IMS Health Study: 2014 a Record-Setting Year for U.S. Medicines

Highest-Ever Levels of Medicine Spending and Volume of Prescriptions Filled;

Key Drivers Include Increased Demand for New Specialty Drugs, Record Number of Transformative Treatments, Fewer Patent Expiries

PARSIPPANY, N.J.--()--Total spending on U.S. medicines increased 10.3 percent on a real per capita basis to $373.9 billion in 2014, with a record volume of 4.3 billion prescriptions filled, according to a new report issued today by the IMS Institute for Healthcare Informatics. The year also marked the highest number of transformative medicines launched in more than a decade.

The study – Medicine Use and Spending Shifts: A Review of the Use of Medicines in the U.S. in 2014 – found that total dollars spent on medications in the U.S. rose 13.1 percent on a nominal basis last year, up from a 3.2 percent increase in 2013. Primary drivers include higher spending on innovative new treatment options, the lower impact of patent expiries and increases in list prices of branded medicines. The factors that came together to drive the extraordinary spending growth in 2014 are expected to have less impact in future years, resulting in more moderate levels of growth.

Much of last year’s innovation-led spending growth was from specialty medicines, which grew 26.5 percent and accounted for one-third of medicine spending, up from 23 percent of the total spend five years ago. New drugs contributed $20.3 billion to growth in 2014, including $11.3 billion from four new hepatitis C treatments as nearly ten times as many patients were treated for that disease last year than in 2013.

The impact of patent expiries has consistently slowed spending growth over the past five years. In 2014, that impact was $11.9 billion, down significantly from the peak amount of $29.3 billion in 2012. Last year, 42 New Molecular Entities were launched – the largest number in a decade – focused on disease areas that include oncology, autoimmune disorders, hepatitis C, HIV, multiple sclerosis and diabetes. Prices for branded products last year rose at an average rate of 13.5 percent on an invoice basis, but were reduced to a 5-7 percent increase when taking into account off-invoice discounts and rebates.

Demand for healthcare services declined in 2014 despite it being the first year of insurance coverage for millions of Americans under the Affordable Care Act (ACA). From the end of September 2013 to year-end 2014, the uninsured rate was reduced by 5.1 percent, with 15.7 million people added to the insured population due to the ACA’s Medicaid expansion, Health Insurance Exchanges and the continued economic recovery.

“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.”

The report’s key findings include the following:

  • Spending on medicines. Spending reached $373.9 billion in 2014, up 13.1 percent, the highest level since 2001 when growth was 17.0 percent. In addition to the lower impact from patent expiries and the record spending on new brands, price increases for protected brands also increased spending in 2014 by $26.3 billion, contributing 8.2 percent to total market growth on an invoice price basis. Estimated net price growth was substantially lower, as rising off-invoice discounts and rebates offset incremental price growth and reduced the net price growth contribution to 3.1 percent. Spending on specialty medicines increased $54.0 billion over the past five years, contributing 73 percent of overall medicine spending growth in that period. The biggest driver of specialty spending growth was the more than 161,000 patients who started treatment for hepatitis C in 2014, more than four times the previous peak as spending on widely adopted new treatments totaled $12.3 billion.
  • Changes in the demand and payment for medicines. In the first full year of enrollment for expanded Medicaid and exchanges under the ACA, patients with Medicaid in states that expanded eligibility filled 25.4 percent more prescriptions than in the prior year, compared with 2.8 percent more in non-expansion states. Newly covered patients in Health Insurance Exchanges (HIX) had slightly lower levels of increase in medicine use, and 70 percent of them were commercially insured in the prior year. Patients with employer-based insurance filled fewer prescriptions in 2014 due in part to the impact of rising co-pays and deductibles. High out-of-pocket costs can be mitigated with various forms of co-pay assistance, including coupons and vouchers. For example, as many as half of all branded prescriptions in newer diabetes treatments are now being supported in this way, compared with 8 percent of brands in all therapy areas. Overall, healthcare services demand shifted last year as patients had 3.0 percent fewer office visits and 1.7 percent fewer hospital admissions – but filled 2.1 percent more prescriptions.
  • Transformations in disease treatment. The drug R&D pipeline has shifted to specialty medicines over the past decade, with 42 percent of the late-stage pipeline now specialty – up from 33 percent ten years ago. Ten therapies were launched in 2014 with “Breakthrough Therapy” status as designated by the FDA under the 2012 FDA Safety and Innovation Act. Last year saw the largest number of orphan drugs launched in a single year, bringing the total number of treatments with orphan designation to 230. Cancer remains the most common orphan drug category, and nine “ultra-orphan” drugs – for populations fewer than 10,000 – became available last year. Among the most anticipated innovations are biosimilars – generic versions of biologic drugs – which began being filed for FDA review in 2014 with approvals already underway this year.

The full version of the report, including a detailed description of the methodology, is available at www.theimsinstitute.org. It can also be downloaded as an app via iTunes at https://itunes.apple.com/app/ims-institute/id625347542.The study was produced independently as a public service, without industry or government funding.

Analyses conducted for the report are based on IMS Health information resources and focus on prescription-bound products, including Insulins that are available without a prescription. OTC products are excluded from the report. Spending figures are derived from IMS National Sales Perspectives™ and reported at wholesaler invoice prices that do not reflect off-invoice discounts and rebates. Prescription data are derived from IMS National Prescription Audit™, which tracks national prescription trends and activity for all pharmaceutical products. Other IMS Health information resources used in this report include NPA Market Dynamics™, IMS National Disease and Therapeutic Index™, National Prescription Audit™, Xponent™ PlanTrak Copay and IMS MIDAS™. More detail on information sources is included in the report.

About the IMS Institute for Healthcare Informatics

The IMS Institute for Healthcare Informatics provides key policy setters and decision makers in the global health sector with unique and transformational insights into healthcare dynamics derived from granular analysis of information. It is a research-driven entity with a worldwide reach that collaborates with external healthcare experts from across academia and the public and private sectors to objectively apply IMS Health’s proprietary global information and analytical assets. More information about the IMS Institute can be found at: http://www.theimsinstitute.org.

About IMS Health

IMS Health (NYSE:IMS) is a leading global information and technology services company providing clients in the healthcare industry with comprehensive solutions to measure and improve their performance. End-to-end proprietary applications and configurable solutions connect 10+ petabytes of complex healthcare data through the IMS OneTM cloud-based master data management platform, providing comprehensive insights into diseases, treatments, costs and outcomes. The company’s 15,000 employees blend global consistency and local market knowledge across 100 countries to help clients run their operations more efficiently. Customers include pharmaceutical, consumer health and medical device manufacturers and distributors, providers, payers, government agencies, policymakers, researchers and the financial community.

As a global leader in protecting individual patient privacy, IMS Health uses anonymous healthcare data to deliver critical, real-world disease and treatment insights. These insights help biotech and pharmaceutical companies, medical researchers, government agencies, payers and other healthcare stakeholders to identify unmet treatment needs and understand the effectiveness and value of pharmaceutical products in improving overall health outcomes. Additional information is available at www.imshealth.com.

Contacts

IMS Health
Tor Constantino, +1-484-567-6732
tconstantino@us.imshealth.com

Contacts

IMS Health
Tor Constantino, +1-484-567-6732
tconstantino@us.imshealth.com