Report: US prescription drug costs rise nearly 7 percent in 2010

An analysis by Barclays Capital showed that the price of 130 prescription medicines that make up more than half of drug sales in the US increased by an average of 6.9 percent in 2010, The Wall Street Journal reported Thursday. The increase is the largest recorded over the past decade, exceeding the previous highest increase of 6.8 percent in 2008.

The review suggested that the largest price increase was observed for Daiichi Sankyo's Benicar, which soared in price by 29.3 percent last year. Other notable gains, included Novartis' Gleevec, which rose 20.9 percent, and Johnson & Johnson's Concerta, whose price jumped 19.7 percent. Several drugs that are facing upcoming patent expiries also saw large price increases, according to the analysis, including Pfizer's Lipitor, whose cost went up 12.4 percent, and Bristol-Myers Squibb and sanofi-aventis' Plavix, which rose 13.2 percent.

Greg Barrett, Daiichi Sankyo's vice president of US marketing, explained that the price increase for Benicar was partly due to the relatively higher cost of similar hypertension medicines, such as Novartis' Diovan, Merck & Co.'s Cozaar and Hyzaar, and Bristol-Myers Squibb and sanofi-aventis' Avapro and Avalide. "We want to make sure the franchise remains competitively priced with other compounds in the class," Barrett remarked.

In raising Benicar's price, Barrett noted that the drugmaker looked at the average daily cost of a typical prescription across all dosage strengths and formulations compared with the cost for similar drugs. Although the average daily cost for Benicar rose, Daiichi Sankyo said it deliberately kept the overall cost lower than all but one of the similar products.

Barrett suggested that another factor that contributed to the Benicar price increase was the rebate that Daiichi Sankyo gives to health plans covering the cost of the drug. The executive said that the Japanese drugmaker gives "quite competitive" rebates, although he declined to specify the amount. According to investment research firm Sector & Sovereign Research, rebates for private health plans averaged 14.3 percent for brand-name drug prescriptions in 2009, up from 8.4 percent in 2002. At the start of the year, US healthcare reforms lifted Medicaid's minimum rebate for branded drugs to 23.1 percent, from 15.1 percent.

However, Richard Evans of Sector & Sovereign Research remarked that overall the cost increase for medicines outpaced rebate growth. Barclays Capital analyst Lawrence Marsh said that the overall trend suggests that prices of medicines will continue to rise, noting that in January and February of this year, the prices for 65 of the 130 products included in the analysis increased by an average of 8.6 percent.

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