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The Inexplicable American Consumer Revolts Against Prescription Drugs
Wolf Richter www.testosteronepit.com www.amazon.com/author/wolfrichter
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.
That the US has too much debt is no longer a controversial statement. Some may believe other problems are more urgent, or that we need to grow our way out rather than slash spending. But the debt-to-GDP ratio must decrease if we are to have a stable, prosperous economy. Read... One Chart Explains Why Government Debt Is Dragging on the Economy.
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Everyone here who has any interest in taking a fascinating trip inside Big Pharma and their sleazy ways should get & read
Selling Sickness: How the World's Biggest Pharmaceutical Companies are Turning Us All into PatientsYou can find it new or used for less than a couple bucks now. It's fascinating because it demonstrates how sophisticated Big Pharma companies are at marketing (they're perhaps more successful as marketers than any other industry). The drug companies have ad agencies that were the first to "astroturf" (i.e. they invented that strategy).
I read the book in one day because I couldn't put it down.
I don't think it's reckless to estimate that perhaps as much as 40% of the medications prescribed to Americans either do more harm than good, or are not effective in treating the claimed disorder they were prescribed to treat, and that perhaps as much as 25% of the remaining 60% could be avoided by relatively simple dietary changes and exercise.
Big Pharma had a heavy hand in writing The Affordable Care Act, and there is no doubt that they will reap major revenue gains as a result of that law's implementation. This will necessarily crowd out what could have been other, far more effectivemeasures to treat or even prevent medical conditions, diseases and disorders.
They basically gave up some meaningful rebates dollars in Medicare Advantage to avoid allowing getting Medicare to negiotiate wholesale prices and they got the promise of millions of additional customers who are now uninsured being added to the Medicaid rolls. Got a bit more complicated with the SCOTUS ruling earlier this year allowing states to back out of the Medicaid expansion but I bet most GOP governors gave in short order now that Obama won since they have powerful provider lobbies in their state and don't want to have huge rates of uninsured citizens compared to other states.
I have a Ph.D. in Economics, and I am not aware of any respectful institution offering Ph.D. program in Health Economics. Do you mean to say that you are an econ phd with research focus in health economics?
There are several including the Health Management and Economics program at Wharton at Penn. PhD from University of Minnesota through the school of Public Health with a post-doc at Haas at Berkeley.
Dunno about the US, but in the UK NICE (National Centre for Clinical Excellence) was certainly providing funding for both Masters and Doctorates in Health Economics - in 1995. When I worked at St Barts, London, one of the Reasearch Fellows in Endocrinology had a Ph.D in Health Economics from Liverpool, so the Degree must exist, and with increasing costs of healthcare, I'd be surprised if it wasn't more popular.
Just go to AcademyHealth for a list or the list of schools that AHRQ has funded health care research post-doc positions.
Morelike the Tijuana School of Internet Medical Sciences.
Healthcare Economics should have once lesson if it has any credibility whatsoever -- the medical racket is sick, but somehow I highly doubt such a prestigous credential would illuminate such things like a monopoly.
Tell us how smart you really are.
Incoherent ranting from an idiot basically. Yeah there is much more money to be made in healthcare from someone who is sick than in basic public health prevention. Thanks for the insight. Maybe you can tell us some other basic MacroEcon 101 points next. Dick.
As Americans cut down their drugs, watch the death rate fall.
If they can't afford food, and cut their intake in half, watch the fatties get healthy
If they have to fast (starve) for a while, watch most diseases disappear.
Dr. Alan Goldhamer - Fasting Can Save Your Life
http://www.youtube.com/watch?v=fHbJMmm2rOU
(By the way... that's not Doogie Houser... dude is like 60 but looks 35
Cutting caloric intake has been proven to increase lifespan, problem is no one can explain why. It is postulated that the reduction in free radicals causes less cellular damage to the organism.
Or maybe we are working our bodies over-time, especially filters such as the liver and kidneys and especially when we are eating junk on a regular basis. More product to handle, more by-product to dispose of. As efficiency in these systems is overwhelmed through overeating or other excesses, more junk builds up in our bodies, leading to more disease.
Common sense, it seems to me. Proving it physiologically, well that's where you come in.
:D
Sometimes I think ZeroHedge is really WhinerHedge. People constantly complain on here about government regulation in industry yet the primary reason that other countries have much cheaper drug prices is that their national/regional health services negiotiate very aggressively with pharmaceutical companies to get those lower pries. In India currently, they don't increasingly don't acknowledge IP rights of Western pharmaceutical firms and allow Indian firms to create a generic version of a drug under patent to allow for resale in India and much of the rest of world.
If you have a market where the gov't essentially set prices for a good/service and governments that don't acknowledge basic IP/property rights of foreign firms, you can't remotely begin to have a capitalistic system.
Awesome article, Wolf. You're one of ZH's consistently best contributors.
Shit is hitting the fan all around, and while it doesn't surprise those who are paying attention that prescription drug sales are declining, it is a clarion call that the knife of consumer & business deleveraging will slice very deeply.
Medications are probably as close to the "inflexible" category of goods that exist, trailing only food & utilities, but probably more inflexible than gasoline, so if these sales are declining by such significant amounts, that's yet more proof of the deep, structural degradation in our economy.
I genuinely believe U6 is running over 24% and that U3, if tabulated in an honest fashion with decent survey techniques, would be 13%+, and that these numbers will get far worse.
Oh, I disagree about most medications being "required" spending. What percentage of prescription drugs are really necessary to preserve life? I don't have the figure, but I'm guessing single digits. Most prescription drugs these days are for lifestyle enhancements (viagra) or to control conditions that won't kill you (cholesterol over 200, can't fall asleep after watching 60 inch HD TV for four hours), etc. I think what's happening is people are spending all of their money on insurance, college tuition, etc., need to cut back, and realize that many of the drugs they are using aren't really necessary.
I am Canadian currently in Vegas. I needed a perscription nasal spray containing Cortozone. I bought it at Walgreens $156 for a generic bottle (the guy told me the name brand was $250 a bottle! I also paid $80 to a "clinic" on the premices just for the script.
I happened to be in Canada a short while later, walked into a walkin clinic, no appointment, no waiting got a script for 2 bottles. Total cost for both $25 for the name brand.
I leave it to you to consider how the drug industry is fucking America.
All of you Canadians should send all of us U.S. drug consumers a big thank you note and an apology for being such big leaches. Yes, we're getting fucked, but it's by you. We're tired of hearing Canadians brag about how they're freeloading from us.
It costs drug companies around $300 million just to do a drug trial, and keep in mind that most drug trials are unsuccessful. Drug companies are going broke left and right.
Canada refuses to do their fair share by imposing prescription medicine price controls, which is why they're cheap in Canada. As a result, it's the US consumer that must pay for those extremely expensive drug trials, but not you. We're carrying the burden for you.
Don't come here and brag about how cheap your drugs are and what fools we are in the United States. Show some respect for the people you're screwing.
"All of you Canadians should send all of us U.S. drug consumers a big thank you note and an apology for being such big leaches"
The drug I mentioned was manufactured in Toronto by a US firm. The reason drugs are cheaper there,and most everywhere else, is the fact that their governments are not in bed with the drug companies.
Manufactured does not mean the R&D was done there. This is not a valid argument. Price controls are a reality and it forces the Pharmaceutical companies to recoup all their R&D dollars from the US market.
"not in bed with drug companies..."
I can't argue sense with mindless cliché’s. The fact is, we pay for those extremely expensive R and D costs and you don't. Good night.
"I can't argue sense with mindless cliché’s. The fact is, we pay for those extremely expensive sales, marketing, lobbying and G&A costs and you don't. Good night."
Fixed it for ya.
Correction, you seem HAPPY to pay for the mindless "Safety At All Costs" mentality promulgated by your FDA.
Accept a (very small) risk of injury, and cut out all the often irrelevant "safety testing" and associated paper piles.
Wathc the cost of drugs start to slide downward (and LOTS of new drugs magically appear too!)
Speaking of mindless cliches, has it occurred to you the FDA-Pharma complex might be the reason for those extremely expensive R&D costs?
Remember when Nancy Palosi got a huge chunk of free drug company stock just before signing important legislation regarding regulation of the drug industry?
Oh and she did not see a problem with that.
For the same name nasal spray containing cortozone in Taiwan:
Cost circa $200 local currency, or cira $6 Canadian dollars, or $6.2 US dollars, assuming one does not want see doctor and get the prescription directly from the pharmacists.
Suppose one wants to see a doctor in a hospital to get a prescription and have the hospital filled the prescription:
Fee for seeing doctor would be $100 local currency, or circa $3 Canuck dollar, or $3.1 US dollars, then one will be required to pay $25 local currency to have the drug filled. (every person is covered under the universal health coverage, even foreigners who have been living in Taiwan for longer than 3 or 6 months?)
Oh, by the way, no appointment is needed for seeing doctors. Just walking in. And,if you don't want to wait, one can use the emergency service, just pay an additional fee of $300 local currency.
I am Canadian currently in Vegas. I needed a perscription nasal spray containing Cortozone. I bought it at Walgreens $156 for a generic bottle (the guy told me the name brand was $250 a bottle! I also paid $80 to a "clinic" on the premices just for the script.
I happened to be in Canada a short while later, walked into a walkin clinic, no appointment, no waiting got a script for 2 bottles. Total cost for both $25 for the name brand.
I leave it to you to consider how the drug industry is fucking America.
The law that keeps you from buying that OTC is a federal law. The drug companies aren't fucking you, the government is.
And just who the fuck lobbied that federal law? Did they just magically appear out of the government's ass?
Want to start taking charge of your own medical care? Start here with "Where there is no doctor"
http://hesperian.org/books-and-resources/
If you get the opportunity tear off the arm of a banker and beat a drug rep with it. It's therapeutic.
“Men will never be free until the last king is strangled with the entrails of the last priest”. Denis Diderot
If you break a KongressKlown's face, then you can beat the drug rep with the jawbone of an ass.
Anyone else feel like puking every time you see a drug advert on TV. I mean 70% of the advert is side effects. Appears to me that big pharma advertizes their own failure.
Take your TV out back
pile all your drugs on it
douse it with gasoline
and light it with a cigarette.
Dance around the fire
tossing in your credit cards
and sing "I'm free, I'm free!"
Drink way too much,
and piss on the ashes.
Next morning wake up
in the future.
yea I do, and that brings up the question as to why even bother with direct marketing of pharmaceuticlas to consumers when we cannot make direct purchases of them
Because, silly, said consumer trots down to their doctor and say "I have acid reflux, give me the purple pill". Doctor makes his/her patient happy and makes a little money off of the prescription.
No TV, its all stupid shit.
Actually, this is where regulation is a good thing. Just think if Goldman or JPM had been forced to list the side effects of their mortgage puke...the country might look a whole lot different these days.
In a perfect world, CEO George Paz would be taken to a public place and his head would be lopped off with a samurai sword.
Said head would decorate a pike in the middle of town along with the body as a warning to passersby. "No Stealing" and "Thieves will be executed".
In a slightly less perfect world CEO George Paz's company Express Scripts would go belly up and Paz would be forced to live beneath a plastic tarp under a highway overpass and live on the small animals he can catch with his bare hands.
These greedy cocksuckers are the downfall of us all, the destruction of the entire world for a handful of colored bits of paper. And they are 'shocked by the decline of sales', they aren't nearly as shocked as they should be. They should tremble in their boots.
Debt is indeed a problem but the borrowed money went into someone's pockets: CEO George Paz's and his tycoon friends. Hang them all.
If you need extra rope, just call. I'm there.
Amen brother im ready to go out and eat the motherfuckers face off right now!!
don't forget your bath salts - hate to get there all ready and find that essential item missing...
Just like the guy in Florida?
Y'know - it wasn't that long ago that the pharmaceutical business was not a slave to Wall St. They made good money and had high returns and salaries and "drug detailers" and such... Heck, they even had R&D that was dedicated to improving people's conditions - but then we got to financialization - and now they are just another group of hack business guys. They are focusing on relieving people of their $ via a pill to take off their excess weight/lack of hair/sexual appetite etc. They gladly sell their cures for less than 5% profit abroad - meanwhile they scalp the American and American taxpayer at 500% markup. They are scum - just like the banks.
What decade is not that long ago to you? Designer drugs and overpriced antibiotics have been a price problem since the late 70's. This has been a big problem for 40 years in a 60 year old business.
It was always about the money.
Don't make it sound like its an age old problem and everyones to blame. The fact is that they have got greedier by the year, found ways to compromise government (think Rumsfeld) and really get on the money viagra train.
I knew since the 60's the drug and medical industry would suck the system dry. Why are healthcare costs soaring. It's a SERVICE based industry.
And it was always about the money...uh huh...I didn't think this was done out of the goodness of their hearts. However, it was not until the 90's when every stinkin' business was supposed to be an annuity with 9% annual profit growth that things really turned to shit. Wall St. and over-priced C-suites - you probably remember that too. Oh, and thanks for reminding me that I am getting older...
http://www.youtube.com/watch?v=UDlH9sV0lHU&feature=youtu.be
Another group of greedy assholes that need their fucking heads cut off.
Want to live? Here buy this for $500 month. Don't want too? Fuck off and die. Big Pharma.
Eat shit motherfuckers I wish you the most horrible fucking death possible.