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After Six Decades, Drug Spending Finally Falls

Update Date: May 10, 2013 09:52 AM EDT

For the first time in nearly six decades, spending on drugs has decreased within the United States. This decrease in numbers is due to the wide range of generic alternatives that people choose over expensive, brand name drugs. Generic medications are as safe as brand name drugs because they are forced to use the same active ingredients set by the Food and Drug Administration (FDA). Generic medications have to also be made in the same dosages and strength, and must be used for the same reasons as the brand name drugs. As more people learn about the safety behind generic drugs, most patients might no longer feel the need to get a well-known brand, especially if it can save them money.

The drop in drug spending, however, is not only attributed to higher sales of generic drugs because patients are more aware of them, but also to the fact that there are more generic drug options today. Pharmaceutical companies experienced a patent cliff, which occurs when these big name companies' patents on drugs expire. Once the patents protections are gone, other companies start to make the generic versions of the drugs and sell them at a much cheaper price. Although pharmaceutical companies tend to lose a lot of money in sales during the patent cliff, these companies stated that at least, their loss is the patient's gain.

"The largest driver of this slowdown [was] unprecedented cluster of very popular and effective medicines losing patent protections and facing generic competition at the same time," Michael Kleinrock, the IMS research director, said. "We've often called it the 'patent dividend' for the health system and for patients."

This report was compiled by the IMS Institute for Healthcare Informatics. The IMS has been adamantly tracking data regarding drug sales since 1957. The institute found the first decrease in overall drug spending since last year when the total number of sales dropped one percent. After adjusting for inflation and population growth, the decline raised to three and a half percent. These percentage drops represent an average of a 33-dollar drop per person, lowering the current average spending per person to $898.

The report also cited other reasons, such as a weaker cold, cough and flu season, which resulted in less drugs being bought. The research also found a decrease in per capita basis, which meant that some people might have skipped filling out their prescriptions and did not take the recommended treatments. Although there are several factors at play here, next year's numbers will be interesting since more patents will be expiring.

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