IMS Report on Medication Use

Of all the categories of health spending, prescription drug use tends to have the most complete data, largely because the system for prescribing and paying for medications has been fully electronic for many years.  Among others, the IMS Institute for Healthcare Informatics produces a number of useful reports on drug use, including a recent review of stats for 2014.   (IMS Report)   According to IMS, spending for prescription medications reached $374 billion in the United States in 2014, up 13% from the prior year, the highest growth rate in almost 15 years.  The culprits are well-established by now–introduction of expensive new specialty drugs, fewer drugs coming off patent, and significant price increases in generic and brand drugs, with the generic increases often driven by industry consolidation.  Loss of patent exclusivity led to $12 billion less spending, but price increases on remaining branded drugs added $26 billion in cost.  New brand drugs alone added $20 billion in spending.   Prices for branded drugs rose 7% to 8%, taking into account discounts and rebates.  Generic spending only increased by $9.5 billion and 88% of prescriptions were filled by generics.  Specialty drugs represented a third of all medication spending, with especially strong growth in hepatitis C, oncology and multiple sclerosis treatments.  Real per capita spending has risen from $339 in 1995 to $995 in 2014.

Oncology was the single largest therapeutic category, with $32 billion in spending, and 30% of that was for drugs launched in the last two years.  Diabetes was close behind, also at $32 billion.  There was a mix of increased and decreased utilization among payer populations.  In states that participated in the Medicaid expansion, 25% more prescriptions were filled under that program.  The non-exchange commercially insured actually decreased the number of prescriptions filled, possibly because of continued high deductibles and copays.  It appears that higher copays are associated with more patients failing to fill or renew prescriptions.  To some extent this is offset by rapid growth in the provision of copay coupons by manufacturers, usually when their drug is not in a preferred formulary status.  According to IMS’ data, there were 3% fewer office visits in 2014, 2.2% less hospital outpatient usage, 1.4% more ER visits and about 6% fewer inpatient hospitalizations.  The number of prescriptions dispensed rose 2.1%.  While the health system has consolidated and become more integrated in some respects, 75% of prescriptions were written by physicians who were no part of an integrated health system.  IMS looked at practice patterns for different integrated delivery networks in the same geography and found substantial variation across those networks.  IMS is anticipating continued high spending growth trends, based on the number of new drugs close to approval and the high-cost nature of those drugs.