Projecting future drug expenditures--1993.

The effects of inflation, generic competition, market introduction of new drug entities, and recent legislation on forecasting drug expenditures are discussed. Inflation as it relates to pharmaceutical prices has been decreasing over the past couple of years. The U.S. Bureau of Labor Statistics reported a 6.9% increase in the Producer Price Index for drugs and pharmaceuticals in 1991, diminishing to a 4.5% increase for part year 1992. Pharmaceutical industry analysts predict overall annual inflation rates for pharmaceuticals in 1993-94 will range from 2% to 11%. Explanations for the recent low inflation rates and the wide variance among analysts may include the uncertainty of future government regulation on price increases and the backlog of FDA approvals for biotechnologically derived agents. To evaluate generic competition, information on patent or market exclusivity expiration can be used. The price of a generic drug may be 60-70% of the brand price at market introduction, but it usually stabilizes at approximately 50% of the list price. Predicting the market entry of new drug products is difficult and requires monitoring of (1) filing dates for new drug applications (NDAs) and (2) changes within the FDA approval process. According to an FDA report, the mean time to approval for an NDA in 1991 was 28.5 months and for a new molecular entity was 30.03 months. These figures represent little change from the previous five years.(ABSTRACT TRUNCATED AT 250 WORDS)