Cancer-Drug Spending in U.S. May Climb 42 Percent by 2013

Spending on cancer drugs by U.S. employers and health insurers may climb as much as 42 percent by the end of 2013 as the number of patients rises and new medicines reach the market, Medco Health Solutions Inc. said.

Specialty drugs that are among the costliest cancer medicines and that lack generic equivalents will drive most of the spending increases, Franklin Lakes, New-Jersey based Medco, the largest pharmacy benefits manager by revenue, said today in a report.

Celgene Corp. (CELG)’s Revlimid and Novartis AG (NOVN)’s Gleevec are among cancer drugs contributing to the spending growth as disease detection improves and the treatments prolong patients’ lives, the report found. The number of cancer survivors in the U.S. may rise by more than 30 percent to 18 million by 2020, Medco said in the annual analysis of prescription-drug spending among its clients.

“We’re really expecting to see an explosion in innovation in treating cancer, which is great news,” Medco Chairman and Chief Executive Officer David Snow said today on a conference call. “Many types of cancer are going to go from catastrophic to chronic diseases. The challenge is managing that, such that the costs are not completely out of control.”

Worldwide sales of oncology drugs may reach $80 billion in 2012, and more than 900 other potential cancer medicines are in development, according to the findings. Health-plan spending on specialty cancer drugs such as Revlimid, Gleevec and Roche Holding AG (ROG)’s Tarceva rose 21 percent last year, Medco said.

Diabetes Treatment

Overall prescription-drug spending by health plans rose 3.7 percent in 2010, the study found. Diabetes treatments were the biggest contributors to overall spending growth, followed by respiratory and rheumatology drugs and treatments for ADHD, or attention-deficit hyperactivity disorder.

The unit price of branded drugs rose 9.4 percent last year, and Medco is seeing “strong signs of greater inflation” for 2011, Snow said. That inflation is a “natural reaction” to a wave of generic copies that may cause the branded-drug industry to lose roughly $700 billion in revenues in the next decade as patents expire, he said.

Rising use of generic drugs moderated overall drug spending last year, said Glen Stettin, Medco’s chief medical officer. More than 71 percent of all prescription drugs dispensed were generics, up from 68 percent in 2009. Generic drug prices rose less than 1 percent, the study found.

While spending on ADHD drugs jumped more than 17 percent last year, Shire Plc (SHP)’s ADHD drug Adderall had a 40 percent drop in usage after generic versions reached the market in 2009, Medco said.

Use of Vyvanse, another ADHD drug and Shire’s top-selling product, jumped 33 percent. Shire, based in Dublin, is seeking to replace Adderall sales with Vyvanse, cleared by the FDA in 2007, and Intuniv, approved in 2009.

To contact the reporter on this story: Molly Peterson in Washington at mpeterson9@bloomberg.net

To contact the editor responsible for this story: Adriel Bettelheim at abettelheim@bloomberg.net

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