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COPYRIGHT 2003 Eli Research, Inc.
Under Administrator Tom Scully, the Centers for Medicare and Medicaid Services has published a series of "market updates," which include observations by Wall Street analysts on various sectors of the health care industry. This week's Perspectives takes a look at some of the ground covered in the two most recent updates: one covering the pharmaceutical industry, published Jan. 10, and one on the medical products industry, published in October.
... ON PHARMACEUTICALS ...
The competitive stakes in the brand-name prescription drug industry are increasing, CMS says, as generic competition and managed care cost containment put pressure on drugmakers to adapt or fall by the wayside.
CMS uses much of the update to detail threats to brand-name companies, but there are at least a couple of reminders that the industry overall remains in solid shape. "Despite earnings disappointments, the pharmaceutical industry maintains a very healthy financial position and generates strong cash flow," says David Risinger of Merrill Lynch.
And demand for prescription drugs certainly isn't drying up. Indeed, Rx spending is the fastest growing piece of the national health care spending pie. From 2000 to 2001, CMS points out, Rx spending grew 15.7 percent, from $12.2 billion to $14.1 billion. By comparison, overall health spending grew at barely more than half this rate--rising 8.7 percent, from $1.31 trillion to $1.42 trillion--over the same period, while spending for physician and clinical services, hospitals, and nursing homes grew 8.6 percent, 8.3 percent and 5.5 percent, respectively.
Nevertheless, while prescription drug spending has been going up, revenue growth for brand-name pharmaceutical companies has of late been moving in the other direction. For the first...
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