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Published by: BCC Research
Published: Nov. 1, 2003 - 151 Pages
Table of Contents
Introduction
Prescription Drug Pricing Policy And Drug Industry Profitability
Study Background
Study Goals And Objectives
Intended Audience
Scope And Format
Methodology And Information Sources
Analyst Credentials
Related Bcc, Inc. Research
Bcc Online Services
Executive Summary
Summary Table: U.S. Prescription Drug Market By Price Segment, Through 2008 ($ Billions)
Overview Of U.S. Prescription Drug Market
Market Size And Segmentation
Figure 1 Trends In U.S. Prescription Drug Expenditures Vs. Total Health Care Expenditures, 2000-2002 ($ Billions)
Figure 1 (Continued)
Therapeutic Category
Comparison Of Therapeutic Drug Sales
Figure 2 U.S. Prescription Market Shares By Therapeutic Category, 2002 (Percent Of Total Sales)
Sales/Distribution Channels
Sales Channels
Figure 3 U.S. Prescription Drug Sales Channels, 2002 (% Of Total Sales)
Figure 3 (Continued)
Wholesale Distribution Channels
Direct Distribution
Figure 4 U.S. Prescription Drug Manufacturer Direct Sales To Dispensers (%)
Wholesalers
Rising Cost Of Prescription Drugs
Recent Price Trends
Figure 5 Trends In Average U.S. Retail Prescription Prices, 1990-2002 (Average Dollars Per Prescription)
Figure 5 (Continued)
Forces Driving Up Costs
Prescription Drug Basket
Table 1 Average Value Of Prescription Drug Basket, 2002 ($)
Central Nervous System Agents
Table 2 Sales, Number Of Prescriptions And Average Value Of Best Selling Cns Agents In The U.S., 2002
Cardiovascular Agents
Table 3 Sales, Number Of Prescriptions And Average Value Of Best Selling Cardiovascular Agents In The U.S., 2002
Gastrointestinal Agents
Table 4 Sales, Number Of Prescriptions And Average Value Of Best-Selling Gastrointestinal Agents In The U.S., 2002
Respiratory Agents
Table 5 Sales, Number Of Prescriptions And Average Value Of Best-Selling Respiratory Agents In The U.S., 2002
Anti-Infective Agents
Table 6 Sales, Number Of Prescriptions And Average Value Of Best-Selling Anti-Infective Agents In The U.S., 2002
Genito-Urinary Agents
Table 7 Sales, Number Of Prescriptions And Average Value Of Best-Selling Genito-Urinary Agents In The U.S., 2002
Musculo-Skeletal Agents
Table 8 Sales, Number Of Prescriptions And Average Value Of Best-Selling Musculo-Skeletal Agents In The U.S., 2002
Anti-Cancer Agents
Table 9 Sales, Number Of Prescriptions And Average Value Of Best-Selling Anti-Cancer Agents In The U.S., 2002
Dermatological Agents
Table 10 Sales, Number Of Prescriptions And Average Value Of Best-Selling Dermatological Agents In The U.S., 2002
Blood Agents
Table 11 Sales, Number Of Prescriptions And Average Value Of Best-Selling Blood Agents In The U.S., 2002
Diabetes Drugs
Table 12 Sales, Number Of Prescriptions And Average Value Of Best-Selling Diabetes Drugs In The U.S., 2002
Diuretics
Table 13 Sales, Number Of Prescriptions And Average Value Of Best Selling Diuretics In The U.S., 2002
Hormone Supplements And Contraceptives
Table 14 Sales, Number Of Prescriptions And Average Value Of Best-Selling Hormone Supplements/Contraceptives In The U.S., 2002
Ophthalmic Agents
Table 15 Sales, Number Of Prescriptions And Average Value Of Best-Selling Ophthalmic Agents In The U.S., 2002
Public And Private Sector Responses To Rising Drug Costs
Private Sector Responses To Rising Drug Costs
Increasing Use Of Generic Drugs
Figure 6 Trends In Generic Drug Share Of U.S. Prescriptions, 1990-2002 (Percent Of Total Number Of Prescriptions)
Figure 7 Average Cost Of Generic Vs. Brand-Name Prescription Drugs, 2001 ($)
Growing Popularity Of Discount Sales Channels
Growth Rates
Figure 8 Growth Rates By Prescription Distribution Channel, 2001-2002
Projected Market Shares
Figure 9 Projected Changes In Prescription Drug Retail Market Shares, 2002-2008 (Percent Of Total Retail Sales)
International Purchases
Group Purchasing Organizations
Group Purchasing Organizations (Continued)
Rebate Negotiations With Drug Manufacturers
Development Of Pharmacy Networks
Formulary Management
Drug Utilization Reviews
Generic Drug Substitution
Disease State Management Programs
Impact Of Pbms On Drug Costs
Prescription Drug Discount Card Programs
Program Features
Advantages And Disadvantages
Manufacturers Discount Cards
Table 16 Summary Of Manufacturer Drugs Discount Card Programs
Table 16 (Continued)
Affinity Organization Programs
Private Programs
Public Sector Responses To Rising Drug Costs
Federal Programs
Medicare
Medigap
Medicare+Choice
Pharmacy Plus Waivers
Medicaid Drug Rebate Program
Other Federal Discount Programs
Public Health Service (340b) Discount Program
Federal Supply Schedule
"Big 4" Federal Ceiling Price
Sub-Ceiling Prices
State Programs
State Drug Discount Card Programs
Bulk Pharmaceutical Purchasing
Supplemental State Rebate Programs
Reduced Reimbursements
Legal Environment
Cost Controls
Major Price Segments
Definitions
Pharmaceutical Pricing Terms
Table 17 Pharmaceutical Pricing Definitions
Table 17 (Continued)
Price To Final Purchaser
Table 18 Final Drug Pricing For Different Types Of Customers ($)
Cash Customers
Private Insurers
Medicaid
Price Segments
Figure 10 Major Price Breaks In The U.S. Prescription Drug Market (Average Cost For A Representative Basket Of Prescription Drugs)
Cash Customers
Table 19 Retail Cash Customer Cost Of Prescription Drug Basket, By Type Of Outlet ($)
Savings Mechanisms Impact
Other Private Buyers
Public Sector Buyers
Public Sector Buyers (Continued)
Trends In Prescription Drug Price Segments
Sales By Price Segment, 2000-2002
Market Shares
Figure 11 Prescription Drug Market Shares By Price Segment, 2002 (Percent Of Total Sales)
Growth Trends, 2000 To 2002
Table 20 U.S. Prescription Drug Sales Trends By Price Segment, 2000-2002 ($ Billions, Percent Of Total Sales)
Cash Customers
Insurers And Pbms
Hospitals, Hmos And Other Health Care Providers
Medicaid
Federal Supply Schedule
340b Sales
Federal Ceiling Price
Dva/Dod National Contracts
Projected Sales, 2003 Through 2008
Overall Market Trends, 2003 Through 2008
Figure 12 Overall Trends In The U.S. Prescription Drug Market, 2000-2008 ($ Billions)
Figure 12 (Continued)
Growth Trends By Price Segment, 2003 Through 2008
Table 21 Prescription Drug Sales Trends By Price Segment, Through 2008 ($ Billions, Percent Of Total Sales)
Retail Drug Sales
Figure 13 Projected Total Retail Expenditures On Prescription Drugs, 2002-2008* ($ Billions)
Non-Medicaid Retail Market
Figure 14 Cash Customer Share Of Non-Medicaid Retail Prescription Market, 2000-2008 (Percent Of Total Non-Medicaid Retail Market)
Cash Customer Sales Projections For 2003 Through 2008
Figure 15 Projected Prescription Drug Sales To Cash Customers, 2002-2008 ($ Billions)
Insurers And Pbms Sales Projections 2003 Through 2008
Table 22 Projected Prescription Sales To Insurers/Pbms, Through 2008 ($ Billions)
Medicaid
Figure 16 Trends In Prescription Drugs As A Percentage Of Total Medicaid Spending, 1998-2002 (% Of Total Medicaid Spending)
Figure 16 (Continued)
Figure 17 Projected Trends In Medicaid Spending On Prescription Drugs, 2002-2008 ($ Billions)
Figure 17 (Continued)
Hospitals, Hmos, And Other Large Health Care Providers
Figure 18 Trends In Prescription Drug Sales As A Percentage Of Total Hospital And Other Health Care Provider Costs, 2000-2002
Hospital And Other Healthcare Sales Projections 2003 Through 2008
Federal Supply Schedule
Figure 19 Projected Trends In Federal Supply Schedule Spending On Prescription Drugs, 2002-2008 ($ Billions)
340b Prices
Figure 20 Projected Trends In 340b Spending On Prescription Drugs, 2002-2008 ($ Billions)
Federal Ceiling Prices
Department Of Defense And Veterans Administration Healthcare Expenditures
Figure 21 Projected Increases In Dod/Dva Medical And Healthcare Spending, 2002-2008 ($ Billions)
Figure 21 (Continued)
Figure 22 Total Dod/Dva Prescription Drug Expenditures, 2000-2008 ($ Billions)
Figure 22 (Continued)
Figure 23 Projected Trends In Dva/Dod Prescription Drug Expenditures Under Fcp, 2002-2008 ($ Billions)
Figure 23 (Continued)
National Contracts
Figure 24 Projected Trends In Dva/Dod Prescription Drug Expenditures Under National Contracts, 2002-2008 ($ Billions)
Figure 24 (Continued)
Market Share By Price Segment, 2003 Through 2008
Figure 25 Prescription Drug Market Shares By Price Segment, 2003 And 2008 (Percent Of Total Sales)
Developments That Could Influence Baseline Projections
"Discount-Only" Programs
Vermont Pharmacy Discount Program
"Healthy Maine" Program
Future Initiatives
Medicare Prescription Drug Benefit
Recent Administration Proposals
Summary Of President’s Medicare Plan
Congressional Proposals
Impacts
Three Legislative Scenarios
Scenario Impacts On Drug Sales
Table 23 Baseline Prescription Drug Sales Vs. Scenarios 1-3, 2003 And 2008 ($ Billions)
Scenario Impacts On Market Price Structure
Figure 26 Price Structure Of Prescription Drug Market Under Different Scenarios, 2008 (% Of Total Sales)
Scenario 1 (Medicare Prescription Drug Benefit) Description
Impact On Drug Sales And Market Structure By Price Segment
Table 24 Potential Impact Of Medicare Prescription Drug Benefit On Market Size And Structure By Segment, 2003 Through 2008 ($ Billions)
Scenario 2 (State Discount Cards Only) Description
Impact On Drug Sales And Market Structure By Price Segment
Impact On Drug Sales And Market Structure By Price Segment (Continued)
Table 25 Potential Impact Of State Discount-Only Cards On Market Size And Structure, 2003 Through 2008 ($ Billions)
Scenario 3 (Medicaid Prescription Drug Benefit Plus State Discount-Only Card For Low-Income Uninsured) Description
Impact On Drug Sales And Market Structure By Price Segment
Table 26 Potential Impact Of Medicare Drug Benefit Plus State Discount-Only Cards On Market Size And Structure, 2003 Through 2008 ($ Billions)
Prescription Drug Industry
Leading Drug Manufacturer Revenues
Table 27 Top U.S. Drug Company Revenues, 2000-2002 ($ Billions)
Leading Drug Manufacturer Profitability
Table 28 Top U.S. Drug Company Profitability, 2000-2002 (Net Income As A Percent Of Total Revenues
Table 29 Most Profitable Fortune 500 Industries, 2002
Fortune 500 Drug Company Operating Performance
Figure 27 Fortune 500 Drug Companies’ Application Of Revenues, 2002 (Percent Of Total Revenues)
Figure 27 (Continued)
Pharmaceutical Wholesalers
Financial Performance
Table 30 Selected Drug Wholesaler Financial Performance, 2000-2002 ($ Billions/Percent)
Table 30 (Continued)
Operating Performance
Figure 28 Major Drug Wholesaler Application Of Revenues, 2002 (Percent Of Total Revenues)
Figure 28 (Continued)
Pharmacies And Other Drug Retailers
Financial Performance
Table 31 Selected Drug Retailer Financial Performance, 2000-2002 ($ Billions/Percent)
Operating Performance
Figure 29 Selected Drug Retailer Application Of Revenues, 2002 (Percent Of Total Revenues)
Impacts Of Price Segmentation
Impact Of Price Segments On Overall Prescription Drug Costs
Figure 30 Trends In Discount Sales Vs. Average Price Of Prescription Drugs, 2000-2002 (2000 = 1.0)
Impact Of Price Segments On Prices Paid By Specific Drug Customer Groups
Impact Of Price Segments On Size And Patterns Of Demand For Prescription Drugs
Impact Of Price Segments On Pricing Transparency And Decision-Making
Impact Of Price Segments On Drug Industry Financial Performance
Value Chain Analysis
Figure 31 Average Prescription Drug Value Chain ($)
Value Chain Analysis By Price Segment
Table 32 Value Chain By Price Segment ($)
Cash Sales
Insurers/Pbms
Hospitals/Hmos
Medicaid
Federal Programs
Profitability Impacts Of Potential Changes In Price Structure
Impact On Drug Manufacturers
Table 33 Impact Of Sales Projections On Drug Manufacturers’ Profitability, Through 2008
Drug Retailers
Conclusions
Conclusions (Continued)
Appendix
State Discount Drug Programs For Seniors
Table 34 State Drug Discount Program Characteristics
Table 34 (Continued)
Table 34 (Continued)
Table 34 (Continued)
Prescription Drug Basket Prices
Table 35 Independent Pharmacy Prescription Drug Basket Prices, 2003
Table 35 (Continued)
Table 36 Chain Pharmacy Prescription Drug Basket Prices, 2003
Table 37 Mass Merchants Prescription Drug Basket Prices, 2003
Table 38 Mail Order Prescription Drug Basket Prices, 2003
Table 39 Internet Pharmacy Prescription Drug Basket Prices, 2003
Table 40 Offshore Pharmacy Prescription Drug Basket Prices, 2003
Table 41 Insurers/Pbms Prescription Drug Basket Prices, 2003
Table 42 Hospital/Hmo Prescription Drug Basket Prices, 2003
Table 43 Medicaid Prescription Drug Basket Prices, 2003
Table 44 Federal Supply Schedule Prescription Drug Basket Prices, 2003
Table 45 340b Price Prescription Drug Basket Prices, 2003
Table 46 Federal Ceiling Price Prescription Drug Basket Prices, 2003
Table 47 Va/Dod National Contract Prescription Drug Basket Prices, 2003
Company Financial Data
Financial Statement Data
Table 48 Largest U.S. Drug Manufacturers 2002 Financial Results
Table 49 Largest U.S. Drug Wholesalers 2002 Financial Results
Table 50 Selected U.S. Drug Retailers 2002 Financial Results
AbstractThe U.S. prescription drug market exhibits a complicated price structure, in which the price of a prescription can vary by 200% or more, depending on where the prescription is bought and who pays for it. While a number of recent studies have addressed the price of prescription drugs, they have typically examined it from a single perspective, such as the price of generics or the impact of high prescription prices on seniors. There is thus a need for an up-to-date study that addresses the growing trend towards price segmentation of the U.S. prescription drug market in its totality, and the business impact that this highly price-segmented market has had on manufacturers, distributors and dispensers of prescription drugs. This study uses a basket of widely used prescription drugs to identify the major price breaks in the market, and develops detailed market projections for each price tier through 2008.
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