Studies show cheaper drugs don't add up to greater use

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While the patent cliff is credited with creating a deep pool of low-cost versions of breakthrough drugs, a pair of reports suggests that framing these shifts in IP protections as a cost-savings for patients is an incomplete picture of just what's going on in terms of patient health.

Thanks to generics, onetime blockbuster brands like Pfizer's Lipitor or BMS's Plavix can be had on the cheap, but new data from the IMS Institute for Healthcare Informatics shows patients have dialed back their use of the healthcare system. According to IMS, patients spent 3.5% less on medicines in 2012 than they did in 2011, and generics garnered 84% of that year's prescriptions. This would seem like a good thing, care at a lower price—but it's been found that the availability of lower-cost drugs does not necessarily mean greater use or even the embrace of cheaper options. Further erasing the line between cheaper medicines and cheaper care is IMS's finding that insured patients avoided lower-priced office visits while the number of emergency room visits by insured patients “increased at a dramatically higher rate in the last two years.” David Cutler and Nikhil Sahni, whose work was published in Health Affairs this week, found that physician visits fell 17% from the second quarter in 2009 through the second quarter of 2011.

Even allowing for the possibility that patients skirted annual visits when the economy bottomed out, Cutler and Sahni were only able to attribute 37% of the slowdown to the recession, which technically spanned 2007 to 2009. They attributed an additional 8% of the fall-off to a dip in the number of privately-insured patients and modified Medicare payments, but their survey bookends the recession, covering 2003 to 2012, and the remainder is a mystery.

One possible culprit is a shift towards consumer-directed health plans, in which employees must cover a high deductible before the insurer chips in, meaning employees end up paying premiums in addition to the deductible, providing a high overhead. Cutler and Sahni said a Kaiser Family Foundation study found that 33% of all employer plans had deductibles greater than $1,000 in 2012. They also found that among plans with co-payments, 47% had a co-payment of more than $25 for a general office visit and charged at least $30 to see a specialist.

For pharmas, this would appear to be a bad sign, but the latest round of earnings reports shows that while generics are hurting overall sales, the industry has managed to dilute the impact of the lower-cost drugs partly by raising prices, as Lilly did during the first quarter.

Cutler and Sahni's analysis added some color on the low-cost/lower-use trend, noting that real median household income for the insured fell 6.3% between 2001 and 2011. That period spans the end of 1990's dotcom tailspin, financial fallout from the 9/11 attacks and the more recent credit crisis and burst housing bubble.
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