Study Finds Prescription Drug Spending Rose 13% in 2014

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Spending on prescription medications reached $373.9 billion in 2014, representing the largest increase in 13 years.


Spending on medications in the United States went up 13% in 2014, representing the biggest percentage increase in spending since 2001, according to a new report by the IMS Institute for Healthcare Informatics. New medicines alone contributed to $20.3 billion of the total figure of $373.9 billion in 2014, with little more than half ($11.3 billion) of the new medicine spend growth due to four new hepatitis C treatments. The number of patients treated for hepatitis C also increased nearly tenfold in 2014, from 17,000 to 161,000, and the majority of these patients who received treatment had no commercial insurance.

Lower level of expiry impact
According to the report, the impact of patent expiries in 2014 was nearly $8 billion less than 2013 and $17 billion less than 2012. The high rate of spending is not expected to continue throughout 2015, and is expected to level off by 2018, largely because many branded drugs face a new wave of patent expiry, Murray Aitken, executive director of IMS, told Reuters. Interestingly, Teva’s Granix (tbo-filgrastim)-which was launched through a biologics license application in November 2013 prior to the release of the first true “biosimilar” of Neupogen (filgrastim) in March 2015-captured approximately 11% of filgrastim volume in 2014.

Rebates counteract higher drug prices, less generic competition
While IMS attributes a large part of the overall spending increase (approximately one-third of drug spend) to specialty drug releases for the treatment of hepatitis C, multiple sclerosis, cancer, diabetes, and rare diseases, less competition from generic-drug companies also played into the calculations. Generic drugs reduced spending in 2014 by $12 million, whereas new generic entrants saved approximately $20 billion in 2013 and $29 billion in 2012. IMS also cites higher list prices (an increase of 13.5% before rebates; 8% after rebates) for branded medications as another reason for the increased spending. Discounts and rebates on medications granted to health insurers and pharmacy benefit managers helped keep pricing growth stagnant: After rebates and discounts, price increases on existing brand drugs accounted for $10.3 billion in 2014 in spending growth, compared with $11.8 billion in 2013.


Prescription demand increases
Expanded access in Medicaid as a result of Affordable Care Act implementation led to an approximately 25% increase in prescription demand, notes the report, as 15.7 million more people gained health insurance coverage. More medications reached more people than previously, as IMS estimates that 9% of patients filling Medicaid prescriptions and 24% of those with exchange plans may have been previously uninsured, “representing a substantial shift in coverage.” The report concludes that Medicaid was actually the “leading driver of retail prescription growth in the first year of expanded coverage under the Affordable Care Act,” accounting for 70% of the growth in retail prescription demand.

More new active substances
There were 42 New Active Substances launched in 2014, up from 36 in 2013. Of the 42 new substances, 25 had new mechanisms or orphan indications. Specialty drugs represented 42% of the late-stage pipeline in 2014, up from 33% 10 years ago. The first biologic with a Breakthrough Therapy designation was launched in 2014 and the first biosimilar applications were filed in 2014. Two new therapies targeting T cells-Keytruda (pembrolizumab) and Blincyto (blinatumumab) were launched in 2014.