Prescription Drug Spending Expected to Double by Mid-Decade

June 6, 2001 -- U.S. spending on prescription medicationslikely will double in the next five years, according to a forecastby Merck-Medco, the country's biggest manager of prescription drugplans.

Just over half of the increase will be from increased spendingon two categories of drugs: cardiovascular medicines, includingthose for controlling cholesterol and blood pressure; and centralnervous system drugs, including those for pain, arthritis, anddepression and other psychiatric disorders.

Baby Boomers Make Everything Higher

A surprise in the report, which was released today, is thatthe expected trend is fueled not by senior citizens, but by BabyBoomers developing chronic health problems like heart disease andgastrointestinal disorders.

"While it's definitely true that older people tend to havehigher drug costs ..., the rate of growth in prescription drugspending is highest in people aged 40 to 55," said Glen Stettin,vice president of clinical products for Franklin Lakes, N.J.-basedMerck-Medco, which handles prescription benefits for nearly one infour Americans.

The company also determined that spending on prescriptions among Merck-Medco clients rose 14 percent last year.

The rate of increased spending was lowest in the 65 to 79 agegroup, but that group's average cost per member for prescriptiondrugs was the highest, nearly $1,400 a year.

Stettin expects spending to rise 15 percent to 20 percent a yearfor many of the prescription plans Merck-Medco administers.

Unlike years ago, many patients with chronic conditions such asheart disease are taking multiple medicines, rather than just oneor two, Stettin said Tuesday.

Another reason for increased spending is higher prices for somewidely used drugs.

"A lot of the newer drugs, they're brand-name drugs. They'reprotected by patent and they're more expensive," Stettin said.

Some relief is in sight, however, according to Stettin: "In thenext three to five years, there will be patent expirations forbrand-name drugs representing $20 billion in annual sales."

Generic Drugs Losing Patent Protection

Generic drugs, which generally cost a third to a half as much asbrand names, will soon be competing with those losing patentprotection.

Merck-Medco, a subsidiary of drug maker Merck & Co., administers plans for other health insurers, government agencies and major employers such as General Motors Corp. and the United Parcel Service.

The company handles electronic payment and approvals forpurchases at retail pharmacies for 65 million Americans. It alsooperates a mail order prescription business for those customers.

The report did not disclose total spending on medications by allof Merck-Medco's customers.