American Consumers Revolt Against Prescription Drugs

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Anecdotal evidence has been coagulating into numbers, and these numbers are now beginning to weigh down corporate earnings calls. It appears the toughest creature out there, the one that no one has been able to subdue yet, the ever wily and inexplicable American consumer, is having second thoughts about prescription drugs. And is fighting back. A paradigm shift.

We’ve already heard from some companies, such as drug maker Pfizer, whose revenues in the US plunged 18%, largely due to the collapse of its flagship drug Lipitor that is losing its battle with much cheaper generics. But the direst indications came from Express Scripts, the largest pharmacy benefit manager in the US—and perhaps one of the best gauges of spending patterns for prescription drugs.

During the earnings call, CEO George Paz, who ominously was “not prepared to provide 2013 guidance,” embarked on a dark speech. The company’s clients had “unprecedented concerns about our country’s economic outlook,” he said. Unprecedented concerns! So even worse than 2008-2009. He went on:

Our health claim clients are expecting membership reductions in 2013. Large employers have pulled back on hiring plans, using contractors and part-time employees when necessary. Mid to small employers are cutting back or postponing health care coverage decisions while waiting for more clarity on Health Care Reform. And we continue to see low rates of drug utilization as individuals deal with uncertainty at the household level.

He lamented “the current weak business climate and the unemployment outlook” and was worried about the “challenging macroeconomic environment.” Shorts must have felt a certain frisson. Remains to be seen whether the dive that Express Scripts shares performed is a buying opportunity that will add to a cushy retirement or one that will slice off your fingers.

But beyond the company’s fate, he’d pointed at what ails the US economy, including a shift to part-time workers and contractors often without healthcare benefits, and smaller employers who, in their struggle to survive, are cutting back on healthcare benefits. As these workers—the inexplicable American consumers—are left to their own devices, they have to make their own decisions about what prescription drugs, if any, to blow their scarce money on.

Express Scripts has seen this trend in another area. Its Drug Trend Report, which dissected prescription drugs sold to its members in 2010 and 2011, sketched the beginnings of the paradigm shift: in 2011, specialty drugs sales increased 17.1%, down from a 19.6% increase in 2010; traditional drugs only eked out a gain of 0.1%, the lowest increase since it began tracking the data; and spending on all prescription drugs combined rose only 2.7%, also a record low. That was for 2011.

But the report didn’t include insights into the buying behavior of the 48.6 million uninsured Americans who’re even more reluctant to spend money they don’t have on prescription drugs they can live without. And it didn’t include the trends of 2012, which as Paz phrased it, are cause for “unprecedented concerns.”

Whatever the reasons, whether prescribing behavior by doctors or buying behavior by consumers, lack of insurance or lack of money, or the growing prevalence of generic alternatives: spending on prescription drugs, long considered recession-proof, seems to have bumped into a wall for the first time ever.

Healthcare costs in the US, around $2.6 trillion a year, or 17.9% of GDP, may be reaching a level beyond which the various players in the economy cannot go, or refuse to go, a market-based barrier of sorts. And the inexplicable American consumer may be on the forefront—not only those who don’t have insurance, but also those who have high-deductible plans.

In 2012, plans with deductibles of $1,000 or more made up 19% of employee-sponsored health plans. Families covered by such plans, for better or worse, are cutting back medical spending … by 14%, according to a study last year. They’re making medical decisions where at least one part of the equation is their own money. And they’re accomplishing what no one has been able to accomplish so far, namely taming the untamable healthcare expense monster.

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  10 comments for “American Consumers Revolt Against Prescription Drugs

  1. Makati1
    November 8, 2012 at 2:03 am

    Here in Manila, and most of the Philippines, Generics have their own chain of drug stores that sell only drugs. The number of Generic stores equal or outnumber the other drug store chains. I found that to be a refreshing change from the US where generics are considered 'dangerous' and from China or some other 'bad' country.

    I can buy many of the same drugs here, at much reduced prices, than I could in the US. The only time I had to pay US prices was when I had a touch of pneumonia and my doctor wrote a prescription for an American made drug and I did not ask for a generic equivalent. The American made antibiotic cost $120 for 10 pills. I found out later that I could get the identical pill in generic for about 1/10th the price. I'm glad I live where generics are easily available, even though an 80 mg. aspirin is all I take regularly.

  2. EXPATinThailand
    November 8, 2012 at 12:52 pm

    Same here in Thailand Makati but with one big interesting twist…I get the very same USA made Glaucoma medicine here in Thailand for $20 that I had paid $150 for while still in the U.S. 9 years ago. All but the 'experimental' pharmaceuticals are basically priced less than half of what is being charged in the U.S.
    Not only that, but all medical cost here in Thailand are a mere penitence of the cost of U.S. medical services….and there are NO insurance forms to fill out…social medicine is provided for the basic needs of the citizens and the extremely expensive medicines and treatments not provided can be purchased for those that can afford it or have bought an optional medical insurance policy.
    What this article didn't mention was the fact that something big is happening in America…and that is people are getting off prescription drugs and going to holistic and Herbal treatments….the same herbs that many pharmaceuticals were built upon.
    People are learning and spreading the word about Herbal Detox and getting off the GMO Pesticide Antibiotic Processed foods that are making them sick and using Herbs and alternative medicine when it is seen as a good choice for non-life threatening ailments.

  3. yawp
    November 8, 2012 at 6:04 pm

    Looks like atlas is shrugging on their bottom line.

  4. RDE
    November 8, 2012 at 7:31 pm

    Returned to the US after three years working in Canada. "You are in Canada now, we don't allow workers to go without access to health care. Here is your BC "Care Card." Free.

    Went to the ER here in the states with minor pains in my chest. False alarm fortunately. The bill for an overnight stay in the hospital and 10 minutes of conference with a doctor? $11,000. Think I'm going to keep $10,000 of it and invest the other $ 1,000 in moving expenses to Cartegena, Colombia. Ranked in the top 10 worldwide for health care. The US? #37.

  5. Wolf Richter
    November 8, 2012 at 7:56 pm

    We live in CA, and a lot of people here are getting their major stuff done in …. Mexico. Including dental work that they can't afford to have done in the US. And they buy their drugs there too. Some low-cost insurance plans actually require it (under certain conditions). It has given rise to a whole new industry in Mexico, medical tourism.

  6. RDE
    November 9, 2012 at 5:20 pm

    The Co-pay on insurance in the US is as much as the total cost of treatment in Mexico or Colombia. Welcome to ObamaCare. Now you can be forced to carry insurance that doesn't pay for your health care expenses!

  7. humptydumpty
    November 9, 2012 at 8:01 pm

    It's called "efficiency", and it's coming to the health care industry. I don't feel the tinyest bit sorry for those crooks

  8. JohnM
    November 12, 2012 at 6:06 pm

    While we in the UK are fast heading towards the US model: Expensive.

  9. Baruch Obamawitz
    November 17, 2012 at 5:51 am

    I got MRIs in Matamoros Mexico for a little over $100 each. No waiting. Centro Medico Internacional

  10. November 19, 2012 at 7:17 am

    And the inexplicable American consumer may be on the forefront—not only those who don’t have insurance, but also those who have high-deductible plans.

Comments are closed.