Currently Viewing:
Newsroom

US Prescription Drug Spending Projected to Grow in Moderation

Priyam Vora
Between 2005 and 2013, the United States prescription drug market grew at an average annual pace of 1.8%. The same market experienced a dramatic growth rate in 2014 of 11.5%.
Between 2005 and 2013, the United States prescription drug market grew at an average annual pace of 1.8%. The same market experienced a dramatic growth rate in 2014 of 11.5%. A new study, published in Health Affairs, sought out to understand if this dramatic increase was a one-time event or a permanent sign of future spending trends.

Murray Aitken, the executive director of the IMS Institute for Healthcare Informatics, in Parsippany, New Jersey, and colleagues found that forecasts suggest a moderation in prescription drug spending growth after 2014. The spending growth will average at 6.7% from 2016 through 2025.

“The recent acceleration in FDA approvals of new drugs, innovative and increasingly patient-friendly formulations, and regulatory initiatives may all be contributing to new treatment options, improved outcomes, and faster drug spending growth,” the authors wrote. “However, consolidation on the demand side by pharmacy benefit managers, insurers’ shift to increased patient copayments, and highly visible drug price increases by some manufacturers suggest that drug spending growth will likely be highly publicized and controversial.”

Study Design and Results

The authors analyzed US prescription drug spending trends using data from IMS Health’s National Sales Perspectives (NSP). Both price and quantity components for brand-name and generic medications were considered.

The observed spending patterns included:

  • Before the real pharmaceutical spending picked up in 2014, it gradually decelerated from 6.1% in 2006 to 4.5% in 2012.
  • The reduction in spending on brand-name drugs was significant in 2012 when several known-names, such as Lipitor, Plavix, Singulair, Actos, and Lexapro, faced generic competition for the first time. The brand-name drugs lost exclusivity and consequently, $49 billion in real invoice spending.
  • Spending picked up in 2014 because of introduction of new brand-name drugs. Several new drug launches to treat cancers, multiple sclerosis, and diabetes also contributed to spending growth.
 

Spending will Increase, but in Moderation

Based on the study of manufacturers’ rebates and discounts on prices, the researchers identified the 3 key factors that will most likely influence prescription spending over the next decade:

  1. A strengthening of the innovation pipeline
  2. Consolidation among buyers such as wholesalers, pharmacy benefit managers, and health insurers
  3. Reduced incidence of patent expirations (meaning fewer cheaper generic drug substitutes entering the market)
 

The pharmaceutical market landscape is evolving dramatically. However, the sudden growth that was seen in 2014 was a one-time phenomenon. Over the long term, based on the forecasts for 2016 through 2025, the retail prescription drug spending is expected to average at 6.7%.

 
Copyright AJMC 2006-2020 Clinical Care Targeted Communications Group, LLC. All Rights Reserved.
x
Welcome the the new and improved AJMC.com, the premier managed market network. Tell us about yourself so that we can serve you better.
Sign Up