Generic Price Declines Slowing
PLYMOUTH MEETING, Pa., Nov. 13 /PRNewswire/ -- IMS HEALTH (NYSE: RX) today
reported that the annual rate of change for prescription pharmaceutical prices
in the U.S. was 3.4 percent for the third quarter of 1998 compared to the same
period for 1997. While that rate remained unchanged from the second quarter
of 1998, there were significant changes by market segment. IMS HEALTH is the
world's leading provider of information solutions to the pharmaceutical and
healthcare industries.
Prices for brand-name drugs rose by 4 percent in the third quarter of
1998 versus the same period in 1997 (See Table). This rate is 0.3 percentage
points lower than the measurement reported for the second quarter of this
year. With a rate not seen since the early 1990s, generic products are
showing a dramatic reduction in price declines due to aggressive price
increases in select products, counteracting the traditional declines usually
experienced overall. The net overall generic price change in the third
quarter was -2.7 percent, representing a major change in pricing strategy for
the generic marketplace.
Retail Sector Accounts for Majority of Sales
Prescription drug prices for the retail sector, which accounts for
73 percent of the overall pharmaceutical sales in the U.S., rose by a
weighted-average rate of 4.3 percent for the third quarter of 1998 versus the
same period a year ago. This figure is up slightly from the annual rate of
3.9 percent reported for the second quarter of 1998.
"This increase in the retail sector is being driven by the slowing of
price declines for generics," stated Myron Holubiak, general manager of The
Plymouth Group, the consulting arm of IMS HEALTH. "While prices of brand-name
drugs in this sector remain unchanged from last quarter, generic drug prices
decreased 3.2 percent. This is a significant change from the 6 percent
declines seen in the past year."
Non-Retail Sector Balances Overall Price Changes
For the non-retail distribution channels, brand-name drugs experienced
smaller price increases in each non-retail segment compared to the second
quarter of 1998. "A reduced inflation rate for brand-name drugs tempered
overall price increases for the non-retail distribution channels," commented
Sue Capps, senior manager, Pricing Studies at IMS HEALTH. "Prices rose by
only 1.1 percent in the third quarter of 1998 versus the same period a year
ago, and this rate was lower than the 2 percent increase recorded for the
second quarter of 1998.
"The non-retail brand-name drugs are affecting the overall brand total
figure of 4.0 percent," continued Capps. "Non-retail brands brought down the
overall rate from 4.3 percent last quarter since retail brands remained
unchanged."
Sales for the non-federal hospital channel accounted for 13 percent of
overall prescription sales. Prices for prescription drugs purchased by
non-federal hospitals rose 1.8 percent in the third quarter 1998 versus a
2.8 percent increase in the second quarter. For the non-retail injectable
pharmaceutical market there was a -- 0.3 percent price change.
New Product Sales Drive Growth
Overall prescription sales volume for the six channels of distribution
audited by IMS HEALTH grew by 12.4 percent for the third quarter of
1998 versus the same period a year ago. This growth rate is lower than the
rates experienced in the earlier quarters of 1998, but still represents strong
double-digit growth within the market.
Price accounted for less than a third of the total sales growth,
contributing only 3.4 percentage points to the growth. Of the 9 percent real
growth, new products and line extensions represented 6.6 percent of the
growth, while volume and mix categories accounted for 2.4 percent. As with
recent quarters, new product sales are driving the increases in the
prescription pharmaceutical market.
Holubiak noted that the inflation rate measured by IMS HEALTH, at
3.4 percent, is far below the Producer Price Index, Industry Weighted, which
increased to 21.5 percent for September 1998 versus September 1997. The
Consumer Price Index for all items was 1.5 percent for the same time period.
"We maintain that new product sales -- not just price increases -- are
driving growth," he said. "The Bureau of Labor Statistics derives its
statistics using a market basket approach of selected items, which may undergo
price changes that aren't representative of the overall marketplace. IMS
HEALTH measures price changes on virtually all drug items weighted according
to unit volume."
Holubiak noted that the market continues to respond favorably to newer,
advanced drugs, thus influencing a market basket approach to calculating
purchaser outlay for prescription pharmaceuticals. "The newer therapies may
be providing significant incremental benefit that is not captured using the
market basket methodology," he said.
Inflation for Top 10 Drugs Remains Below Industry Totals
Prices for the top 10 selling prescription drugs increased 2.5 percent
overall and 3.2 percent for the retail sector, when comparing the third
quarter of 1998 to the third quarter of 1997. These measurements exclude any
new products that were not on the market during the base 1997 period. The
rates, while up slightly from the second quarter 1998 figures, remain below
the overall market inflation for all brands -- 4 percent overall and 5 percent
for the retail pharmacy market.
"For some pharmaceutical manufacturers, pricing strategies may have become
more sophisticated as methods for managing product portfolios," commented
Holubiak. "There is a variation of strategies across product lines and also
across market segments."
Figures Reflect Acquisition Prices of 20,000 Products
IMS HEALTH's acquisition-price database includes more than
20,000 pharmaceutical products and is updated continuously. The database
reflects invoice-based discounts for pharmaceutical purchases through six
audited channels of distribution. It does not include subsequent, off-invoice
rebates that, if considered, would further reduce drug purchase prices.
IMS HEALTH calculates all price changes on a weighted average level, based on
unit volume. As a result, the rate of price change is driven by those
products with the highest unit volume. All rates calculated by IMS HEALTH use
actual transaction prices, not list prices such as Average Wholesale Price
(AWP).
IMS HEALTH
IMS HEALTH is the world's leading provider of information solutions to the
pharmaceutical and healthcare industries. With more than $1 billion in
1997 revenue, IMS HEALTH operates in over 90 countries. IMS HEALTH is the
largest pharmaceutical manufacturer information partner, with over 40 years'
experience in the industry. Key products and services integral to customer
day-to-day operations include: market research for prescription and
over-the-counter pharmaceutical products; sales management information to
optimize sales force productivity; technology enabled selling solutions for
sales and marketing decision-making; technologies systems and information
services that support managed care organizations. Additional information and
previous press releases are available at IMS HEALTH's web site:
http://www.imshealth.com.
Table
Third Quarter 1998 vs. Third Quarter 1997
Price Changes for Prescription Drugs in U.S. Market
Percent Change Q3 '97 to Q3 '98
Market TOTAL BRANDS GENERICS
Total Market 3.4 4.0 -2.7
Retail Pharmacies 4.3 5.0 -3.2
Hospitals 1.5 1.8 -1.3
Injectables 0.9 1.1 -0.6
Non-Injectables 3.2 4.2 -2.5
Clinics -0.1 -1.2 0.9
Injectables -2.7 -3.1 2.0
Non-Injectables 4.1 4.8 -1.1
Staff-Model HMOs 3.5 4.0 -0.8
Injectables -0.9 -1.0 2.7
Non-Injectables 4.6 5.3 -0.9
Long-Term Care Facilities 4.4 5.1 -4.2
Injectables 4.5 4.8 0.1
Non-Injectables 4.3 5.2 -4.6
Federal Facilities -1.0 -0.5 -4.4
Injectables -2.5 -2.3 -4.6
Non-Injectables -0.5 0.0 -4.3
Source: IMS HEALTH, a healthcare information company
SOURCE IMS HEALTH
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CONTACT:
Nancy Duckwitz of IMS HEALTH, 610-834-5338
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