4. BABY BOOMERS FUEL DRUG SPENDING GROWTH
Americans are going to double the amount they spend on prescription drugs
over the next five years, says a new report from Merck Medco, the leading
provider of prescription drugs in the U.S. That growth will be driven by
baby boomers -- mainly people from ages 40 to 55.
Merck Medco, which operates as a fully owned subsidiary of Merck & Co.
(MRK, $74, unch.), said drug spending increased 14% in 2000 and is
expected to more than double by 2006. More than half of that increase
will come as a result of baby boomers using drugs that treat central
nervous system and cardiovascular disorders. People over the age of 65,
by contrast, generally spend about the same amount per year (or very slow
growth) on prescription drugs. This age group does, however, spend the
most per person, approximately $1,400 a year.
TODD’S TAKE: No surprises here. Over the past few years we’ve mentioned
time and time again that big drug companies are going to benefit from the
baby boomer generation, but it’s nice to have that good news confirmed.
Drug companies are making more and better prescription drugs all the time.
Baby boomers, meanwhile, are reaching the age level where they tend to
ramp up their prescription drug spending. As a result, we’re expecting to
see incredible industry growth over the next few years and beyond.
The demographic trends look encouraging, and we’re set to realize some
great and protracted gains from a number of our pharmaceutical holdings,
including Merck and Pfizer (PFE, $44, up 1). |
