According to a new report issued by the IMS Institute for Healthcare Informatics, total spending on medicines in the U.S. reached $310 billion in 2015 –up 8.5 percent from the previous year.
The surge of new medicines remained strong last year and demand for recently launched brands maintained historically high levels.
“The challenge of balancing access and the cost of care in an era of innovative but more expensive treatments continues as a theme across our healthcare system.”
While spending on specialty drug reached $121 billion rose more than 15 percent from 2014, the report also found that savings from branded medicines facing generic competition were relatively low in 2015, and the impact of price increases on brands was limited due to higher rebates and price concessions from manufacturers.
“The challenge of balancing access and the cost of care in an era of innovative but more expensive treatments continues as a theme across our healthcare system,” said Murray Aitken, IMS Health senior vice president and executive director of the IMS Institute for Healthcare Informatics.
“The level of price concessions achieved in 2015 points to a shift in market dynamics as manufacturers accept lower price increases on existing products. At the same time, spending on new brands continued at near-historic levels.”
The report’s key findings:
- Total spending on medicines. In 2015, spending net of off-invoice discounts and rebates reached $309.5 billion and grew 8.5 percent year over year. Growth moderated about 2 percentage points from the 2014 level, when total spending was at its highest since 2001. The increase in 2015 spending of $24.3 billion on a net basis and $46.2 billion on an invoice basis was fueled by new brands and protected brand price increases, offset by the impact of patent expiries. The greater use of generics and a small increase in demand for branded drugs contributed to the spending growth.
- Growth in specialty drugs. Spending on specialty medicines has nearly doubled in the past five years, contributing more than two-thirds of overall medicine spending growth between 2010 and 2015. Increased specialty spending was driven primarily by treatments for hepatitis, autoimmune diseases and oncology, which accounted for $19.3 billion in incremental spending. Overall, 2015 saw a 21.5 percent spending increase for specialty medicines to $150.8 billion on an invoice price basis.
- Transformative new medicines. A total of 43 New Active Substances (NASs) was launched in 2015, a third of those receiving orphan drug designations from the FDA. An additional 30 brands were launched last year, bringing new combination therapies, alternative dosing and treatment administration options to patients. The strong momentum of breakthroughs and R&D productivity is reflected in the 2015 cohort of new medicines. Among last year’s launches, the number of non-orphan drugs with new mechanisms of action reached 14, double the number in 2014. Among the 2015 NAS launches were notable advances in precision medicines, rare disease therapeutics and chronic disease medicines that could benefit large populations.
- Prescription volume growth. Total prescriptions dispensed in 2015 reached 4.4 billion, up 1 percent year over year. Demand was higher in some therapy areas such as antidepressants and anti-diabetes, each of which increased about 10 percent in 2015. Among those therapy areas that declined, narcotic drugs saw a 16.6 percent drop in the number of prescriptions dispensed. Provisions under the Affordable Care Act for coverage to the uninsured through Medicaid expansion and Health Exchange Plans (HIX) have been the leading drivers of retail prescription growth in the past two years. At the same time, growth in Medicare Part D subscriptions has slowed, and the number of retail prescriptions filled through commercial plans (excluding HIX) and for cash have declined.
- Patient cost exposure. The average patient cost exposure for brand prescriptions filled through a commercial plan has increased more than 25 percent since 2010, reaching $44 per prescription last year. The increased prevalence of health plans with pharmacy deductibles, co-payments and co-insurance is contributing to the rise. In response, brand manufacturers are steadily increasing their use of mechanisms such as coupons or vouchers to help patients offset these expenses. Within the diabetes market, for example, coupons are being used by patients in commercial plans to reduce their costs. Of those diabetes patients facing $50 or more per prescription, about half were able to reduce their out-of-pocket cost to zero in 2015. The average patient cost exposure for generics has remained at approximately $8 per prescription since 2010.
- Healthcare delivery changes. Over the past five years, Integrated Delivery Networks (IDNs) have expanded their affiliations with healthcare professionals (HCPs) in an effort to increase negotiating power with insurers, leverage economies of scale and drive pay-for-performance initiatives. More than 54 percent of all HCPs nationally now are affiliated with IDNs. Newer facility types addressing patient access and convenience, such as urgent care centers and pharmacy in-store clinics, have grown by 115 percent in the past five years, and are part of an increasingly diverse set of healthcare facilities. The number of prescriptions written by Nurse Practitioners and Physician Assistants more than doubled over the past 5 years, reaching 676 million prescriptions in 2015.
- 2020 growth forecast. U.S. spending on medicines on a net price basis is expected to reach $370-400 billion in 2020, growing at a compound annual growth rate of 4-7 percent. This growth will reflect increased spending on innovative medicines, offset by lower spending on brands that will lose market exclusivity over the next five years. While brand price increases are expected to continue in the 10-12 percent range on an invoice basis, they will be significantly offset by rebates, discounts and other forms of price concessions. The prospects for additional innovative medicines becoming available for patients through 2020 are very bright. The late-phase pipeline holds 2,320 novel products, and an average 43-49 NASs are expected to be launched annually over the next five years.
The study was produced independently as a public service, without industry or government funding.