks later,litigation stopped the sale of the drug.However, since generic clopidogrel inthe supply chain was not recalled,generic clopidogrel also contributedto moderation in the increase in 2006drug expenditures.46

Drugs with substantial expen-ditures will continue to lose patentprotection in 2007. The consultingfirm Bain and Company estimatedthat the value of drugs expected tolose patent protection in 2007 willbe $27 billion.47 Table 2 lists specificdrugs expected to lose patent protec-tion in 2007 and 2008. (Note thatestimating a patent expiration date iscomplex, and these dates are subjectto rapid change due to litigation,additional patents, exclusivities, andother factors, which are impossible toanticipate.) Important potential pat-ent expirations for 2007 that may be

particularly relevant to hospitals andclinics include fosphenytoin, carve-dilol, zolpidem, and amlodipine.

Recent developments related tothe prompt availability of genericdrugs are mixed. Generic availabilitycould be improved by efforts to limitcitizen petitions to FDA that maydelay generic drugs and the ongo-ing scrutiny of authorized genericdrugs. However, generic availabilitymay be limited because regulatory


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Figure 3. Quarterly expenditures for nesiritide.

barriers may exist for the approval ofsome generic drugs, and the regula-tory pathway for generic biologicsremains undefined.

To alert the agency of scientificor safety issues related to a pendingdecision, a citizen petition can befiled with FDA. While this process isdesigned to communicate legitimate

concerns, there is concern that it isbeing used as a mechanism by whichmanufacturers of brand-name prod-ucts can block the introduction ofgeneric drugs. The number of peti-tions has increased from 90 in 1999to 170 in 2006, and one analysis hasshown that 20 of 21 petitions filed bymanufacturers of brand-name drugssince 2003 were eventually rejectedby FDA.48 FDA has taken action toresolve petitions more quickly, and

legislation has been introduced in theSenate and House of Representativesto limit the influence of petitions.Specifically, the legislation wouldmake it such that petitions would notdelay approval of an NDA.49,50

The number of authorized genericdrugs marketed in 2006 has grown,including widely used drugs such as

paroxetine, metformin, bupropion,gabapentin, and, most recently, ser-traline.51,52 Authorized generic drugsare made when the original manu-facturer contracts with another com-pany to market a generic version of adrug. The drug is still manufacturedand marketed under the originalNDA but at a lower price and notunder the brand name. Authorizedgenerics are usually marketed onlywhen the brand-name drug loses

patent protection and are often dis-continued once more generics reachthe market. While authorized gener-ics may increase competition anddecrease generic prices during the ex-clusivity period, they limit the profitsof the generic company with initialexclusivity to sell the generic drug,and the generic drug industry views

them as disincentive for companiesthat manufacture generics.53

Several developments may makeit less attractive for manufacturersof brand-name drugs to market au-thorized generics. The Federal TradeCommission (FTC) is studying theshort- and long-term competitiveimpact of authorized generic drugs.54The results of the FTC study areexpected in 2007. In addition, billswere introduced in both the Senate


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and House of Representatives thatwould not allow authorized genericsto be marketed during the exclusivityperiod.55,56

While these actions are not ex-pected to eliminate frivolous citizenpetitions or the marketing of autho-rized generic drugs in 2007, they in-dicate that the regulatory and legisla-tive environment is sensitive to issuesrelated to the availability of genericdrugs. Nevertheless, other regulatoryissues exist that may constrain theavailability of generic drugs.

The first issue that may limit theavailability of generics is the rate ofabbreviated NDA (ANDA) approvalat FDA, which is the applicationprocess used to approve genericdrugs. The number of generic ap-provals decreased by approximately10% in 2005, from 380 in 2004 to 344in 2005, and the median approval

Figure 4. Quarterly expenditures for caspofungin and voriconazole. Squares = caspofungin, triangles = voriconazole.

time for generics increased from 15.7months in 2004 to 16.4 months in2005.16 FDA projects that approvaltime will continue to increase to 16.9months in fiscal year 2006 and 17.5months in fiscal year 2007.57

Further, there is a substantialbacklog of 800850 pending ANDAsat FDA, and a record number of ap-plications was expected in 2006.58

The number of pending applicationsis not expected to be reduced quicklysince funding for FDAs Office of Ge-neric Drugs has essentially remainedflat over the past three years.57 FDAofficials have attempted to quell con-cerns regarding the backlog by not-ing that lack of communication andslow action by ANDA sponsors havecontributed to the backlog.59 Whilethe backlog does not appear to slowthe approval of first-time genericdrugs, it could act to reduce the num-

ber of generics that reach the marketquickly and limit competition.

If available, generic versions ofbiological therapies could providemeaningful savings for hospitals andclinics.a Although patents for somebiologicals have expired, limitedprogress toward widespread avail-ability of generic biologics was madein 2006. While various barriers tomarket entry of generic biologicsexist, including significant initialresearch, development, and manu-facturing costs and a market struc-ture that is significantly smaller anddifferent from chemical compounds,perhaps the most significant barrieris the lack of a clearly defined regula-tory pathway for approval.60

Progress toward a defined regula-tory pathway has been slow. WhenSandoz filed an application for thefollow-on human growth hormone


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product Omnitrope, it was thoughtthat this product might representa template for future approvals.After almost three years of debate,including legal action, the productreceived FDA-approved labelingin 2006.61 However, FDA explicitlyarticulated that the product is nota generic biologic, is not equivalentto the innovator product, and doesnot represent a pathway for futureapprovals.62 Predictably, the genericindustry contends that many genericbiologics can be approved using thecurrent regulations and process forsmall molecules, but the biotechnol-

ogy industry is lobbying to retainrequirements for a full-approvalprocess, including extensive clini-cal trials for safety and efficacy.63,64To provide a process for the approvalof generic biologics, it is becomingclear that legislative action will berequired.65 Senators Hillary RodhamClinton (D-NY) and Charles Schumer(D-NY) and Representative HenryWaxman (D-CA) introduced a bill(HR 6257) on September 29, 2006,

seeking to expand access to lower-cost generic versions of biotechnol-ogy medications. The bill would pro-vide guidance to FDA on the reviewand approval of follow-on productsusing standards analogous to thoseused to approve conventional genericdrugs (similarity of molecular struc-ture and action), empower pharma-cists to make generic substitutionof approved products, and providetax incentives to manufacturers todevelop generic biologics.66 While itis unlikely this legislation will movethrough Congress quickly, it is anencouraging step toward cost con-

tainment in this extremely expensivecategory of medications.

Beyond issues related to genericdrug availability, it is also importantto monitor generic drug pricing.The dynamics of the generic drugindustry play an important rolein determining generic drug costs.Last year, we reported that extensiveconsolidation had occurred in thegeneric drug industry.44 It remainspossible that fewer companies in the

market will result in higher prices forgeneric drugs, and anecdotes of thisoccurring exist.67 However, genericdrug industry analysts predict thatmultiple factors will limit genericdrug companies ability to broadlyincrease prices. However, genericdrug industry dynamics can result insubstantial price increases for prod-ucts relevant to hospitals.68 For ex-ample, when a large pharmaceuticalcompany sold several niche genericproducts, including chlorothiazide,indomethacin, mechlorethamine,and dactinomycin, to a smaller cor-poration, substantial price increases

followed.69 The cost of these drugsincreased by approximately 1000%or more, and one purchasing groupof 42 pediatrics hospitals estimatedthat its members expenditures forthese four drugs would increase from$300,000 to $5.9 million.70

In summary, both factors that willlimit and improve generic availabilityexist, and, due to rapid change in thegeneric drug industry, the possibilityexists for substantial price increases

Table 2.

Selected Potential Patent Expirations, 200708a

Drug Manufacturer ClassCurrent Patent

Expiration Dateb

Metoprolol extended release (Toprol XL)Zolpidem (Ambien)

Fentanyl transmucosal (Actiq)

Amlodipine (Norvasc)

Carvedilol (Coreg)

Ziprasidone (Geodon)

Sumatriptan (Imitrex)

Fosphenytoin (Cerebryx)

Cetirizine (Zyrtec)

Irinotecan (Camptosar)

Zaleplon (Sonata)

Alendronate (Fosamax)

Venlafaxine (Effexor)

Granisetron (Kytril)

Risperidone (Risperdal)

Levetiracetam (Keppra)

Salmeterol (Serevent)

Divalproex (Depakote)

AstraZenecaSanofi

Cephalon

Pfizer

GlaxoSmithKline

Pfizer

GlaxoSmithKline

Pfizer

Pfizer

Pfizer

King Pharmaceuticals

Merck

Wyeth

Roche

Janssen

UCB Pharma

GlaxoSmithKline

Abbott Laboratories

-BlockerInsomnia

Opioid analgesic

Calcium channel blocker

- and -Blocker

Atypical antipsychotic

Antimigraine

Anticonvulsant

Antihistamine

Antineoplastic agent

Insomnia

Bisphosphonate

Antidepressant

Antiemetic

Atypical antipsychotic

Anticonvulsant

Antiasthmatic

Anticonvulsant

20072007

2007

2007

2007

2007

2007

2007

2008

2008

2008

2008

2008

2008

2008

2008

2008

2008

aSources: Medications in Development Database (MinDD) and University of Wisconsin Hospital and Clinics.bPatent expirations listed were verified from multiple sources at the time of publication. Drug patent expirations are subject to rapid change, and patent expiration

does not guarantee drug availability.


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for generic drugs. However, thesepotentially negative developmentsfor generic availability and pricingdo not overshadow the fact that anunprecedented number of high-cost,

high-volume brand-name drugs lostpatent protection in 2006.71 This pat-tern will continue in 2007 and serveto moderate the growth in prescrip-tion drug expenditures.

Other factors that may influence

drug expenditures

In addition to new drugs in thepipeline, the diffusion of recentlyapproved drugs, and the availabilityand pricing of generic drugs, other

emerging factors are expected toinfluence drug expenditures in 2007.While it is difficult to predict theprecise impact of these factors, phar-macy leaders should consider eachfactor as they prepare budgets andother plans for their organizations.

Medicare Part D. The new Medi-care prescription drug benefit (PartD) began on January 1, 2006. With

just one year of experience with thisnew program, there are limited dataon its effect on prescription drugexpenditures and how it has affectedhospitals.

The rollout of Part D was marredwith problems, most of which in-volved dual-eligible beneficiaries(those who qualify for both Medicareand Medicaid) who were switchedto Medicare in December 2005. Be-ginning in January, as these patientssought to get prescriptions filled,pharmacists were unable to processprescription claims because of CMSs

failure to load eligibility information.As a result, most state Medicaid pro-grams had to enact emergency cover-age programs to reimburse pharma-cies for drugs that should have beencovered by Part D plans.

For hospital pharmacies that billfor self-administered or take-homedrugs, one of the biggest initial prob-lems was confusion between the PartD and Part B programs. Part D planswould often reject claims for inject-

able drugs and require pharmaciststo submit a claim of refusal from PartB, creating a significant and unneces-sary delay. Other types of pharmacieswere (and continue to be) affected

by this problem, including retail,specialty or home infusion, and long-term care pharmacies that routinelybill for drugs covered under variousparts of Medicare. This problem isplan specific and, in some cases, hasnot been resolved.

A substantial area of uncertaintybefore January 1, 2006, was howmany people would enroll in thePart D program. Clearly, enrollmentwould affect drug expenditures.

Because enrollment in the discountdrug programs that preceded the PartD program was so dismal, CMS putsignificant effort into ensuring goodenrollment in the new program. All43 million Medicare-eligible seniorswere encouraged to enroll by May15, 2006, under the threat of penal-ties. Dual-eligible beneficiaries wereautomatically enrolled. Enrollmentexceeded CMSs expectations. As ofJune 14, 2006, according to CMS,there were 22.5 million people en-rolled in Part D plans, while 10.4and 5.4 million had credible pre-scription drug coverage throughan employer plan or an alternativesource (e.g., Veterans Health Ad-ministration), respectively.72 How-ever, these numbers have been dis-puted. A Kaiser Family FoundationReport found that the number ofbeneficiaries with prescription drugcoverage has not changed but rathershifted from other forms of coverage

to Medicare.73

No definitive data on the cost im-plications of Medicare Part D havebeen published, and it is unlikelythat any data will be available untillate in 2007. In an article publishedon June 1, 2006, Mark McClellan,who was the director of CMS, statedthat competition is providing bet-ter coverage options and is leadingto lower costs than expected forbeneficiaries and taxpayers.74 How-

ever, the data provided to supportthe claim were based on premiumspaid by beneficiaries rather thanactual drug costs. A survey of phar-macists and physicians conducted

by the Kaiser Family Foundationprovides some early informationon the drug cost implications ofMedicare Part D.75 The majority ofpharmacists (86%) and physicians(71%) surveyed believed that thebenefit was helping patients savemoney on medications. Seventy-nine percent of pharmacists report-ed believing that the new benefit hasimproved access (well or somewhatwell) to prescription drugs for

their patients. Nevertheless, mostpharmacists (91%) and physicians(92%) believed that the law is toocomplicated and reported problemsencountered by patients when try-ing to obtain medications.

Until further data become avail-able, it is difficult to include Medi-care Part D in forecasts of prescrip-tion drug expenditures. At this point,there is no evidence that the programwill increase or decrease hospitaldrug expenditures.

Changes in drug distribution.Relationships among manufacturers,wholesalers, and group purchasingorganizations continue to evolve andmay substantially influence costspaid by health-system pharmacies.Drug wholesaler fee-for-service dis-tribution contracts now appear firm-ly established, but this trend requirescontinued monitoring.76-78 Note thatother changes in the pharmaceuticalsupply chain may occur, which could

increase costs for health systems. Forexample, in 2006, one biotechnol-ogy company proposed to strictlylimit the number of distributors forthree drugs and exclude these drugsfrom prime-vendor agreements.79

While the distribution program waseventually modified, one pharmacistsuggested that the changes as origi-nally proposed would have increasedhis hospitals drug expenditures by$150,000.80


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Drug expenditure forecast

Forecasting drug expenditure pat-terns is very complex. The factorsthat drive increases in drug expendi-tures can be divided into four main

categories: (1) price inflation, (2) uti-lization, (3) mix, and (4) a blend ofutilization and mix representing ex-pensive but innovative medications.The inflationary rate of prescriptiondrugs attributable to price is theincrease in the unit cost for exist-ing drugs over time. The increase inexpenditures attributable to utiliza-tion can be described as the changesin the number of users, number ofdays of therapy, or dose per day of

therapy. The increase in expendituresattributable to mix reflects utilizationpatterns that emphasize newer, moreexpensive agents over older, less ex-pensive, yet equally effective alterna-tives (e.g., manifesting as a preferencefor brand-name products over gener-ic alternatives). Finally, a portion ofthe increase in drug expenditures canbe attributed to a blend of the utiliza-tion and mix factors.In this case, veryexpensive drugs become availableto treat diseases that are untreatablewith existing medications.

Various factors contribute to thedevelopment of a forecast for futurepharmaceutical expenditures. Thesefactors include changing patterns ofprescription drug utilization, impactof new drugs in development, expect-ed patent expirations, and changesin price of existing drugs. Below,we summarize trends in prescrip-tion drug expenditures and presentspecific information related to drug

expenditures in clinics and hospi-tals. While this article is primarilydirected to practitioners in hospitalsand health systems, drug expenditurepatterns for the outpatient and clinicsettings are also discussed. We definedrugs administered in a physicianoffice or a hospital outpatient clinicas clinic-administered drugs. Clinic-administered drugs are typicallychemotherapy or biologics that areadministered intravenously. Trends

in ambulatory care (outpatient andclinic administered) drug expendi-tures may not be relevant for healthsystems that do not manage signifi-cant outpatient enterprises, but they

should be considered by hospitals asthese behaviors often influence inpa-tient utilization. Further, outpatientdrug expenditures drive public andpolicy-related awareness of risingdrug expenditures.

Trends in overall prescriptiondrug expenditures. Several reportsare released annually studying thetrends in prescription drug expen-ditures as well as the drivers (Table3).1,81,82 The Express Scripts cohort

uses a substantial sample of Ex-press Scripts clients but excludesMedicaid recipients and Medicarebeneficiaries enrolled in Medicare+ Choice plans. The data reportedfor Express Scripts in Table 3 alsoexclude specialty drugs. IMS Healthdata contain prescription drug salesin retail and nonretail settings. It isimportant to note that two of thesereports (Express Scripts and MedcoHealth) focus solely on prescriptiondrug expenditures of a managed carepopulation in the outpatient setting.

The methods used in each of thesestudies vary, and thus the estimatesof overall growth in drug expendi-tures between 2004 and 2005 areslightly different, ranging from 5.4%to 7.9%. Price inflation was the big-gest driver of the increase in drugexpenditures in 2005 (for two of thethree analyses), similar to the trendseen in 2004. Lipid-lowering agentswere identified as the main driver of

the overall increase in drug expendi-tures and accounted for the highestprescription and dollar volume in2006.1,81,82 Sedatives and hypnoticsexperienced the highest growth inboth the Medco and Express Scriptspopulations. All of these analysesshowed the significant effect of drugsafety issues for COX-2 inhibitors,selective serotonin-reuptake inhibi-tors, and antipsychotics on the slow-ing of drug expenditures.1,81,82

Express Scripts projects a 7.5%and 7.0% increase in drug expendi-tures per capita in 2007 and 2008,respectively. Medco is forecasting a68% and 79% increase in 2007 and

2008, respectively. IMS Health is pro-jecting a 58% increase in prescrip-tion drug expenditures in the UnitedStates in 2007. CMS has estimatedthat total outpatient prescriptiondrug expenditures will increase by8.0% in 2007 and 2008.2 There is lit-tle variation in the projected growthof drug expenditures. An increase ingeneric drug use, the negative impactof drug safety issues, a decrease inthe extent of prescription drug in-

surance, and higher overall rates ofprescription drug use are expectedto be the key factors in future drugexpenditures. To date, Medicare PartD is not expected to have a majorimpact on total prescription drugexpenditures.

Overall, the spending on prescrip-tion drugs in nonoutpatient settings(hospitals, clinics, long-term-carefacilities, and home health care) in-creased by 8.6% from 2004 to 2005,compared with an increase of 10.2%from 2003 to 2004.1 These settingsaccounted for 25.8% of the totaldollar volume of drug sales in 2005.Nonfederal hospitals accounted for39.6% of the drug spending for thenonretail setting and 10.2% of thetotal drug expenditures for 2005.Interestingly, through the first ninemonths of 2006, the spending forclinics ($21.7 billion) was higher thanthe spending for nonfederal hospitals($19.7 billion). The trend in drug

expenditures for nonfederal hospitalsand clinics is described below.

Trends in clinic-administeredd r ug e xpe nd i tur e s . Prescrip-tion drug expenditures for clinic-administered medications increasedby 12.4% in 2005 compared with2004.1 Growth in expenditures forclinic-administered medication wassignificantly higher than expendi-tures in outpatient and nonfederalhospitals. Clinic expenditures have


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increased by 90% over the five-yearperiod between 2001 and 2005, in-creasing from $13.2 billion in 2001 to$25 billion in 2005. However, clinicexpenditures are small in relationto total medication expenditures(representing only 9.9% of totalmedication expenditures in 2005)and largely involve oncology agents,a trend that could be significantlyaltered with continued changes inMedicare reimbursement. The con-

tinued emergence of restricted-accessprograms and specialty pharmaciesthat often manage these therapies hasclear practical and financial implica-tions for health-system pharmacies,but there is not yet sufficient infor-mation to quantify the implicationsof these practices.

Over the past few years there hasbeen an increase in the diseases andnumber of people treated by clinic-administered medications. More

cancers, often treated with high-costmedications, are also being treatedin clinic settings. This trend is ex-pected to continue increasing withthe increase of cancer diagnoses.83

The global oncology market spend-ing was more than $28 billion in2005 and grew by 18.6% in 2005compared with 2004.84 Recent trendsindicate that the inflationary trendfor clinic-administered medicationshas stabilized at 1213% after years

of an annual growth rate exceeding20%. This decrease can largely be at-tributed to a decrease in the use andmix of drugs administered in clinics.However, negligible price inflationfor these drugs is also important inthe moderation of drug expendi-tures. Through the first nine monthsof 2006, the growth in expendituresfor clinics was 18.2% more than thesame time period in 2005. The topfive drugs in 2005 accounted for 39%

of all clinic-administered medicationpurchases, and the top three in 2004(epoetin alfa, pegfilgrastim, and dar-bepoetin) accounted for 28% of alldrug purchases (Table 4).

Antineoplastic agents and he-mostatic modifiers experiencedthe highest growth among clinic-administered medications, increas-ing by 23% and 18%, respectively.The growth in expenditures forantineoplastic agents was largely

driven by increased expenditures formonoclonal antibodies. As shownin Table 4, the expenditures forbevacizumab increased by 349%,trastuzumab by 57%, and cetuximabby 53%. The growth in expendituresfor gastrointestinal agents was drivenby infliximab (Remicade, Centocor),which increased in sales by 15%,and the growth in expenditures forblood growth factors was driven by a39% increase in sales of darbepoetin.

Table 3.

Prescription Drug Expenditure Trends1,81,82

Item Express Scripts Medco Health IMS Health

Data source

Population

Population size

Cost data

Overall increase in prescription

drug expenditures from 2004to 2005

Increase attributable to price from

2004 to 2005 (%)

Increase attributable to utilization

from 2004 to 2005 (%)

Increase attributable to mix from

2004 to 2005 (%)

Trend projection, 2007 (%)

Trend projection, 2008 (%)

Express Scripts claims data

Individuals in a sample of

health plans served by

Express Scripts (70%

nonmanaged care and 30%

managed care; excludes

Medicaid and Medicare +

Choice enrollees)

3 million

Discounted average wholesale

price

7.9

3.3

4.0

0.4

7.5

7.0

Medco Health claims data

Clients with integrated

benefits (plans that

include both retail and

home delivery options)

NAa

Net of average wholesale

price discounts and

rebates

5.4

4.7

2.7

1.1

68

79

National Sales

PerspectivesTotal retail national

pharmaceutical sales

Total U.S. population

Invoice price

5.4

4.1

1.1 (utilization and mix)

2.3 (new drugs only)

58

NA

aNA = not available.


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Infliximab is classified as a gastro-intestinal agent but is also used fornongastrointestinal indications (e.g.,rheumatoid arthritis).

Trends in hospital drug expendi-

tures. Data for nonfederal hospitaldrug purchases taken from the IMSHealth National Sales Perspectivesdatabase were used to evaluate trendsin hospital drug expenditures.1 Thesedata consisted of drug purchasinginformation for 5230 hospitals incalendar year 2005. Hospital drugexpenditures increased by 5.7%between 2004 and 2005, totaling$25.8 billion in expenditures in2005. For the 12 months ending

September 2006, prescription drugexpenditures in the hospital set-ting increased by 3.0%. Factors af-fecting the trend in hospital drugexpenditures included drug prices(2.9%), volume and therapeutic mix(1.9%), and new drugs (2.0%). It isinteresting to note that expendituresrelated to volume and mix have de-creased for both injectable and non-injectable drugs, likely reflecting anincrease in the use of generic drugs.

Injectable drugs accounted for 74%($18.9 billion) of the total inpatientdrug expenditures.1 Expendituresfor injectable drugs increased by2.6%, while expenditures for nonin-

jectables increased by 4.1% in 2004compared with 2003. However, theprices of injectable drugs rose ata slower rate than noninjectables.Overall drug prices for injectablesincreased by only 2.4% between Oc-tober 2005 and September 2006, butprices for noninjectables increasedby 4.8%.

Table 5 presents the hospital drugexpenditures and change in expen-ditures for the top 10 therapeutic

classes. These therapeutic classesmake up more than 70% of hospitalexpenditures. Antiinfectives alonecomprise more than 12% of hospi-tal drug expenditures. Expendituresfor antiinfectives increased by 7%in 2005 compared with 2004; how-ever, expenditures decreased by 5.6%through the first nine months of2006, largely due to the generic avail-ability of ceftriaxone. Biologicals andhemostatic modifiers were the fastest

growing therapeutic classes in 2005.Table 6 presents the hospital drugexpenditures and change in expen-ditures for the top 15 drugs. Thesedrugs accounted for 27.9% of total

inpatient drug expenditures in 2005.The most significant growth in dollarvolume in 2005 was for darbepoetin(Aranesp, Amgen), which increasedin expenditures by 67%; however, thiswas offset by a significant decrease inexpenditures for Procrit (Ortho Bio-tech Products) and Epogen (Amgen),which decreased by more than 18%.Drug expenditures for nesiritide(Natrecor, Scios) decreased by 28%in 2005 and decreased by more than

68% through the first nine monthsof 2006.Forecast of increased expen-

ditures for 2007. There may beimportant new drug approvals in2007, but no drugs in the pipeline areexpected to have a major financialimpact across all settings. Increasedutilization is expected to continue inthe outpatient setting, especially withthe continued implementation ofMedicare Part D. However, increased

Table 4.

Top 15 Drug Expenditures for Clinics1

Drug

Total 2005Expenditure

($ Thousands)

Percentage ofTotal 2005 Clinic

Expenditures

PercentIncrease

over 2004

2006Expenditures

(throughSep 2006)

($ Thousands)

Percent Increase,Year-to-Date Sep2006 vs. Year-to-

Date Sep 2005

Epoetin alfa (Procrit, Epogen)

Darbepoetin (Aranesp)

Pegfilgrastim (Neulasta)

Infliximab (Remicade)

Rituximab (Rituxan)

Oxaliplatin (Eloxatin)

Docetaxel (Taxotere)

Bevacizumab (Avastin)

Trastuzumab (Herceptin)

Zolendronic acid (Zometa)

Gemcitabine (Gemzar)

Paricalcitol (Zemplar)

Pneumococcal vaccine, diphtheria

conjugate (Prevnar)

Irinotecan (Camptosar)

Cetuximab (Erbitux)

3,814,051 15.2 2.3 3,021,091 5.1

1,691,197 6.8 39.3 1,893,500 54.5

1,500,168 6.0 29.3 1,483,439 34.4

1,461,973 5.8 15.1 1,229,255 15.1

1,220,564 4.9 27.8 1,046,976 20.5

737,247 2.9 36.2 694,264 27.4

679,701 2.7 6.9 538,436 7.0

674,272 2.7 348.5 881,221 95.2

574,638 2.3 57.2 688,318 81.5

537,307 2.1 15.1 413,457 4.4

469,285 1.9 11.6 358,327 2.6

378,303 1.5 8.1 305,785 8.4

367,172 1.5 4.2 288,127 4.1

305,820 1.2 6.5 272,090 18.8

257,793 1.0 52.9 306,053 68.2


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generic availability of importantdrugs such as clopidogrel and sim-vastatin will significantly contrib-ute to the moderation of growth indrug expenditures. We project an

inflationary rate of 57% for theoutpatient setting (12% related toprice, 35% related to volume andmix, and 1% related to new drugs).Clinic expenditures will continueto increase at a pace similar to that

of the past few years. We project a1416% increase in expendituresfor clinic-administered drugs (34%related to price, 89% related to vol-ume and mix, and 23% related to

new drugs). We project a 46% infla-tionary rate for hospital drug expen-ditures (23% related to price, 34%related to volume and mix, and 1%related to new drugs). These projec-tions are summarized in Table 7.

ConclusionModeration in the growth in

prescription drug expenditures hasoccurred over the past several years.A variety of factors, including the

availability of important and widelyused generic drugs, recent safetyconcerns, and the continued increasein cost sharing for employees inemployer-sponsored health plans,have contributed to this moderation

Table 5.

Top 10 Therapeutic Classes by Expenditures for Nonfederal Hospitals1

Therapeutic Class

Total 2005Expenditure($ Thousands)

Percentage ofTotal 2005

NonfederalHospitalExpenditures

PercentIncreaseover 2004

2006Expenditures

(throughSep 2006)($ Thousands)

Percent Increase,

Year-to-Date Sep2006 vs. Year-to-Date Sep 2005

Systemic antiinfectives 3,101,632 12.0 7.1 2,229,846 5.6

Hemostatic modifiers 3,035,120 11.8 9.5 2,364,684 4.4

Antineoplastic agents 2,781,424 10.8 7.8 2,308,742 13.0

Blood growth factors 2,642,378 10.2 7.7 2,120,270 8.3

Diagnostic aids 1,386,260 5.4 5.6 1,106,555 7.1

Hospital solutions 1,172,584 4.5 3.5 863,330 2.3

Psychotherapeutics 1,128,637 4.4 1.3 841,730 0.8

Anesthetics 1,125,912 4.4 3.8 711,932 17.3

Biologicals 1,064,736 4.1 24.1 821,578 5.0

Gastrointestinal agents 967,189 3.7 1.1 784,028 9.9

Table 6.

Top 15 Drug Expenditures for Nonfederal Hospitals1

Drug

Total 2005Expenditure

($ Thousands)

Percentage ofTotal 2005Nonfederal

HospitalExpenditures

PercentIncrease

over 2004

2006 Expenditure(through

Sep 2006)($ Thousands)

Percent Increase,Year-to-Date Sep2006 vs. Year-to-

Date Sep 2005

Epoetin alfa (Procrit, Epogen) 960,121 3.7 18.2 664,605 8.7

Enoxaparin (Lovenox) 899,069 3.5 11.6 708,274 5.3

Darbepoetin (Aranesp) 633,150 2.5 66.5 593,241 30.5

Pegfilgrastim (Neulasta) 559,470 2.2 31.1 484,581 17.9Infliximab (Remicade) 554,083 2.1 6.2 459,733 13.4

Ondansetron (Zofran) 531,495 2.1 7.9 434,426 10.0

Rituximab (Rituxan) 488,436 1.9 8.3 395,614 9.8

Piperacillintazobactam (Zosyn) 448,198 1.7 17.2 363,020 8.1

Filgrastim (Neupogen) 347,282 1.3 3.7 262,165 0.8

Eptifibitide (Integrilin) 309,313 1.2 1.1 240,561 2.9

Pneumococcal vaccine, diphtheria

conjugate (Prevnar) 307,279 1.2 44.2 223,743 3.9

Iohexol (Omnipaque) 302,810 1.2 2.8 273,725 24.6

Sevoflurane (Ultane) 295,165 1.1 16.7 193,218 10.4

Ceftriaxone (Rocephin) 286,044 1.1 33.8 8,587 96.9

Caspofungin (Cancidas) 273,403 1.1 26.3 173,646 13.8


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trend. The drugs expected to be ap-proved in 2007 will not likely cause a

broad increase in drug expenditures,and the diffusion of some recentlyapproved drugs remains restrainedby safety concerns. Also in 2007,important generic drugs will receiveapproval. With a prescription drugexpenditure growth rate of less than10% expected for both the outpatientand hospital settings, this modera-tion trend is expected to continue in2007. However, double-digit growthin drug expenditures is expected for

the clinic setting, fueled primarilyby biologicals, especially monoclo-nal antibodies for cancer therapy. Itremains essential for pharmacy man-agers to understand institutional andnational drug expenditure patternsand take a proactive approach topromoting efficient drug use. Com-parison of health-system-specificdata and trends with the nationalinformation presented in this articlemay provide a useful context when

presenting institutional drug costs tosenior management.

aSince therapeutic biological productscannot be replicated in a precise mannerlike chemical compounds, the term ge-neric is not entirelyappropriate. A variety ofother terms are used, including postpatent

biologicals, follow-on protein products,subsequent entry protein pharmaceuticals,second-generation biologicals, biogener-ics,biosimilars, and follow-on biologicals.European regulatorsuse the term biosimilars,but FDA appears to prefer follow-on bio-logicals or follow-on protein products. FDAdefines such a drug as a protein product with

Table 7.

Summary of Drug ExpenditureInflation Rate Forecast by

Setting

Setting Inflation RateForecast (%)

Outpatient 57

Clinica 1416

Nonfederal hospital 46

aThis category includes drugs administered in aphysicians office or a hospital outpatient clinic asclinic-administered drugs. Clinic-administered drugsare typically chemotherapy or biologicals that areadministered intravenously.

the same amino acid sequences and a similarenough productionprocess and overall struc-ture to appear on its face to be verysimilar toan already approved product or products.The number of different terms for genericbiologics illustrates the complexity of the is-sue. For simplicity, we refer to these products

as generic biologics.

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