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PRESCRIPTION PRICES INCREASED 8.1% IN 1991, BY PDS DATA: AVERAGE Rx PRICE WAS $14.75 v. $13.64 IN 1990; IMS SAYS FIRST HALF UP 23%; SECOND HALF UP ONLY 13%

Executive Summary

The average per prescription price in 1991 was $14.75 (at pharmacy acquisition cost) compared to $13.64 in 1990, according to retail market data collected by Pharmaceutical Data Services. The increase in the average prescription cost in 1991 was only 8.1% for the year, down from 8.9% the year before. The slowing rate of growth in the average prescription price reflects the trend toward moderating drug price increases and the gains by generic drug marketers in total numbers of prescriptions filled (see related story, next page). PDS VP-Marketing/Product Development Patrick Miller, PhD, pointed out the slowing rate of price inflation to a March 10 session at the National Wholesale Druggists Association Marketing Conference in San Antonio. "Increasingly," Miller observed, "the industry is beginning to slow the rate at which it increases the price of pharmaceutical products....Sales growth is moderating more rapidly than volume growth as the industry is beginning to moderate its price increases." IMS VP-Field Operations Doug Long also stressed the decline in price inflation in 1991 in a speech on March 11 to NWDA. Long noted that the rate of growth in the industry was much stronger in the first half of the year (when the market was up 23%) than in the second half (up 13%). The major factor in that decline, Long indicated, was a sharp drop in the rate of price growth in the second half of the year. "Price increase was there" in the market in 1991, Long said. "It was stronger in the first half of the year than it was in the second half of the year as a lot of people are painfully aware in the wholesaler business." While the general public has continued to hear more about drug price inflation, the news in the trade since at least the last quarter of 1991 has been the slowdown in price increases ("The Pink Sheet" Nov. 11, 1991, T&G-10). NWDA's leadership, including its elected officers, tacitly has been acknowledging the slowdown in price increases by referring to the need to develop new sources of profit potential for the distribution industry in the future. The investment buying in front of price increases that has contributed greatly to wholesaler profits during recent years may have to be supplemented or supplanted by efforts such as more efficient and less costly order transfers. The association's service firm is moving ahead with its proposal to bring out an inter-organization service firm by the middle of this year (see related item, T&G-12). Miller noted the stable but slight growth in overall volume of prescriptions (1.36% in 1991 v. 1.39% in 1990) translates into a large number of actual new prescriptions. "The retail market has not been growing at leaps and bounds," Miller said, "but you have to realize that we are talking about a market segment that is in excess of 1.7 bil. prescriptions large. So, 1.36% represents over 23 mil. prescriptions and over $350 mil. in sales at the wholesale level. So the percentage growth is small, but it is actually a reflection of a very healthy market that is growing steadily off a very, very large base." There is a hint of two of the future public policy/pricing problems for the industry in the data from the prescription tracking firms. IMS pointed out that a significant slice of the $8 bil. new dollars that it found in 1991 data came from the biotech sector. "The biotech products were about $2 bil. in 1991," Long reported. IMS expects that "if the trend continues, this may be a $50 bil. business in the year 2000." With that type of growth and the high prices per dose that the biotech products have been commanding, that could foreshadow one of the next generation of price issues in the drug industry. Similarly, the PDS data show both an increasing number of prescriptions being filled in generic, low-price categories and the importance to volume of some of the newer therapeutic categories. The difference between the list of top 10 volume products and top 10 sales products (the only overlapping products on both lists are Zantac and Ceclor) highlight the emerging challenge to justify the increased premiums for the new therapies.
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