Some drug companies experiencing higher prescription volume, revenue with Medicare drug benefit

Sep 5 2006

The Philadelphia Inquirer on Monday examined how the Medicare prescription drug benefit "is boosting prescription volume and revenue for drug companies."

According to IMS Health, Medicare prescription drug plans cover about 12.4% of all U.S. prescriptions.

As a result, the Medicare prescription drug benefit "has had a pronounced effect on pharmaceutical companies' financial results, with a majority of U.S. pharmaceutical revenues in the second quarter exceeding Wall Street expectations," the Inquirer reports.

However, "experts caution that the upside to pharmaceutical earnings may not last," according to the Inquirer.

Jon Resnick of Cambridge Pharma Consultancy, a division of IMS Health, said that Medicare prescription drug plans in the future might limit formularies to allow brand name drugs only after generic medications fail or use other measures to limit costs.

Tim Anderson, an analyst at Prudential Equity, in a recent note to investors wrote, "The tailwind is likely to last through the end of 2006, and if investors are lucky, it will extend past 2006."

He added, "We think that health plans' primary focus in the year has been to simply get enough enrollees into their programs.

It may not be until 2007 and beyond that those plans then begin to ratchet down price more aggressively" (Loyd, Philadelphia Inquirer, 9/4).