Generic drugs, with their lower prices, are definitely being used more. That's the good news.

But the bad news is that the cost of brand-name drugs with high price tags is accounting for a huge proportion of drug spending. That's according to Modern Healthcare, which reports that overall drug spending only rose by 2 percent from 2016 to 2017—less than in earlier years.

But that increase “was largely due to branded-drug price hikes, according to an update of the Blue Cross and Blue Shield Association's study of medical claims of more than 40 million members.” In fact, says the report, during that period of time, spending on both branded patent-protected drugs and branded specialty drugs increased 5 percent and 10 percent, respectively.

In addition, brand-name prescription drugs only accounted for 17 percent of total prescriptions filled in 2017, but their costs took up some 79 percent of total pharmaceutical spending. Branded patent-protected prescription drugs made up 52 percent of branded prescription drugs filled, but accounted for 66 percent of total branded-drug spending.

And brand-name specialty drugs only made up 3 percent of branded-drug prescriptions filled, but ate up 34 percent of total branded-drug spending, at $27 billion.

Generics, meanwhile, are grabbing an increasing market share, climbing to 83 percent of prescriptions filled. Their share of total prescriptions filled was 66 percent in 2010, but branded pharmaceuticals' price hikes are overwhelming greater usage of lower-cost alternatives. Total spending on generic drugs has actually fallen 3 percent since 2016, while branded prescription drug spending is up 4 percent.

“Given the increase in generics, we should be in a fairly strong negative downturn in overall spending. But we're not,” Brian Harvey, executive director of the Blues' Health of America research initiative, which came out with the study, said in a statement.

Harvey added, “It's not negative because of the upward trend in the branded patent-protected space, particularly in the specialty space.”

More insights into drug spending:

Instant Insights /

Price hikes on name-brand drugs cancel out savings from generics

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