Analysis: Fewer prescriptions filled

Posted: September 23, 2008

People are picking up fewer prescription drugs and visiting their doctors less often as the economy pinches pocketbooks, according to analyst research.

The drug industry is often thought to be invulnerable to a recession because people are reluctant to skip doctors' visits or stop taking medications.

But the number of prescriptions dispensed in the second quarter of this year fell almost 2 percent from a year earlier. That followed a 0.5 percent drop in the first quarter of this year, the first time that number has been negative since 1996, according to data provider IMS Health Inc. Its research did not go back further than 1996.

"The bottom line for 2008 is a significant decline in prescription growth," said Diana Conmy, corporate director of market insights for IMS. For the 12 months ending in July, doctors' visits droppped about 1.2 percent, IMS said.

Many factors contributed to the changes, she said. Drug companies have introduced fewer new products. High-profile stories about dangerous drug side effects may have made doctors and consumers wary of prescribing and taking drugs.

The Food and Drug Administration also has slowed the pace at which it approves new drugs. Corporate cutbacks have shrunk paychecks and pushed up co-pays for prescriptions and doctor visits.

In the late 1990s, yearly prescription growth peaked at 9 percent, IMS said.

"Pharmaceutical companies have been used to much higher growth rates than we're seeing now," Conmy said.

Although the number of prescriptions was down, the dollar value of drug sales showed modest growth of 1.4 percent, to $288 billion, in June from a year earlier. Even so, sales growth has slid dramatically from late 2006, when yearly growth approached 12 percent.

A report published yesterday by Moody's Investors Service echoed concerns raised by the IMS data.

Moody's said it viewed the pharmaceutical industry's outlook as negative because of "significant patent expirations in the years 2010 through 2013, a tougher regulatory climate resulting in a slower rate of new product approvals, as well as global cost-containment efforts that may target pharmaceutical pricing or access."

Moody's said companies with strong credit ratings, a solid pipeline of drugs to replace those with expiring patents, and cash-rich balance sheets should weather the crisis most easily.

Moody's did point out two bright spots: An aging population should boost sales of prescription drugs, and the industry may be less vulnerable to a recession than other sectors.

Generic drugs remain a huge threat to big pharmaceutical companies, many of which have large operations in the Philadelphia area.

Barbara Ryan, a managing director at Deutsche Bank Securities Inc., said generic competition would continue to rise as a percent of sales as consumers and health insurers seek cost savings.

The economic downturn is putting a damper on sales of brand-name drugs, said Tim Anderson, an analyst with the research firm Sanford C. Bernstein & Co. L.L.C.

"I think it also has the effect of driving share to generic drugs, and once patients switch from brand to generic, they're essentially lost forever," Anderson said.

Contact staff writer Miriam Hill at 215-854-5520 or


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