Specialty Drugs Drove Significant Increase in US Drug Spending in 2014

Driven by innovative, yet expensive new specialty drugs, US spending on prescription drugs jumped 13 percent to $374 billion in 2014, the largest percentage increase since 2001, according to a new report.

The significant increase was primarily due to the introduction of expensive breakthrough drugs, manufacturer price hikes and a surge from millions of newly-insured people resulting from the Affordable Care Act (ACA).

Last year, 42 novel drugs were launched, an unusually high number. Among these, 18 were for rare diseases, defined as affecting fewer than 200,000 Americans, and ten were designated as breakthrough therapies, for conditions including multiple sclerosis, various cancers and hepatitis C. New hepatitis C drugs accounted for more than $11 billion of the spending, according to the report released Tuesday by IMS Institute for Healthcare Informatics.

Four breakthrough drugs for treating hepatitis C accounted for $11.3 billion in spending, nearly half of the $24.5 billion spend on new products in 2014. These new hepatitis C drugs are among the most expensive drugs on the market, with Gilead’s Sovaldi priced at $1,000 per pill, or $84,000 for a course of treatment.

According to the report, in 2014, specialty drugs grew by 26.5 percent. Specialty drugs include those for complex, chronic and often expensive disorders – such as MS, autoimmune diseases, cancer and hepatitis C. These drugs now account for one-third of spending on medicines. Driven by new oral and self-administered medications, MS spending rose 24 percent to $13.9 billion in 2014. Additionally, spending on cancer drugs reached $43.4 billion, driven by new therapies for melanoma, lung, breast and prostate cancer.

Meanwhile, the entry of new generic versions of brand name drugs reduced spending by only $12 billion last year. This is a significant decrease in market entry, compared to the $20 billion savings in 2013 and $29 billion in 2012.

In 2014, a record 4.3 billion prescriptions were filled, many for inexpensive generic drugs for patients now insured through Medicaid in states that have expanded eligibility for the poor and disabled. The number of Medicaid-covered prescriptions rose by nearly 17 percent. Additionally, due to the ACA, there was a 5.5 percent decline in prescriptions paid for in cash, normally filled by uninsured people. These newly insured patients drove a 2.1 percent increase in prescriptions filled.

“Last year’s $43 billion growth in spending on medicines was record-setting and the result of simultaneous very high levels of spending on new drugs and an unusually low level of patent expiry impact,” said Murray Aitken, IMS Health senior vice president and executive director of the IMS Institute for Healthcare Informatics. “It also was a landmark year in the implementation of the Affordable Care Act – and yet, the increase in the number of insured patients under the ACA directly accounted for only $1 billion of the spending growth as patients took some time to ramp up their medicine use.”

To access the full report, click here.

Source: IMS Institute for Healthcare & Informatics

Last updated: 4/14/15; 10:40am EST

 

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