IMS Report on Prescription Drug Use and Spending

By May 9, 2017Commentary

A lot of posts on medication spending and drug plan benefits coming in the next couple of weeks.  For commercial plans especially, this category of health care has seen dramatic spending growth over the last decade, rising to 20% or so of total spending.  QuintilesIMS has released the latest in a series of annual reports reviewing recent drug spending and projecting forward, in this case to 2021.   (IMS Report)   IMS says that $323 billion was spent on prescription drugs in the US in 2016.  That was up 4.8% year-over-year, down from about a 9% growth rate in 2015 and 10% in 2014.  (Of course, IMS has to emphasize that invoiced spending was $450 billion in 2016, but out of the goodness of their hearts, the drug makers gave us generous discounts and rebates.)  IMS says that “real” net per capita growth in spending has been much lower, around 7.5% in 2015 and 2014 and 2.5% in 2016, but that is small comfort.  Adults under age 65 saw an increase in per capita prescription drug use from 2011 to 2016, while those over 65 actually saw a small per capita decline.  30% of prescriptions had no patient co-pay, almost all generics, and the rest largely accounted for by copay coupons, which help patients, but not overall drug spending.  An astounding 24% of prescriptions are abandoned by patients who are still paying under their deductible, with the rate far higher for brand drugs than generics.

Invoice price growth for “protected” drugs, i.e., single-source brands, is expected to be 7% to 10% a year out to 2021, and net price growth 2% to 5%.  Couple with utilization increases, this leads to 30% cumulative more drug spending in the next 5 years.  This may be understated as there is a rich pipeline of drugs expected to be approved in this time span, many of which are very expensive specialty drugs, and manufacturers are getting more creative in finding ways to delay biosimilar competition for specialty drugs whose patents are expiring.  So IMS’ projection of moderate annual spending growth looks shaky to me.  And only in the la-la land of drug manufacturers could mid-single digit spending growth be referred to as moderate.  The projected rates are twice those of either general inflation or economic growth.  Anything in health care that increase faster than economic growth is bad, really bad, because that means consumers, through taxes, transferred wages, and out-of-pocket spending, are using more and more financial resources on health care.  And since most of the growth is due to unjustifiable price increases, there is no real economic or health benefit from the additional spending.

Author Kevin Roche

The Healthy Skeptic is a website about the health care system, and is written by Kevin Roche, who has many years of experience working in the health industry through Roche Consulting, LLC. Mr. Roche is available to assist health care companies through consulting arrangements and may be reached at khroche@healthy-skeptic.com.

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