(WSJ) Prescription drug spending in the U.S. ballooned last year to nearly $374 billion, which was not only a hefty 13.1% increase in growth, but also represented the highest level of spending since 2001, according to a new report from IMS Institute for Healthcare Informatics.
Two key factors were cited.
The first was the emergence of pricey and widely used hepatitis C treatments, including the Sovaldi and Harvoni medicines sold by Gilead Sciences. Sovaldi, in fact, was the biggest-selling drug last year at $7.9 billion, according to IMS calculation. Meanwhile, more than 161,000 patients started hep treatments in 2014, nearly 10 times more than in the previous year. A Gilead spokeswoman declined to comment.
The other reason cited for the jump in spending was that fewer brand-name medicines lost patent protection than in previous years. This meant there were fewer low-cost generic alternatives that became available to consumers. Last year, the loss of patent protection on brand-name drugs resulted in nearly $12 billion in reduced spending, which was well below the $19.6 billion in lower spending in 2013.
“It was truly a remarkable year,” says Murray Aitken, executive director of the IMS Institute. “We had an unusual confluence of events.”
Indeed, spending on new brand-name drugs – which IMS defined as medicines that were approved during the previous 24 months – amounted to $20.2 billion last year, much higher than the $6.5 billion seen in 2013. And spending on older brand-name drugs reached $26.3 billion, up from $20.3 billion during 2013. Price increases for brand-name drugs were helped by price increases that averaged 13.5%.
Hepatitis C treatments were not the only new medications contributing to rising spending. Aitken also points to drugs for treating cancer and multiple sclerosis, which contributed $1.6 billion and $2 billion, respectively, to spending growth. And spending on diabetes drugs jumped 30.5% to $32.2 billion last year, which was the second-highest therapeutic category in terms of spending growth after hepatitis C.
We should note that IMS based its data on invoice prices, not the standard average wholesale prices or wholesale acquisition costs that are generally used when describing drug prices. In addition, the research firm does not include rebates and discounts on invoices, which Aitken notes can be significant. For instance, discounts and rebates would have lowered diabetes spending growth to 22%.
Going forward, Aitken suggests such huge increases in spending are less likely. More patents on brand-name drugs are expected to expire over the next two years, which means more lower-cost generics arriving in pharmacies. And he believes that usage for the new hepatitis C treatments is expected to eventually moderate, at least compared with the sudden surge seen in 2014.
But what impact may new, pricey cancer meds have? Aitken readily acknowledges that big price tags will play a role in increased spending, but notes that “most of the new drugs still have relatively small patient populations. So they will be used on thousands of patients, rather than millions. Therefore, the impact on spending growth is expected to be relatively modest.”
A few other nuggets from the report: Spending on specialty medicines increased by $54 billion in the last five years, and contributed 73% of overall medicine spending growth during that period, according to IMS. Meanwhile, spending on cancer and autoimmune drugs rose 16.8% and 24%, respectively, and spending on multiple sclerosis medicines increased 24.4%.
Medicaid was the leading driver of retail prescription growth in the first year of expanded coverage under the Affordable Care Act. Retail prescriptions rose 2.4% in 2014, the first year of major coverage expansion. Overall, Medicaid prescriptions increased 16.8% in 2014, accounting for 70% of the growth in retail prescription demand.
Lower adherence is seen at every out-of-pocket level for patients with a deductible, which worsened after costs exceed $30, and most when costs exceed $125. The overall number of prescriptions where patients used a co-pay card has now reached 8% of all branded prescriptions.