Where Prescription Drug Prices Are Headed in U.S.
Spending on medicines increased by double digits for a second year in 2015 and reached $425 billion based on invoice prices. After adjusting for rebates and other price concessions by manufacturers, net spending was $310 billion, up 8.5 percent over 2014 levels, according to a healthcare industry research report.
The surge of new medicines remained strong and the use of recently launched brands remained at historically high levels, while the savings from brands facing generic competition were relatively low, according the report, Medicines Use and Spending in the U.S.: A Review of 2015 and Outlook to 2020, from the IMS Institute for Healthcare Informatics.
The findings reflect a market where drug manufacturers are accepting lower prices on well-established drugs while gaining increasing revenues on newer specialty and innovative drugs. Specialty drug spending reached $121 billion on a net basis, up more than 15 percent from 2014.
The study’s outlook for medicine spending through 2020 is for mid-single digit growth, driven by innovative treatments and offset by brands facing generic competition. The report forecasts that U.S. spending on medicines on a net price basis will reach $370-400 billion in 2020, growing at a compound annual growth rate of 4 to 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.
The average patient cost for brand prescriptions filled through a commercial plan has increased more than 25 percent since 2010, reaching $44 per prescription last year. according to the report from the New Jersey research institute.
The report says that a number of additional innovative medicines should become available for patients over the next five years as the late-phase pipeline currently holds 2,320 novel products.
Healthcare Delivery
The study found that longer-term trends continued to play out last year, driven by the Affordable Care Act and rising overall healthcare costs. Increasingly, healthcare is being delivered by different types of healthcare professionals and from different facilities, while patients face higher out-of-pocket costs and barriers to access.
The invoice prices for branded medicines rose 12.4 percent in 2015, compared with 14.3 percent in the prior year. The study says that heightened competition among manufacturers, along with more aggressive efforts by health plans and pharmacy benefit managers to limit price growth, resulted in concessions that reduced price increases on an estimated net basis to 2.8 percent, significantly lower than in prior years.
“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 findings include the following:
- 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 Federal Drug Administration (FDA). An additional 30 brands were launched last year, bringing new combination therapies, alternative dosing and treatment administration options to patients. 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.
