REPORT HIGHLIGHTS
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U.S. 2003 prescription drug sales, including retail, institutional and governmental customers, should grow from $277 billion in 2002 to $490 billion in 2008.
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The cash segment is projected to grow at an average annual rate (AAGR) of 7.9% through 2008 in the absence of any new programs.
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However, this segment will experience a projected AAGR of -10.4% or -6.2% under a Medicare drug benefit or state discount-only program, respectively.
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If a Medicare drug benefit is implemented, most of the difference will be made up in the insurer/PBM price segment, whose AAGR is projected to increase from 12.7% to 17.6% under this scenario.
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If a large number of states implement discount-only programs, the decline in cash sales will be made up in the Medicaid segment.
REPORT SCOPE
The average consumer spends more than $500 per year on prescription drugs, while the number spending in excess of $2,000 per year more than quadrupled between 1998 and 2001. Despite the proliferation and expansion of public and private drug subsidies and low-cost distribution channels, drug manufacturers’ profits as a group remain the highest of any major sector of the U.S. economy (17% in 2002). Indeed, drug manufacturers’ “exorbitant” profits are a rallying cry for advocates of new drug benefits, such as a Medicare prescription drug benefit. Advocates often present proposals to end “price-gouging” at the expense of medically and economically vulnerable members of society.
Drug companies, understandably, deny their profits are excessive. To bolster their defenses, they cite such factors as high R&D costs, regulatory burdens and the inherently risky nature of the drug . Meanwhile, a growing number of retail pharmacists complain that drug-pricing policies unfairly are squeezing their much thinner (4% on average) profit margins.
The high price of prescription drugs has spurred the development of new, low-cost distribution channels, such as discount, mail order and Internet pharmacies. This and expanded prescription drug coverage and benefits has resulted in a drug market that is highly segmented by price.
This timely BCC study elucidates the ways in which the current price structure affects the profitability of various players in the drug industry, as well as the potential effects of changes in the pricing structure. More specific objectives are to a) quantify the major segments of the U.S. prescription drug market; b) analyze the historical and current (2002) value of prescription drug sales in each of these price segments and evaluate the impact of demographic, , technological, legal/regulatory and other factors that will drive the market in each segment; c) forecast future (2003 through 2008) sales in each price segment; and d) analyze the issues raised by projected changes in the price structure of the prescription drug market. While it stresses and financial issues raised by the highly price-segmented prescription market, the report will be of interest to a wide range of readers.
This report provides:
- A market overview, covering overall size and price trends
- Analysis of private and public sector responses to rising prescription drug prices
- Analysis of the major price segments and the and financial implications of these segments
- Market drivers and constraints
- Detailed U.S. market projections by price segment through 2008
- An examination of the long-term outlook for the U.S. prescription drug market.
