Pennies and Pounds: How Expected 2016 Trends in Health Care Costs Will Affect Pharmacies

Pennies and Pounds: How Expected 2016 Trends in Health Care Costs Will Affect Pharmacies

http://www.pnarx.com/?p=20512015 was a bit of a rough year for some in the pharmaceutical world, with pricing for prescription drugs vaulting into the spotlight following the stunning 5,000 percent price hike of cancer and AIDS treatment drug Daraprim by biotech firm Turing Pharmaceuticals. With so much focus on health care costs and the practices of the pharmaceutical world’s bad apples, it can be hard to understand how prescription drug pricing can simultaneously promote growth and controversy for pharmacies. Forecasters believe 2016 will still see drug prices rise, though not to the same soaring levels as in 2015.1

What could lead to a less precipitous rise in drug costs? Another “patent cliff” will begin to happen in 2016, with many purveyors of brand-name medications seeing their patents run out, including for major drugs like Crestor and Abilify. This will likely result in the generic and compound drug markets promoting lower costs for the same medications.2

Regulatory changes may also come into play. The staggering rise of drug costs in 2015 prompted attention from lawmakers, providers, insurers and patient advocates, and in an election year a bipartisan effort to curtail price setting practices in the pharmaceutical industry is not a far-fetched notion.3

“Patent Cliff” Could Boost Compounded Drugs and Generics

The news of a “patent cliff,” or a series of major drugs undergoing patent expiration, is nothing new. There are always drugs with patents expiring. It depends on which industry observer you read whether 2016 represents the end of the patent cliff that began in 2012, or the beginning of a new one that could result in up to $65 billion in lost revenue for pharmaceutical manufacturers.4

Last year actually saw more major medications come “off patent” than those that will in 2016, but it’s likely that the health care costs and effects of 2015’s lost patents won’t be felt until at least 2016. These included major drugs such as Abilify, Symbicort, Cymbalta and Spiriva, and 2016 will see the likes of Crestor and Glivec removed from patented status.5

Generally, a patent cliff is mostly good news for specialty pharmacies and manufacturers of generics. Drug demand doesn’t simply go away because the brand name went off patent. Compound pharmacy operators can prepare to fill the market gap by offering the same drug to patients in generic form.

As an operator, it’s important to make sure your staff is educated on the compounded versions your pharmacy is able to offer. Referring to previously patented branded drugs can help patients make a connection with a more familiar name and help assure patients that your pharmacy is offering a compounded version. Highlighting the benefits of compounding—for instance, that a drug previously only available in commercial pill form can actually be offered to patients through another delivery system that suits them better—can help patients embrace the compounded version as well.

Thou Shalt Not Gouge: Regulatory Framework May Be on the Way for Drug Pricing

The outrage over Turing Pharmaceuticals’ price increase for Daraprim also led to scrutiny of the price-setting practices for several other companies, as well as bipartisan calls for a regulatory framework for drug pricing.

With the political climate in the lead-up to the 2016 election, it’s hard to gauge whether the saber-rattling over drug pricing will give way to true legislation. Regardless, even increased regulation of drug pricing is unlikely to seriously affect the pharmaceutical industry overall, since it would probably only impact a few manufacturers and not affect overall earnings. Regulations for drug pricing wouldn’t necessarily directly affect specialty compounding pharmacies. It seems unlikely that there will be new legislation passed before the 2016 election, though the uncertainty may keep things interesting in pharmaceutical stocks for a while.6

Most predicted 2016 health care trends are measured by the way they will affect larger pharmaceutical manufacturers and other bigger industry players. Operators of specialty and compounding pharmacies should always keep in mind how these trends will play out for their own organizations. For instance, a consulting firm forecast that pharmacy cost increases for active employees will increase by double digits in the next couple years, which could mean more opportunity for compounding pharmacies as long as patients and physicians are educated about compounded prescription options.

There’s no doubt that health care costs will continue to increase across the board. Categories from drug costs to expanded health care coverage costs will drive the amount of money passing through and around the industry to staggering numbers throughout 2016. Stay on top of trends and news to help your compounding pharmacy navigate changes and maintain the highest standard of patient care.

Pharmaceutica North America is a leading provider of high-quality compounding kits and active pharmaceutical ingredients for compounding pharmacies and other health care organizations. Contact us to learn more about our products.

Show 6 footnotes

  1. “Specialty Drugs to Fuel 10% Pharmacy Cost Hike in 2016,” April 20, 2015, http://ww2.cfo.com/health-benefits/2015/04/specialty-drugs-fuel-10-pharmacy-cost-hike-2016/
  2. “Healthcare trend projections for 2016,” April 2015, https://wfis.wellsfargo.com/insights/clientadvisories/pages/healthcaretrendprojections2016.aspx
  3. “2015 Year in Review: High drug prices emerge as top issue,” Dec. 21, 2015, http://www.chicagobusiness.com/article/20151221/NEWS03/151229966/2015-year-in-review-high-drug-prices-emerge-as-top-issue
  4. “Drug makers face another $65 billion patent cliff,” Dec. 10, 2014, http://www.marketwatch.com/story/drug-makers-face-another-65-billion-patent-cliff-2014-12-10
  5. “Patent Expirations Through 2016 Predicted to Lower Brand Spending by $127 Billion,” Feb. 10, 2014, http://www.drugs.com/article/patent-expirations.html
  6. “Drug pricing reform could be huge for big pharma — here is who has the most to lose,” Oct. 11, 2015, http://www.businessinsider.com/drug-price-debate-is-real-2015-10
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