The first analyses of drug sales since the implementation of Medicare Part D show an increase in demand for prescription drugs, but also a concerted effort by payers to hold down drug costs.
A study from Wolter Kluwer Health found a three percent growth in the volume of third-party insurance claims after the launch of the prescription drug benefit. Some drug categories, like diabetes, grew six percent in the first 90 days of the benefit's launch.
"You'd anticipate that those are the types of products that elderly patients would utilize -- and they do," said Peter Demogenes, product director in the pharma solutions business unit at Wolters Kluwer.
At the same time, the study also saw a 24 percent increase in claim rejections, the majority of which were due to plan limitations. Drug classes that saw the most rejections for this reason included sleep aids, proton pump inhibitors, and erectile dysfunction treatments.
"Those pharma companies that are proactive and well prepared [are asking themselves]: how much damage potential is my product going to take from cash erosion?" Demogenes noted.
Both payers and pharmacy benefit managers have been recommending less expensive options to customers, including OTC products, and pharmacists have also received incentives for referring patients to preferred drugs and generics.
Therefore, while nearly all drug categories received a boost last quarter, the news was not all positive for individual brands. Being included on a formulary's list of preferred drugs was a strong predictor of how a brand would fare under Part D , according to Mason Tenaglia, managing director of the Amundsen Group, a consulting firm. But generic drugs received the greatest boost overall.
A study from Verispan found that 55 percent of prescriptions filled by Medicare patients were for generic drugs. The analysis also noted that generic manufacturer Teva Pharmaceuticals filled the most prescriptions of any drug maker, and half of the top 10 companies that filled the most prescriptions manufacture generic drugs.
Across the board, drug companies saw an average increase in business of 5.9 percent.
But Tenaglia noted that the impact of Part D on an individual brand is likely to vary from region to region because of the vast differences between Medicare drug plans.
"The national numbers are a bit inconclusive," he said. "Understanding if your brand is doing well or poorly has gotten a lot more complex."
Tenaglia predicted that the market would see increased uptake in drug utilization in the short term, but more price competition shortly thereafter.
Those competitive pressures will spur companies to engage in more rationalization, he added.
"You have to focus your resources in markets where you have access, and selectively reduce resources in markets where you don't," he said.
Drug utilization will also change as beneficiaries hit the so-called donut hole in their coverage and begin to act more like cash payers, Tenaglia added. Because of the number of late enrollees this year, the real impact of the donut hole might not be felt until at least 2007.
Wolter Kluwer's Demogenes also predicts that the plans themselves will become more competitive -- which could impact formularies -- but eventually expects the market to tighten.
"You'll start to see the smaller players weed themselves out," he said. "The strong players are going to survive."